IBS Software Services Private Limited Vs ACIT (ITAT Cochin)
ITAT Cochin held that since loans and advances are denominated in foreign currency, LIBOR Rates would be more suitable for benchmarking. Accordingly, AO directed to benchmark the international transaction of loan/advances to Associated Enterprise using applicable LIBOR Rate.
Facts- The Assessee is a subsidiary of International Business Services Group (P) Limited having units in Software Technology Park of India and Special Economic Zone. During the assessment proceedings, it was noticed from the audit report in Form 3CEB that the Assessee had entered into International Transactions amounting to INR.2,34,83,13,172/- with its Associated Enterprises. The case of the Assessee was referred to the Transfer Pricing Officer u/s. 92CA of the Act for determination of the Arm’s Length Price in relation to the said international transactions. TPO passed order, dated 28/10/2016, u/s. 92CA(3) of the Act proposing an upward transfer pricing adjustment of INR.31,09,52,334/-.
AO passed the Draft Assessment Order, dated 29/11/2016, proposing aforesaid transfer pricing addition and corporate tax additions/disallowances including (a) disallowance of INR.5,66,26,572/- in respect of loss on onerous contracts, (b) disallowance of INR.77,71,759/- in respect of employee’s contribution towards Provident Fund (PF) and Employee State Insurance (ESI), (c) disallowance of interest of INR.12,68,911/- under Section 36(1)(iii) of the Act. The objection raised by the Assessee were disposed off by the DRP vide Order, dated 07/08/2017. DRP rejected the objections raised by the Assessee in relation to the aforesaid additions/disallowances. Accordingly, AO passed the Final Assessment Order making various additions/disallowances. Being aggrieved, the present appeal is filed.
