Rate at which loan taken by Appellant cannot be taken as internal CUP to benchmark loan given to AE

LTIMindtree Limited Vs ACIT (ITAT Mumbai)

ITAT Mumbai held that TPO was correct in concluding that the rate at which loan is taken by the Appellant cannot be taken as internal CUP to benchmark the loan given by the Appellant to its AE as there is a difference in credit rating of the Appellant and its AE.

Facts- The case of the Appellant was selected for scrutiny and notice under Section 143(2) of the Act was issued. During the assessment proceedings, AO noted that the Appellant has entered into the international transactions with its Associated Enterprises (AEs) and therefore, reference was made to Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act.

It was also observed that the revenue earned from onsite services provided by the Appellant cannot be considered as export of software from India derived from STPI Units located in India. Therefore, proposed disallowance of 53.40% of the deduction claimed by the Appellant u/s. 10A of the Act in proportion of Software Development Expenses plus Administration & Another Expenses incurred by the Appellant outside India aggregating to INR 871,75,78,841/- and the total Software Development Expenses plus Administration & Another Expenses incurred by the Appellant aggregating to INR 1632,29,65,745/- and computed the amount of disallowance

On the basis of the above directions issued by the DRP, the Assessing Officer passed the Final Assessment Order, dated 15.01.2014, at assessed income of INR 205,26,28,060/- after (a) making Transfer Pricing Addition of INR 2,72,430/-, (b) making proportionate disallowance of INR 172,94,09,811/- out of deduction of INR 263,04,15,538/- claimed by the Appellant under Section 10A of the Act in the Return of Income.

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