IT/ILT : Where loans taken by assessee from its AE were interest free for initial period of seven years and when said period of moratorium was taken into account, effective rate of interest incurred by assessee was lower than arm's length rate of interest considered by TPO, adjustment made to assessee's ALP on aforesaid ground was to be set aside
IT/ILT : Where rate of interest paid by assessee to its AE in respect of Extra Commercial Borrowing (ECB) was lower than rate of interest paid by said AE to an independent concern, transaction of payment of interest in question was to be regarded as carried out at arm's length price
IT/ILT : In respect of import of capital goods from AE, Commissioner (Appeals) was justified in making addition to assessee's ALP by adopting 10 per cent markup over and above cost of capital goods
■■■
[2015] 53 taxmann.com 169 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Goodyear South Asia Tyres (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle-1, Aurangabad*
G.S.PANNU, ACCOUNTANT MEMBER
AND R.S. PADVEKAR, JUDICIAL MEMBER
IT APPEAL NOS. 1431 (PN.) OF 2010,1868 & 1869,1882 & 1883 (PN.) OF 2012
[ASSESSMENT YEARS 2005-06 TO 2007-08]
NOVEMBER 28, 2014
I. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments**) - Assessment years 2005-06 to 2007-08 - Assessee-company was engaged in business of manufacture and sale of automotive tyres, tubes, flaps etc. - Assessee raised technical knowhow loan and foreign currency cash loan against import of capital goods from its AE carrying interest rate at 12 per cent per annum - TPO compared international transaction of payment of interest on aforesaid loans with ceiling prescribed by Reserve Bank of India (RBI) for payment of interest on ECB loans for previous year under consideration, which stood at LIBOR plus 2 per cent and, accordingly, made addition to assessee's ALP - It was noted that loans raised by assessee were interest free for initial period of seven years and when said period of moratorium was taken into account, effective rate of interest incurred by assessee was lower than arm's length rate of interest considered by TPO - Whether in view of above, impugned adjustment made by TPO was to be set aside - Held, yes [Para 22] [In favour of assessee]
II. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments**) - Assessment years 2005-06 to 2007-08 - Whether where rate of interest paid by assessee to its associated enterprise in respect of Extra Commercial Borrowing (ECB) said was lower than rate of interest paid by associated enterprise to an independent concern, transaction of payment of interest by assessee was to be regarded as carried out at arm's length price - Held, yes [Para 26] [In faovur of assessee]
III. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments†) - Assessment year 2005-06 - Whether where in respect of import of capital goods from AE, Commissioner (Appeals) made addition to assessee's ALP by adopting 10 per cent mark up over and above cost of capital goods, in absence of any credible objection raised by assessee, impugned addition was to be confirmed - Held, yes [Para 31] [In favour of revenue]
IT/ILT : Where rate of interest paid by assessee to its AE in respect of Extra Commercial Borrowing (ECB) was lower than rate of interest paid by said AE to an independent concern, transaction of payment of interest in question was to be regarded as carried out at arm's length price
IT/ILT : In respect of import of capital goods from AE, Commissioner (Appeals) was justified in making addition to assessee's ALP by adopting 10 per cent markup over and above cost of capital goods
■■■
[2015] 53 taxmann.com 169 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Goodyear South Asia Tyres (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle-1, Aurangabad*
G.S.PANNU, ACCOUNTANT MEMBER
AND R.S. PADVEKAR, JUDICIAL MEMBER
IT APPEAL NOS. 1431 (PN.) OF 2010,1868 & 1869,1882 & 1883 (PN.) OF 2012
[ASSESSMENT YEARS 2005-06 TO 2007-08]
NOVEMBER 28, 2014
I. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments**) - Assessment years 2005-06 to 2007-08 - Assessee-company was engaged in business of manufacture and sale of automotive tyres, tubes, flaps etc. - Assessee raised technical knowhow loan and foreign currency cash loan against import of capital goods from its AE carrying interest rate at 12 per cent per annum - TPO compared international transaction of payment of interest on aforesaid loans with ceiling prescribed by Reserve Bank of India (RBI) for payment of interest on ECB loans for previous year under consideration, which stood at LIBOR plus 2 per cent and, accordingly, made addition to assessee's ALP - It was noted that loans raised by assessee were interest free for initial period of seven years and when said period of moratorium was taken into account, effective rate of interest incurred by assessee was lower than arm's length rate of interest considered by TPO - Whether in view of above, impugned adjustment made by TPO was to be set aside - Held, yes [Para 22] [In favour of assessee]
II. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments**) - Assessment years 2005-06 to 2007-08 - Whether where rate of interest paid by assessee to its associated enterprise in respect of Extra Commercial Borrowing (ECB) said was lower than rate of interest paid by associated enterprise to an independent concern, transaction of payment of interest by assessee was to be regarded as carried out at arm's length price - Held, yes [Para 26] [In faovur of assessee]
III. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments†) - Assessment year 2005-06 - Whether where in respect of import of capital goods from AE, Commissioner (Appeals) made addition to assessee's ALP by adopting 10 per cent mark up over and above cost of capital goods, in absence of any credible objection raised by assessee, impugned addition was to be confirmed - Held, yes [Para 31] [In favour of revenue]
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