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| The Tax Publishers2020 TaxPub(DT) 0523 (Kol-Trib) INCOME TAX ACT, 1961
Section 92C
In case of loans advanced to AE, ALP would be determined on the basis of rate of interest being charged in country where loan is received/consumed thus, TPO erred in going by penal interest stipulation in concerned loan agreement than corresponding interest benchmark in overseas market. Accordingly, ALP adjustment was deleted.
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Transfer pricing - Determination of ALP - Interest on foreign currency loan given to AE - Penal interest stipulation in concerned loan agreement v. corresponding interest benchmark in overseas market
Assessee extended interest free loan of AUD 5,00,000 to its associated enterprise (AE). For the purpose of determining ALP assessee adopted CUP method and took interest @8.91 as was prevailing in Australia. However, TPO considered penal rate of 10% stipulated in concerned loan agreement and accordingly, suggested ALP adjustment. Held: In case of loans advanced to AE, ALP would be determined on the basis of rate of interest being charged in country where loan is received/consumed thus, TPO erred in going by penal interest stipulation in concerned loan agreement than corresponding interest benchmark in overseas market. Accordingly, ALP adjustment was deleted.
Relied:CIT v. Cotton Naturals (I) (P) Ltd. (2015) 55 Taxmann.com 523 (Del) : 2015 TaxPub(DT) 1361 (Del-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2010-11 & 2011-12
IN THE ITAT, KOLKATA BENCH
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