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IN THE INCOME TAX APPELLATE TRIBUNAL K, BENCH MUMBAI

,
BEFORE SHRI R.C.SHARMA, AM
&
SHRI VIJAY PAL RAO, JM

ITA No.7073/Mum/2012
( Assessment Year :2008-09)
M/s Everest Kanto Cylinder Ltd., Vs. ACIT (LTU), Mumbai
204, Raheja Centre, Free Press
Journal Marg, Nariman Point,
Mumbai-400 021
PAN/GIR No. : AAACE 0836 F
( Appellant) .. ( Respondent)

/Assessee by : Mr. R.R.Vora &


Mr. Hemen Chanduriya
/Revenue by : Mr. K.C.P. Pattnaik

Date of Hearing : 6th August, 2014


Date of Pronouncement : 25th Sept, 2014

ORDER

PER R.C.SHARMA (A.M):


This is an appeal filed by the assessee against the order passed

u/s.143(3) r.w.s. 144C(13) of the IT Act to give effect to the direction

issued by the Dispute Resolution Panel (in short the DRP) for the

assessment year 2008-09, wherein following grounds have been taken by

the assessee :-

PART I - CORPORATE TAX GROUNDS:


Disallowance under section 14A of the Act of Rs.17,33,157/-
Original ground
1. erred in disallowing an amount of Rs.17,33, 157/ - under section
14A of the Act read with Rule 8D of the Income-tax Rule, 1962;

Supplementary Ground
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ITA No.7073/2012

1.1 erred in making an addition of Rs.17 ,33,157 j - to Book Profits


for the purpose of section 115JB on account of disallowance under
section 14A of the Act;
PART II - TRANSFER PRICING GROUNDS:
Addition of Rs.2,47,07,596/- on account of adjustment in respect of
guarantee commission for guarantee provided to banks in respect
of loans taken by Associated Enterprises ('AEs')
Original ground
2. erred in making adjustment of Rs.2,47,07,596j- on account of
guarantee commission;
Supplementary Ground
2.1 Without prejudice to above, while computing adjustment on
account of arm's length price of guarantee commission, erred in
applying the rate of guarantee commission to the entire amount of
guarantee of USD 2.34 million, instead of restricting the adjustment
only to the actual amount of loan availed by the AE from the
overseas bank during the year;
Addition of Rs.63,44,901/- on account of adjustment in respect of
interest on loan given to AEs :
Original ground
3. erred in making adjustment ofRs.63,44,901/- on account of
interest on loan given to AE;
Supplementary Ground
3.1 Without prejudice to above, erred in not providing the benefit of
the variation of 5 percent from the arithmetic mean as provided in
the proviso to Section 92C(2) of the Act, while making the
adjustment to the value of international transactions of the
Appellant;
The Appellant craves, to consider each of the above grounds of
appeal without prejudice to each other and craves to leave or add,
alter, delete or modify all or any of the above grounds of appeal.

2. Rival contentions have been heard and found from record that the

assessee had earned dividend income of Rs 8,57,149/- which was

claimed as exempt from tax under section 10(33). The total investment in

shares and securities as on 31/3/2008 was Rs 102.62 Cr which

represented 13.81% of the total assets. The assessee had sold and

purchased shares and securities during the year. The assessing officer

computed disallowance under Rule 8D of Rs 17,33,157/-. The AO found


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ITA No.7073/2012

that assessee has incurred the interest expenditure of Rs.4.83 crores for

which assessee has submitted working of disallowance u/s.14A, which

was declined by AO and he computed disallowance at Rs.17,33,157/- by

applying Rule 8D(ii). On reference to DRP, the DRP upheld action of the

AO and sustained the disallowance u/s.14A.

3. It was contended by the learned AR that while computing

disallowance u/s.14A, the investment of the assessee company are

required to be segregated in four parts i.e.

i) investments upto AY 2006-07


ii) investments in AY 2007-08; and
iii) investment in AY 2008-09.

Our attention was also invited Year-wise fund flow statement which was

as under :-

(Rs. in crores)
Particulars Upto 31-Mar-07 31-Mar-08
AY 2006-07 AY 2007-08 AY 2008-09
Profit before Depreciation & Tax 140.11 75.03 57.86

Sources of Funds
Equity share Capital (A) 17.63 19.52 20.23
Reserves and Surplus (B) 133.30 256.01 375.51

Net Worth(C=A+B) 150.93 275.53 395.74


Total Borrowing (D) 39.50 26.57 187.51
Deferred Tax Liability (E) 1.36 0.05 4.51

Total (C+D+E) 191.78 302.15 587.76

Application of Funds
Net Fixed Assets (Including Capital WIP) 93.93 91.25 149.43
Net Working Capital 84.63 156.60 335.72
Investments (refer below table) 13.22 54.30 102.62

Total 191.78 302.15 587.76


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ITA No.7073/2012

Bifurcation of Investments
(Rs. in crores)
Investment in Subsidiaries Upto AY 2007-08 AY 2008-09
AY 2006-07
EKC International (Tianjin) Ltd. (China) 19.76 69.25
(Net
addition
Rs.49.49 cr
EKC International FZE (Dubai) 21.17 21.17

Investment in Associates
Everest Kanto Investment &Finance Ltd 0.09 0.09 0.09
Everest Industrial Gases Private Ltd. 0.00 0.01 0.00
Total (A) 0.09 41.03 90.52
Other investments
Investments in immovable properties 0.00 0.00 0.00
GPT Steel Industries Pvt. Ltd 2.00 2.00 2.00
Solar Explosives Limited 0.45 0.00 0.00
Shivalik Global ltd. 0.30 0.00 0.00

Investment in Mutual Funds


Fixed Maturity Plan/Growth Oriented 0.00 10.00 10.00
Schemes
Other Mutual funds/Dividend Oriented 10.37 1.27 0.10
Schemes
Total 10.37 1.27 10.10
Total(B) 13.12 13.27 12.10
Grand Total (A+B) 13.22 54.30 102.62

Learned AR also invited our attention to the investment made in UTI fixed

maturity/growth plan amounting to Rs.10 crores and contended that if it is

excluded from opening and closing value of investment, disallowance

under Rule 8D would work out to be Rs.1.39 lakhs only. Accordingly, it

was pleaded that even if any disallowance is to be made u/s.14A, the

same should be restricted to Rs.1.39 lakhs.

4. We have considered rival contentions and found that disallowance

under Rule 8D has been worked out by the AO on the total investment,

which included investment made in mutual funds with growth scheme.

Such mutual fund investment is required to be excluded while calculating

disallowance under Rule 8D, since it is not generating any tax free
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ITA No.7073/2012

income. The assessee has also filed copy of the scheme of UTI fixed

maturity plan before us, according to which it is a growth oriented fund

and not eligible for dividend. If we exclude the amount invested by the

assessee in the growth plan, disallowance under Rule 8D @0.5% works

out to be Rs.1.39 lakhs. However, copy of scheme of UTI Fixed Maturity

Plan was first time filed before Tribunal as an additional evidence along

with application for admission of additional evidence dated 27-2-2014. We

accept the additional evidence and matter is restored back to the file of

AO for deciding afresh the quantum of disallowance keeping in view our

above observations.

5. The AO has also made addition of Rs.17,33,157/- to book profit

under Section 115JB on account of disallowance under Section 14A.

5.1 The contention of the learned AR was that the adjustment cannot

be made while computing book profit under Section 115JB of the Act for

the items which are not mentioned specifically in the Explanation to

Section 115JB and for this, reliance was placed in the decision of the

Honble Supreme Court on the case of Appollo Tyres Ltd., 255 ITR 273.

5.2 On the other hand, learned DR relied on the order of the lower

authorities.

5.3 We have considered rival contentions. The AO has computed book

profit by adding the amount of expense disallowed u/s.14A. As per our

considered view, no addition u/s.115JB is warranted for amount of


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ITA No.7073/2012

disallowance u/s.14A of the IT Act. Our view is supported by following

decisions :-

i) Cadila Healthcare Ltd (ITA No. 3140/Ahd/2010) dated 25 May


2012 (Ahmedabad);

ii) Reliance Industrial Infrastructure Ltd (ITA No. 69 &


70/Mum/2009) dated 5 April 2013 (Mumbai);

iii) Essar Teleholdings Ltd (ITA No. 3B50/Mum/2010) dated 29


July 2011 (Mumbai);

iv) J.K. Paper Ltd (ITA No. 4027 & 40BO/Ahd/200B) & (ITA No.
979/Ahd/2006) (Ahmedabad) ;

v) National Commodity Derivatives Exchange Ltd (ITA No.


2923/Mum/2010) dated 26 August 2011 (Mumbai); and

vi) Quippo Telecom Infrastructure Ltd (ITA No. 4931/De1/2010)


dated 18 February 2011 (Delhi).

Respectfully following the propositions laid down in the aforesaid decision,

we direct the AO to exclude the amount of disallowance of Rs.17,33,157/-

made u/s.14A, while computing the book profit u/s.115JB.

6. The next grievance of the assessee relates to addition made in

respect of corporate guarantee amounting to Rs.2,47,07,596/-

6.1 Rival contentions have been heard. The assessee provided

corporate guarantees to its owned subsidiaries namely, EKC International

FZE (EKC Dubai) and EKC Industries (Tianjin) Limited (,EKC China)

amounting USD 23 million and USD 4 million respectively. The said

subsidiaries are set-up for expanding the business of the assessee of

manufacture of cylinders in Dubai & China region which are huge markets

for the assessee. For this purpose assessee approached ICICI Bank,

Bahrain branch and the said bank agreed to provide term loans for
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ITA No.7073/2012

working capital and capital expenditure to the subsidiary company. For

this purpose assessee company provided corporate guarantee to ICICI

Bank by way of Deeds of guarantees. The assessee company charged a

guarantee commission of Rs 44,00,799/- @ 0.5% p.a from EKC Dubai for

such corporate guarantee. This was on the basis of internal CUP available

to the assessee. It was explained that assessee had an independent

sanction "letter of Credit arrangement" between ICICI Bank India in

respect of Inland and Foreign LC, where a guarantee commission of 0.6%

p.a was to be paid by the assessee company to ICICI Bank India for the

bank guarantee provided. The difference of 0.10% was towards strategic

business interest of the assessee company in AE and the fact that 0.5%

was fair rate, as per the prevailing market rate. The diagrammatic

representation of the transaction is as under:

In the Transfer Pricing Study and Form No 3EB, the appellant


company has classified the said transactions as international
transactions and benchmarked the same applying CUP method. In
the order passed under section 92CA(3) of the Act, the Transfer
Pricing Officer ('TPO') held that the appellant company ought to
have charged a cost of guarantee of 3% in an Arm's length situation
by drawing comparisons of the corporate guarantee commission
rate charged by HSBC Ltd., Allahabad Bank and the rate charged
by Rabo India Finance Ltd. Further, he has observed that the Exim
Bank of USA has provided a guarantee to Boeing Co of USA
against Hire Purchase Agreement for purchase of aircrafts by Jet
Airways India and has charged a commission of 3% from Jet
Airways India Ltd.

6.2 In view of the above, the TPO arrived at a rate of 3% and proposed

an addition of Rs.2,47,07,596/-. The same was affirmed by the DRP,

which has been contested by the assessee before us. The contention of

the A.R. was that the transaction of giving corporate guarantee to bank on

behalf of AE is not an international transaction and for this purpose


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ITA No.7073/2012

reliance was placed on the recent decision of Hon'ble Delhi Tribunal in

case of Bharti Airtel Limited (ITA No.5816/DeI/2012) dated 11 March

2014. Reliance was also placed by the learned AR on the decision of

Chennai Tribunal in case of Redington (India) Limited (ITA Nos 513 &

619/Mds/2014) dated 7 July 2014, wherein the Tribunal deleted the

addition made by the TPO of guarantee commission.

6.3 As an alternate, contention of learned AR was that the transaction

of giving corporate guarantee to bank on behalf of AE, is not an

international transaction, the assessee company submits that, even if

corporate guarantee given to the EKC Dubai is regarded as an

international transaction, the assessee has recovered from the AE, the

comparable cost of guarantee commission charged by its bank in India.

Hence the transaction is at arms length and requires no further

adjustment. On the facts of the case, assessee had paid 0.6% as

guarantee commission to ICICI Bank India and has charged @ 0.5% to its

AE. In connection with corporate guarantee given to EKC China, it is

submitted that the non-recovery of any guarantee commission was on

account of restriction under Chinese regulations and accordingly non-

recovery of guarantee commission is to be considered at arm's length.

Further, by giving guarantee, the assessee protects its strategic, business

and economic interest in the subsidiary and ensure goodwill and

reputation of the group.

7. On the other hand, learned DR relied on the order of lower

authorities.
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ITA No.7073/2012

8. We have considered rival contentions, carefully gone through the

orders of the authorities below and found that assessee company had

provided bank guarantee in respect of advances given by HSBC Ltd. to its

AE. For this purpose assessee company has charged guarantee

commission of Rs.44,00,799/- @ .05% p.a. from EKC Dubai for such

guarantee. Similarly assessee was having sanctioned letter of credit

arrangement between ICICI Bank India Ltd. in respect of Inland and

Foreign LC, where a guarantee commission of 0.6% p.a was to be paid by

the assessee company to ICICI Bank for the bank guarantee provided. It

is clear from the record that in respect of transaction of guarantee so

provided assessee has paid charges to the bank and also recovered

certain amount from its AE. The Tribunals order relied on the by the

learned AR in case of Bharti Airtel Ltd., the order of Delhi Tribunal dated

11-3-2014 excluded transaction of giving such corporate guarantee

outside the purview of international transaction on the plea that

transaction of such a nature was not having any bearing on the profits,

income or loss or assets of the enterprise. It was also observed by the

coordinate bench that such transaction should have been an impact on

the profits, income, losses or assets on the real basis, even if in the

present or in future, and not on contingent or hypothetical basis and, there

has to be some material on record to indicate, not to establish it to hilt,

that an intra AE international transaction has some impact on profits,

income, losses or assets. The precise observation of the Bench was as

under :-
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ITA No.7073/2012

33. In any event, the onus is on the revenue authorities to


demonstrate that the transaction is of such a nature as to have
bearing on profits, income, losses or assets of the enterprise, and
there was not even an effort to discharge this onus. Such an impact
on profits, income, losses or assets has to be on real basis, even if
in present or in future, and not on contingent or hypothetical basis,
and there has to be some material on record to indicate, even if not
to establish it to hilt, that an intra AE international transaction has
some impact on profits, income, losses or assets. Clearly, these
conditions are not satisfied on the facts of this case.

34. There is one more aspect of the matter. The Explanation to


Section 92 B has been brought on the statute by the Finance Act
2012. If one is to proceed on the basis that the provisions of
Explanation to Section 92 B enlarge the scope of Section 92 B
itself, even as it is modestly described as 'clarificatory' in nature, it
is an issue to be examined whether an enhancement of scope of
this anti avoidance provision can be implemented with retrospective
effect. Undoubtedly, the scope of a charging provision can be
enlarged with retrospective effect, but an anti-avoidance measure,
that the transfer pricing legislation inherently is, is not primarily a
source of revenue CIS it mainly seeks compliant behaviour from the
assessee vis-a-vis certain norms, and these norms cannot be given
effect from a date earlier than the date norms are being introduced.
However, as we have decided the issue in favour of the assessee
on merits and even after taking into account the amendments
brought about by Finance Act 2012, we need not deal with this
aspect of the matter in greater detail.

35. When it was put to the learned Departmental Representative


that there could be a view that issuance of guarantees could be
outside the ambit of scope of 'international transaction' itself, he
submitted that there are large number of decisions in India and
abroad, notably in Canada, dealing with the determination of arm's
length price of guarantees. His argument seemed to be that even
such a view is to be upheld, entire transfer pricing jurisprudence will
be turned upside down. There does not seem to be any legally
sustainable merits in this argument either. As for the decisions
dealing with quantum of ALP adjustments in the guarantee
charges, in none of these cases the scope of 'international
transactions' under section 928(1) has come up for examination. A
judicial precedent cannot be an authority for dealing with a question
which has not even come up for consideration in that case. It is only
elementary that, as was also held by Hori'ble Bombay High Court in
the case of CIT Vs Sudhir Jayantilal Mulji (214 ITR 154), that a
judicial precedent is an authority for what it actually decides and not
what may what come to follow from some observations made
therein. As observed by Ho n'ble Supreme Court in the case of CIT
vs. Sun Engineering Works P. Ltd. (198 ITR 297) a " judgement
must be read as a whole and the observations from the judgement
have to be considered in the light of the question which were before
court" and that "a decision..takes its colour from the questions
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ITA No.7073/2012

involved in the case in which it is rendered and, while applying the


decision to a later case, the courts must carefully try to ascertain
the true principle laid down by the decision and not to pick out
words or sentences from the judgement, divorced from the context
of the questions under consideration by this court, to support their
reasoning." It would, therefore, be wholly inappropriate to use those
judicial precedents, dealing with ALP of guarantee commission, to
decide a question which was not even before those judicial forums.
Coming to the foreign decisions on the issue of ALP adjustments in
guarantee commission, we have noted that in the case of GE
Capital Canada Inc Vs The Queen (2009 TCC 563), the Tax Court
of Canada has indeed dealt with ALP determination of the
guarantee fees but then it was done in the light of their domestic
law provisions which are quite at variance with the Indian transfer
pricing legislation. Unlike elaborate wordings of Section 92 B of the
Indian Income Tax Act, 1961 defining 'international transaction',
Section 247 of the Canadian Income Tax Act only gives an
inclusive definition which does not even really attempt to define the
expression 'transaction'. It is nobody's case that the relevant legal
provisions are in pari materia. We need not, therefore, deal with
those foreign judicial precedents. Suffice to say that we have
reached our conclusions on the basis of the legal provisions under
section 92 B and no judicial precedent, contrary to our
understanding of these legal provisions, has been cited before us.
There is a decision of the co-ordinate bench in the case of
Mahindra & Mahindra (supra), referred to in the DRP order, but that
decision does not deal with the scope of amended section 92 B and
leaves the issue open by stating that post insertion of Explanation
to Section 92 B, the matter will have to be examined in the light of
the amended law. We have held that even after the amendment in
Section 92 B, amending Explanation to Section 92 B, a corporate
guarantee issued for the benefit of the AEs, which does not involve
any costs to the assessee, does not have any bearing on profits,
income, losses or assets of the enterprise and, therefore, it is
outside the ambit of 'international transaction' to which ALP
adjustment can be made. As we have decided the matter in favour
of the assessee on this short issue, we see no need to address
ourselves to other legal issues raised by the assessee and the
judicial precedents cited before us.

36. For the reasons set out above, and as we have held that the
issuance of corporate guarantees in question did not constitute
'international transaction' within meanings thereof under section
92B, we uphold the grievance of the assessee and direct the
Assessing Officer to delete the impugned ALP adjustment of Rs
33,10,161. The assessee gets the relief accordingly.

It is clear that the coordinate bench has excluded the transaction of

providing bank guarantee outside the purview of international transaction


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ITA No.7073/2012

on the finding that such transaction had no effect on profits, income,

losses or assets of the assessee. However, the facts of the instant case

are clearly distinguishable wherein not only the assessee has incurred

cost for providing bank guarantee but it also recovered guarantee

commission from its AE. Thus, the assessee had effect on its income and

expenditure both on entering into such transaction of providing bank

guarantee. Accordingly, assessee will not get help of the decision of the

coordinate bench to come out of the purview of international transaction.

9. Now, coming to the merit of the addition so made, we found that the

issue has already been decided by the Tribunal in immediately preceding

year in assessees own case, wherein charging of 0.5% guarantee

commission from AE was held to be quite near to 0.6%, where assessee

has paid independently to the ICICI bank and charging of guarantee

commission @0.5% from its AE was held to be at arms length. The

precise observation of the bench for the assessment year 2007-08 are as

under :-

"The universal application of rate of 3 percent for guarantee


commission cannot be upheld in every case as it is largely
dependent upon the terms and conditions, on which loan has been
given, risk undertaken, relationship between the bank and the
client, economic and business interest are some of the major
factors which has to be taken into consideration. "

.in this case, the assessee has itself charged 0.5% guarantee
commission from its AE, therefore, it is not a case of not charging of
any kind of commission from its AE. The only point which has to be
seen in this case is whether the same is at ALP or not. We have
already come to a conclusion in the foregoing paras that the rate of
3% by taking external comparable by the TPO, cannot be sustained
in facts of the present case. We also find that in an independent
transaction, the assessee has paid 0.6% guarantee commission to
IGIGI Bank India for its credit arrangement. This could be a very
good parameter and a comparable for taking it as internal GUP and
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ITA No.7073/2012

comparing the same with the transaction with the AE. The charging
of 0.5% guarantee commission from the AE is quite near to 0.6%,
where the assessee has paid independently to the IGIGI Bank and
charging of guarantee commission at the rate of 0.5% from its AE
can be said to be at arms length. The difference of 0.1% can be
ignored as the rate of interest on which IGIGI Bank, Bahrain Branch
has given loan to AE (i.e. subsidiary company) is at 5.5%, whereas
the assessee is paying interest rate of more than 10% on its loan
taken with IGIGI Bank in India. Thus, such a minor difference can
be on account of differential rate of interest. Thus, on these facts,
we do not find any reason to uphold any kind of upward adjustment
in ALP in relation to charging of guarantee commission.

As the facts and circumstances of the case during the year under

consideration are pari materia, respectfully following the decision of the

Tribunal in assessees own case, we direct the AO to compute arms

length price of transaction as per the direction given by the Tribunal in the

above order for A.Y. 2007-08.

10. The next grievance of the assessee relates to addition of

Rs.63,44,901/- on account of adjustment in respect of interest on loan

advanced to EKC Dubai and EKC China.

10.1 Rival contentions have been heard, record perused and found that

assessee company had provided loan of USD 10 million to EKC Dubai

and USD 3 million to EKC China for a period of six months and further

renewable with mutual consent. The assessee has charged interest @7%

p.a. During the year under consideration, the assessee has paid interest

at the rate of 5.17% on Euro Loan availed from Citibank NA. Also, the

assessee had raised a sum of USD 35 million by issue of Zero Coupon

Foreign Currency Convertible Bonds (FCCB) on 1st July, 2007, which

were due for redemption in 2012. The contention of the assessee before
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ITA No.7073/2012

the lower authorities was that funds utilized for such loan was raised

through issue of Zero Coupon Foreign Currency convertible bonds which

was interest free. These FCCBs were redeemable at a premium in 2012,

so the assessee has availed term loan at Citibank at 7% p.a. the TPO has

asked the assessee to justify the arms length nature of interest charged

on advances given to the AEs. However, the TPO made an adjustment on

account of difference between the ALP determined by the TPO i.e.

14.39% as against 7% charged by the assessee. On reference to the

DRP, the DRP confirmed the action of the TPO and assessee is in further

appeal before us.

10.2 It was contended by the learned AR that the loan was granted by

EKCL to EKC Dubai & EKC China from the proceeds of the FCCBs.

Funds received under FCCBs were interest free funds available with EKC.

In spite of such interest free funds available with EKCL, it has charged

interest at rate of 7% from the AEs and accordingly there is no additional

cost incurred by EKCL on such funds given to AEs. Further, the

contention of the learned AR was that funds were provided by EKCL for

its own benefits of financing its 100% subsidiary for growth of its business

in different countries and that loan so granted to EKCL was in nature of

quasi-equity. Our attention was invited to the loan granted to EKCL which

was converted into equity during the financial year 2011-12. Accordingly,

it was argued that loan was in the nature of equity investment, the benefits

from such investment were expected to arise to EKCL in future. Further

the argument of the learned AR was that the loan has been availed in
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ITA No.7073/2012

foreign currency and has been provided to the subsidiaries in foreign

currency. Hence, EKCL the loan should be considered to be at arm's

length as no risk is involved.

11. We had considered rival contentions and gone through the orders

of lower authorities. As per our considered opinion, appropriate

international rates should be used for the purpose of the comparability

analysis. For this purpose, the London Inter Bank Offer Rate (LIBOR) is

an internationally recognized rate for benchmarking loans denominated in

foreign currency. For this purpose, reliance may be placed on the

following decision of the coordinate bench :-

i) Great Eastern Shipping Co.Ltd (ITA No 397/M/2012) dated 10


January 2014;
ii) Mahindra & Mahindra Limited (ITA No 7999/M/2011) dated 8
June 2012;
iii) Hinduja Global Solutions Limited (ITA No 254/M/2013) dated 5
June 2013
iv) Aurionpro Solutions Limited (ITA No 7872/M/2011) dated 12
April 2013;
v) Aurobindo Pharma Ltd (ITA No 1866/Hyd/2012) dated 29
November 2013;
vi) Cotton Naturals (I) Pvt. Limited (ITA No 5855/Del/2012) dated 8
February 2013;

vii) Siva Industries and Holdings Ltd. vs ACIT, IT Appeal No. 2148
(Mds.) of 2010;

viii) Bharti Airtel Ltd (ITA No 5816/0el/201Z) dated 11 March 2014

ix) Infotech Enterprises Limited (ITA No 115/Hyd/2011) dated 16


January 2014;

x) Kohinoor Foods Ltd (ITA Nos 3688-3691/0el/2012 and ITA Nos


3868-3869/0el/2012) dated 21 July 2014; and

xi) Four Soft Ltd vs. OCIT, IT Appeal No. 1495 of 2011 (Hyderabad
Tribunal)
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ITA No.7073/2012

12. In light of the above decisions, the rate to be used for undertaking

an adjustment should be LlBOR and not the average yield rates

considered by the learned TPO. The LlBOR rate for March 2008 was

2.6798%. However the assessee has charged 7% from its AE as per the

internal CUP available. Thus, the assessee has charged interest to EKC

Dubai and EKC China at the rate higher than existing LlBOR rates.

Accordingly, the said transaction of providing loan to EKC Dubai and EKC

China is at arm's length. Additions made by the AO are accordingly set

aside.

13. In the result, appeal filed by the assessee is allowed in part, in

terms indicated hereinabove.

Order pronounced in the open court on this 25/09/2014.

25/09/2014

Sd/- Sd/-
( ) ( )
(VIJAY PAL RAO) (R.C.SHARMA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated 25/09/2014
/pkm, PS
Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. / The CIT(A), Mumbai.
4. / CIT
5. /
DR, ITAT, Mumbai
6. Guard file.
17
ITA No.7073/2012

//True Copy//

/ BY ORDER,

(Asstt. Registrar)
/ ITAT, Mumbai

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