PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated

27.11.2014 passed by the DCIT, Circle-6(2), New Delhi u/s 143(3) r.w.s. 144C of the I.T. Act for the assessment year 2010-11.

2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and export of Readymade Garments. It filed its return of income on 30.09.2010 declaring total income of Rs.35,60,774/-. The Assessing Officer referred the matter to the TPO u/s 92CA(3) for computation of arms length price of the international transactions entered into by the assessee. The TPO, during the course of TP assessment proceedings, observed ITA No.6910/Del/2014 that the assessee has reported the following international transactions in Form No.3CEB :- Name of the AE Nature of transactions Amount (Rs.) JPC Equestrian Inc. Sale of goods 27490618 JPC Equestrian Inc. Interest on Loan 1990626

3. He observed that the ownership structure of the assessee as on 31.03.2010 is as under :- Shareholders No. shares % of holding Varun Sharma 995000 50% Tokie Sharma 995000 50%

4. He further observed from the TP documentation that the assessee has advanced foreign currency loan to its subsidiary JPC Equestrian Inc., the details of which are as under :- Amount of Loan USD 10,50,000 Interest Receivable Rs. 19,90,626 Effective interest 4%

5. He observed that the assessee has benchmarked the interest using CUP method. He, therefore, asked the assessee to justify such interest on the loan given to the subsidiary. Rejecting the various arguments advanced by the assessee, the TPO made an upward adjustment of Rs.56,68,724/- on the following :- (a) Interest on Foreign Currency Loan - Rs.54,14,503/- ITA No.6910/Del/2014 (b) Receivables - Rs.2,54,221/-

6. The assessee approached the DRP, who vide order dated 29.09.2014 directed the Assessing Officer to adopt the figure of Rs.49,35,541/- as against the upward adjustment of Rs.54,14,503/- made by the Assessing Officer in the draft assessment order as determined by the TPO. So far as amount receivables is concerned, the DRP directed to substitute the same at Rs.1,98,058/- in place of Rs.2,54,221/- as determined by the Assessing Officer in the draft assessment order. Thus, in effect, the adjustment made by the TPO at Rs.56,68,724/- was revised to Rs.51,33,599/-. The Assessing Officer accordingly passed the order on 27.11.2014 making addition of Rs.51,33,599/- to the returned income as shown by the assessee at Rs.35,60,774/-.

7. Aggrieved with such order of the Assessing Officer/TPO, the assessee is in appeal before the Tribunal by raising the following grounds :-

1. On the facts and circumstances of the case, the order passed by the learned AO under Section 143(3) read with Section 144C of theis bad both in the eye of law and on facts.

2. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law in making assessment at an income of Rs. 86,94,370/- as against income of Rs. 35,60,774/- declared by the assessee.

3. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making addition of Rs.51,33,599/- as difference in arms length price determined by Transfer Pricing Officer (TPO) in pursuance of DRPs order and the appellant. 4(i). On the facts and circumstances of the case, the learned AO has erred, both on facts and in law in making to make the above said addition in total disregard to the order of Honble ITAT in assessees own case for the Assessment Year 2007-08 & 2008-09. (ii). That the AO has erred in making the addition despite the fact that the transaction being in pursuance of the same agreement, the facts remaining the same, the order of the Honble ITAT is binding on him. 5(i) On the facts and circumstances of the case, the learned AO has erred, both on ITA No.6910/Del/2014 facts and in law in making the to make addition of an amount of Rs. 49,35,541/- on account of difference in arms length price on the transaction of interest on loan given to the subsidiary. (ii) On the facts and circumstances of the case, the Honble DRP erred in determining the reasonable interest rate @ 14.75% per annum as against 4% determined by the assessee based on transfer pricing study. (iii) On the facts and circumstances of the case, the Honble DRP erred in applying the safe harbour Rule while determining the abovesaid rate of interest despite the fact that the said Rules are not applicable to the relevant assessment year. (iv) On the facts and circumstances of the case, the learned TPO has erred both on facts and law in making comparison with uncomparables like government bonds and topping it up with the various considerations ignoring the fact that the assessee has given loan to an associated enterprise which happens to be a subsidiary in a foreign country. (v) On the facts and circumstances of the case, the learned TPO has erred both on facts and law in making a comparison with the foreign currency loan advanced by an Indian bank to an Indian entity and topping it up with various considerations ignoring the fact that com parables have to be placed in a similar situation and circumstances, that is, the rate of interest prevalent in the country in which the amount has been advanced.

6. On the facts and circumstances of the case, the Honble DRP erred in ignoring the contention of the assessee that the loan having been advanced at a fixed rate way back in the year 2002 & 2003, the interest rate cannot be varied or changed in the year under consideration. 7(i). On the facts and circumstances of the case, the Hobble DRP has erred, both on facts and in law in making to make addition of an amount of Rs. 1,98,058/- on account of interest on export proceeds receivable. (ii) That the above addition has been proposed ignoring the fact that there is no provision of notional interest on such transactions under the.

8. That the above said addition has been made ignoring the detailed transfer pricing study made by the appellant for determining the arms length price.

9. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making the above-said addition without qualifying comparable instance for rate of interest on the comparable transaction.

10. On the facts and circumstances of the case, the learned AO has erred both on facts and in law ignoring the contention of the assessee that the variation of 5% plus-minus arms length interest determined will not be applicable in the case of the assessee ignoring the specific provisions of the.

11. That the appellant craves leave to add, amend or alter any of the grounds of appeal.

8. Ld. counsel for the assessee referred to the loan agreements, copy of which is placed at page 1 to 13 of the Paper Book and submitted that the loan was advanced at a fixed rate way back in the year 2002-03 and, therefore, theA No.6910/Del/2014 interest rate cannot be varied or changed in the year under consideration. Referring to the order of the DRP, ld. counsel for the assessee drew the attention of the Bench to the following observations :-

DRP findings :- This panel has carefully considered the submissions of the taxpayer and the arguments of the TPO and gives the following findings:

1. It is seen that Delhi Bench of Honble ITAT has passed order dated 13- 10-2013 impinging on the issue for the AY 2007-08. This Panel has verified from the TPO and it has been informed that Department has preferred appeal against the said order of Honble ITAT. Accordingly, this Panel is constraint not to follow the order of Honble ITAT.

9. He submitted that the appeal filed by the Department before the Honble Delhi High Court has been dismissed vide ITA No.233/2014 order dated 27.03.2015, copy of which is placed at pages 61 to 82 of the Paper Book. Referring to page 14 to 50 of the Paper Book, he submitted that the Tribunal in assessees own case for assessment year 2008-09 has decided the issue in favour of the assessee by holding that the adjustment suggested by the TPO is not warranted on this issue. The Revenue has not filed any appeal. Therefore, it has attained finality.

10. So far as assessment year 2009-10 is concerned, he submitted that no adjustment has been made. In assessment year 2011-12, the DRP and Assessing Officer has accepted the plea of the assessee on this issue and has not made any adjustment by following the decision of the Honble Delhi High Court in assessees own case. He accordingly submitted that the adjustment sustained by the DRP for this year has to be deleted. ITA No.6910/Del/2014

11. Ld. DR on the other hand heavily relied on the order of the Assessing Officer/TPO/DRP.

12. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Tribunal, in assessees own case for assessment year 2008-09 vide ITA No.5855/Del/2012 order dated 08.02.2013 from para 11 onwards has decided the issue in favour of the assessee by observing as under :-

11. We have carefully considered the submissions and perused the records, we find that the assessee company in this case is a leading manufacturer of rider apparel. Assessee entered into international transaction as under:- Equestrian Apparel sold to JPC Equestrian Inc Rs.48191540/- Loan provided to JPC Equestrian Inc 10,50,000 $

12. As per the TP document, CUP method has been chosen to bench mark the sale of apparel as well as interest received on loan. The TPO accepted the assessees submission qua sale of apparel that the same was at arms length. As regards interest the assessee mentioned that it has received interest at a rate of 4% which was comparable with the export packing credit rate obtained from independent banks in India. The TPO was not in agreement with the above contention of the assessee. He observed that it is to be seen that what the assessee would have earned by giving loans in the Indian market. He noted that lending or borrowing is not one of the main business of the taxpayer. He opined that what is to be considered is the prevalent interest that could have been earned by advancing a loan to an unrelated party in India with the same financial health as that of the tax payers subsidiary. The TPO further observed that the taxpayer has not submitted the financial of the subsidiary, hence the financial healthy of the subsidiary cannot be judged. The TPO further noted that while deciding the interest rate that may be charged on receivables from AEs, Libor rate for calculating interest is not proper. He opined that instead of US rate, Indian rate is to be adopted. He observed that an independent person in India would expect the maximum return on its investment, and if the lending rate is higher in Indian currency then he would not lend in foreign currency where the lending rate is not so attractive. The TPO further noted that it should not be forgotten that, had the AE of the assessee company would have got loan from any bank or financial institution in the place of residency at Libor rate, then why it did not avail of loan at such a rate. Assessing Officer observed that, no company in India would like to invest in the form of loan outside India and that also without security as the interest returns in India would be higher than those prevailing in developed markets. Finally, Assessing Officer held that interest rate at 17.26% would be fair and reasonable.

13. Before the DRP assessee inter-alia contended that comparison has to be made with respect of advance or loan in USA and not based on Indian conditions. The ITA No.6910/Del/2014 comparison could also be with rate of interest being paid by the multinational companies or banks in respect of money borrowed from India. However, the DRP agreed with TPOs point of view. But, it held that further addition on account of security is not needed. It opined that Arms length interest rate may be taken as the PLR of RBI for the financial year 2007-08. In accordance with the above decision, the TPO adopted 13.25% as the rate of arms length interest rate.

14. We note that CUP method is the most appropriate method in order to ascertain arms length price of the international transaction as that of the assessee. We agree with the assessees contention that where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable transactions, therefore, was of foreign currency lended by unrelated parties. The financial position and credit rating of the subsidiaries will be broadly the same as the holding company. In such a situation, domestic prime lending rate would have no applicability and the international rate fixed being LIBOR should be taken as the benchmark rate for international transactions.

15. The above view is duly supported by following case laws relied upon by the assessees counsel. In Siva Industries and Holding Ltd. vs. ACIT Supra it was held by ITAT that the assessee had given the loan to the associate enterprise in U.S. dollars, and in such a situation when the transaction was in foreign currency, and the transaction was an international transactions, then the transaction would have to be looked upon by applying the commercial principles in regard to international transactions. In such a situation domestic prime lending would have no applicability and the international rate fixed being LIBOR rate would have to be adopted.

16. Similar view as above was expressed by theAT in the case of M/s Four Soft Ltd., Hyderabad vs. DCIT Supra, Dy. C.I.T. vs. Tech. Mahindra Supra, Tata Autocomp Systems vs. ACIT Supra.

17. We further note that assessee has arrangement, for loan with Citi Bank, for less than 4%. However, for loan provided to its AEs it has charged 4% p.a. interest. Hence, adjustment suggested by the TPO is not warranted.

18. We further note that assessees profits are exempt u/s. 10B. Hence, there is no case that assessee would benefit by shifting profits outside India. This view is supported by Bangalore Tribunal decision in this case Philips Software Centre P Ltd. vs. ACIT Supra and Mumbai Tribunal in the case of I.T.O. vs. Zydus Altana Health Care P Ltd. Supra.

19. We further note that in this case the loan agreement was for fixed rate of interest. The LIBOR has been accepted in decision referred above as the most suitable bench mark for judging Arms length price in case for foreign currency loan. Hence, adjustment as made by the TPO is not warranted.

20. In the background of the aforesaid discussions and precedents, we hold that the rate of interest charged by the assessee for the loans transactions with the AE was Arms Length Price. Hence, no transfer pricing adjustment is called for.

21. In the result, the Assessees appeal is allowed.

13. We find following the above decision the Tribunal in assessees own case for assessment year 2007-08 vide ITA No.3265/Del/2011 order dated

30.10.2013 has allowed the appeal of the assessee. We find when the Revenue ITA No.6910/Del/2014 filed an appeal against the order of the Tribunal, the Honble Delhi High Court vide ITA No.233/2014 order dated 27.03.2015 dismissed the appeal filed by the Revenue. We further find the DRP in assessees own case for assessment year 2011-12 directed the Assessing Officer to delete the adjustment towards interest of loan by observing as under :-

Grounds no.4 and 5 challenge the adjustment towards interest on loan. The assessee has contended that this issue has been decided in its favour by the Honble Delhi High Court in the assessees own case (CIT v Cotton Naturals (I) Pvt. Ltd. 2015-TII-09-HC-DEL-TP). The assessee stated that the facts this year, are the same as in the year, in which a similar adjustment has been deleted by the Honble High Court. The assessee stated that the loan on which interest adjustment has been made is also the same. Respectfully following the decision of the Honble High Court in the assessees case, the AO is directed to delete the adjustment towards interest on loan.

14. In view of the consistent decisions of the Tribunal for assessment years 2007-08 and 2008-09 and in the light of the direction of the DRP for assessment year 2011-12 and considering the fact that no adjustment was made on account of interest on loan given to the subsidiary for assessment year 2009-10, we are of the considered opinion that no addition is called for on account of difference in arms length price on the transaction on account of interest on loan given to the subsidiary. The grounds raised by the assessee are accordingly allowed.

15. So far as grounds no.7 and 8 are concerned, the said grounds relate to the addition on account of the interest on export proceeds receivable.

16. Ld. counsel for the assessee at the outset submitted that a rectification application u/s 154 is pending before the Assessing Officer and the same is yet to be decided. He further submitted that before the DRP the assessee had ITA No.6910/Del/2014 submitted that there is no international transaction on account of interest on export proceeds receivables and there was some calculation error.

17. Ld. DR on the other hand submitted that since the petition u/s 154 is pending before the Assessing Officer, the same may be restored to the file of the Assessing Officer for deciding the issue afresh.

18. After hearing both the sides, we find the rectification application filed before the Assessing Officer u/s 154 is pending. It is the submission of the ld. counsel for the assessee that there was some calculation error and there is no international transaction at all on account of receivables. Considering the totality of the facts of the case and considering that the rectification application is pending before the Assessing Officer which is yet to be disposed of, we deem it proper to restore this issue to the file of the Assessing Officer for fresh adjudication. The grounds no.7 and 8 are accordingly allowed for statistical purposes.

19. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on this 04 th day of December, 2017. Sd/- Sd/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 04-12-2017. ITA No.6910/Del/2014 Sujeet Copy of order to: -

1) The Appellant

2) The Respondent

3) The DRP-I, New Delhi

4) The DR, I.T.A.T., New Delhi By Order //True Copy// Assistant Registrar ITAT, New Delhi