The Income Tax Appellate Tribunal (ITAT), Mumbai Bench deleted ALP (Arm Length Price) adjustment of Rupees 18 lakhs thereby granting relief to Ambuja Cement Limited.
During the course of proceedings before the Transfer Pricing Officer (TPO), to whom the ascertainment of Arm’s Length Price of the international transactions entered into by the assessee with its AEs was referred, it was noticed that the assessee made instalment payments for two ships under BBCD (Bare Boat cum Charter Demise) from its AE- namely Cement Ambuja International Limited, Mauritius (CAIL).
These two vessels were self-loading bulk cement carriers, and the entire arrangement was routed through, and duly approved by, the RBI. It was noted that under the terms of arrangement, the assessee company was to pay to CAIL ten half-yearly instalments for both of these vessels, and the implicit interest rate, under the arrangement, was 7.5% p.a.
The TPO was of the view that the interest differential between the interest charged to the assessee and interest paid by the CAIL to Bank of America was mutually beneficial to the assessee as also the CAIL and should have been equally shared between the two.
The CIT(A) held that the interest transaction between the assessee and the CAIL needs to be benchmarked, and based on an average interest rate of LIBOR (six months average) plus 3.5% for borrowings of more than 5 years- as per RBI statistics and adopted the ALP at six months LIBOR plus 3.5%. Aggrieved the present appeal has been preferred.
A Bench comprising Pramod Kumar (Vice President), and Sandeep S Karhail (Judicial Member) observed that “In any event, the total ALP adjustment is less than Rs 20 lakhs, and the relevant financial period is almost 20 years ago, it may not even be appropriate to even remit the matter for fresh consideration at the TPO stage. Keeping in all these factors, as also the entirety of the case, in mind, we deem it fit and proper to delete the impugned ALP adjustment of Rs 18 Lakhs. The assessee gets the relief accordingly.”
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