Sec. 92C of Income Tax Act, 1961—Transfer Pricing—Approach adopted by TPO to benchmark the same international transaction in two different ways in the hands of two different taxpayers for the same assessment year signifies arbitrariness in the action of the TPO.

Facts:Aggrieved by the order of AO/TPO, assessee went on appeal before Tribunal and raised the ground that are directed against the arm’s length price adjustment made by AO in respect of receipt of interest on loans and advance granted to AT&S India.

Held, that lending money is not one of the main businesses of the assessee (AT&S Austria) and AT&S India being a wholly-owned subsidiary of the assessee, the assessee is not exposed to significant credit risk in respect of the loan made to AT&S India. Therefore, the credit rating of AT&S India would broadly be the same as that of the assessee. Hence, the DRP was not justified in adding credit spread of 450 basis points to LIBOR, while determining the arm’s length interest rate in respect of loan and advance. DRP did not mention in his order comparability analysis prescribed under clause (a) of sub-rule (1) of rule 10B of the Income-tax Rules, 1962. The Legislature has never shown an intention to treat the same international transaction in two different ways in the hands of two associated enterprises such that there would be arm’s length price adjustment at least in the hands of one of the associated enterprises. Hence, the approach adopted by the DRP/TPO is not acceptable. In the assessee's case, the DRP did not mention in his order the comparability analysis prescribed under clause (a) of sub-rule (1) of rule 10B. The DRP did not bring on record any comparable uncontrolled transaction under the CUP Method for substantiating that the interest rate of LIBOR plus 450 basis points conformed to the arm’s length standard under the CUP Method. Therefore, taking into account these facts and circumstances as narrated above we delete the upward adjustment of INR 3,13,68,273/- to the income of the assessee. - AT & S AUSTRIA TECHNOLOGIE & SYSTEMTECHNIK AKTIONGESELLSCHAFT V/s DY. CIT - [2020] 182 ITD 143 (ITAT-KOLKATA)