Saktijit Dey, Member (J) - (1.) AFORESAID appeal of assessee is directed against assessment order dated 18/10/2010 passed u/s. 143(3) read with section 92CA and 144C of the IT Act in pursuance to the directions of the Dispute Resolution Panel (DRP) pertaining to the AY 2006 -07.
(2.) ASSESSEE in total has raised 11 grounds. Ground No. 11 being general in nature does not require any specific adjudication. At the outset ld. AR submitted that as per the instruction of assessee, he does not want to press ground No. 8. Accordingly, ground No. 8 is dismissed as not pressed. Ground No. 1 reads as under: "The Dispute Resolution Pane erred in directing the AO to make an adjustment of Rs. 8,180.307 to the interest charged by the assessee company in respect of short term facility granted to its subsidiary Matrix Laboratories NV, Belgium, (Associated Enterprise) by adopting interest rate of 7.2476% as against interest rate of 3.3336% per European money markets adopted."
(3.) BRIEFLY the facts relating to the aforesaid ground are, assessee a company is engaged in the business of manufacturing and sale of pharmaceutical drugs. For the AY under consideration, assessee filed its return of income on 29/11/2006 declaring loss of Rs. 24,36,51,137 under normal provisions and book profit of Rs. 1,24,70,16,779 u/s. 115JB of the Act. However, during the assessment proceeding, assessee filed a revised computation by declaring loss at Rs. 23,86,10,109 under normal provisions and book profit of Rs. 1,41,72,00,425 u/s. 115JB. In course of the assessment proceeding, AO noticed that assessee has entered into certain international transactions with its AE by advancing a loan of Euro 1,46,10,390 for four months during the year to its 100% subsidiary Matrix Laboratories NV in Belgium against which assessee has charged interest at EURIBOR + 75 basis points which worked out to 3.3336% per annum. To find out whether the interest charged by assessee on the loan advanced is at arm's length, AO made a reference to the Transfer Pricing Officer (TPO) for determining the arm's length rate of interest. The TPO, however, did not agree to the rate of interest charged by assessee on the loans advanced to the subsidiary. The TPO was of the view that as per the prevailing market rate of loan advanced in India, the rate of interest should be benchmarked at 14%. Accordingly, TPO determined arm's length rate of interest at 14% per annum on the amount advanced, which worked out to Rs. 2,99,44,024 resulting in transfer pricing adjustment of Rs. 2,27,25,240. Accordingly, in the draft assessment order, AO proposed addition of Rs. 2,27,25,240 on account of TP adjustment. Being aggrieved of the addition proposed, assessee made objections before the DRP.;