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Name of associated enterprise                                  Amount of Rs.
(i) Kalpataru power transmission (Mauritius Ltd.)              Rs. 14,70,994/-
(ii) Kalpataru Power transmission (Nigeria Ltd.)               Rs. 37,46,789/-.

6. The TPO noted that no interest was charged on these advances given by the assessee to the AEs. Accordingly show cause notice was issued to the assessee proposing to make adjustment on account of interest on the loans using LIBOR rate of 4.16% in respect of the Mauritius loan and 4.03% in respect of the Nigeria loan. Ld.Counsel pointed out that the assessee had pleaded no such adjustment to be made on the ground that they were not in reality loans but were quasi capital in nature and were given interest free out of commercial expediency since the AEs were subsidiaries of the assessee floated to explore various business opportunities for the assessee only. That notional interest could not be assessed in the context of transfer pricing. The A.O. however rejected all the contentions of the assessee relying on the decision of the ITAT Delhi Bench in the case of Perot Systems TSI vs. DCIT (ITAT Delhi) and bench marked the transmission for interest to be charged thereon @ 4.16% in respect of the Mauritius loan and 4.03% in I.T.A No. 2471 & 2853/Ahd/2017 & Ors. A.Y. 2012-13 & 2013-14 Page No 4 Kalpataru Power Transmission Ltd. . vs. DCIT respect of the Nigeria loan accordingly proposing an adjustment of Rs. 2,52,390/- (Rs. 87,279 + Rs. 1,65,040) respectively for the two loans. The proposed adjustment was made by the A.O. in his order passed u/s. 143(3) of the Act.

The facts of the appellant's case being identical, addition of Rs.2,52,391/- made on short term advance to its overseas subsidiaries is held justified and is hereby confirmed. Relevant ground of appeal is rejected.

8. Before us, the Ld. Counsel for the assessee reiterated the contentions made before the lower authorities that the impugned advances were in the nature of quasi equity capital since they were given to the subsidiaries which were floated to explore business opportunities in their respective regions; the advances had no repayment schedule and was granted without any condition for repayment and further that the loans were given for commercial purposes and was not a simplicitor loan or advance given to the wholly own subsidiary. Heavy reliance was placed on the decision of the ITAT Ahmedabad Bench in the case of Micro Inks Ltd. vs. ACIT (2013) 144 ITD 610. Our attention was drawn to the contents of the said decision which was placed before us at Paper Book page no. 400 to 436. Taking us to Para 14 & 15 of the said decision, it was pointed out that in the case of Perot System TSI (India) Ltd vs Dy. CIT (2010) 37 SOT 358 (Delhi) identical issue was discussed and it was pointed out that the argument of loan being I.T.A No. 2471 & 2853/Ahd/2017 & Ors. A.Y. 2012-13 & 2013-14 Page No 6 Kalpataru Power Transmission Ltd. . vs. DCIT quasi capital in nature was rejected on facts since there was no material on record to establish so. From Para 15 of the order, it was pointed out that the Bench noted that in the facts of the case before it,(Micro Inks) ,it had been demonstrated that the loan was given in place of capital contribution which required the RBI permission. When the RBI permission was ultimately obtained the loan was converted into shares effective from the date when the loan was given. It was also noted by the Bench that the entity which received the interest free advance was not only wholly owned subsidiary of the assessee but also played a significant role in its sales and distribution chain. That in this backdrop the Bench noted that lending of money could not be considered in isolation with these business considerations, and the relationship between the assessee and its AE was not simply that of a lender or borrower. Going forward the Bench thereafter dealt with the applicability of the LIBOR rate for the ALP of interest to be charged on such transaction in the backdrop of these facts and held that even in terms of Rule 10(B)(i) for the computation of ALP under the CUP method, the price is to be adjusted to account for difference between the International Transaction and the CUP method and considering the differences between the circumstances in which LIBOR is applied and the nature of the transaction before the Bench, it was held that the application of LIBOR rate would not be appropriate.

9. Submissions in brief on the issue were filed before us as under:

Appellant' Proposition • Advance is in nature of quasi-equity capital since I.T.A No. 2471 & 2853/Ahd/2017 & Ors. A.Y. 2012-13 & 2013-14 Page No 7 Kalpataru Power Transmission Ltd. . vs. DCIT • Appellant floated these subsidiaries to explore business opportunities in respective regions • Short term interest free advance granted to easily repatriate money back to India once the entities start earning revenue • Advance has no repayment schedule and granted without any condition for repayment • Refer Page 204 to 205 of Paper Book & Page No 701 to 702 of Paper Book • Reliance placed on decision of ITAT Ahmedabad in case of Micro Inks Ltd. v. Asstt. CIT [2013] 144 ITD 610 (Refer Page No 702 to 704 of Paper Book) • Decision of Perot Systems TSI (India) Ltd vs DCIT 37 SOT 358 2010 not applicable (Refer Page No. 702 of Paper Book) • Argument of quasi-equity capital rejected on the basis of facts • Core legal issue i.e. whether ALP adjustments will also be warranted in case of interest free loans given as quasi capital, was left open • There was no material on record to establish that the loans were in reality not loans but were quasi-capital • Without prejudice to above, application of LIBOR + rate for arm's length price determination in case of short-term advance is not permitted. Reliance is placed on decision of ITAT Ahmedabad in case of Micro Inks Ltd. v. Asstt. CIT [2013] 144 ITD 61 • LIBOR is an inter-bank offer rate and is applicable between 2 banks • Such rate charged between banks cannot be made a basis to determine ALP of short-term advance • In any case, if LIBOR is to be applied, appropriate adjustments must be allowed as per Rule 10B(3)(ii) • If differences mentioned in Rule 10B(2) are not removed by way of adjustments under Rule 10B(3), then such ALP determined is bad in law I.T.A No. 2471 & 2853/Ahd/2017 & Ors. A.Y. 2012-13 & 2013-14 Page No 8 Kalpataru Power Transmission Ltd. . vs. DCIT • Reliance placed on CLSA India (P.) Ltd. vs. DCIT [2019] 101 taxmann.com 388 wherein it is held that ALP would be on adhoc basis and void if appropriate adjustments not made for removing the differences.

11. In view of the above, the main argument of the assessee against the transfer pricing adjustment made on account of the short term advances given to its subsidiaries in Mauritius and Nigeria, fails. The assessee being unable to demonstrate that the advances were not in the nature of loan/advance but were quasi capital in nature and for commercially expedient purposes of the assessee and hence the LIBOR rate could not be applied to them for the purposes of making ALP adjustment on the interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. is not applicable to the assessee . The assessee being unable to I.T.A No. 2471 & 2853/Ahd/2017 & Ors. A.Y. 2012-13 & 2013-14 Page No 9 Kalpataru Power Transmission Ltd. . vs. DCIT establish with evidence the parity of facts as noted by the ITAT in the said case, of the advance being in the nature of quasi capital given to safeguards the business interest of the assessee, the said decision is of no assistance to the assessee. The advances therefore we hold are in the nature of loans and since no interest has been charged by the assessee on the same, the transfer pricing adjustment made by charging interest applying LIBOR is, we hold, justified.