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         Nature of Transaction     Amount (Rs.)
         Sale of material           80,41,01,594
         Purchase of material        6,31,40,264
         Interest received on loan     26,52,961
         Conversion of loan into     5,33,61,000
         Equity shares
         Repayment of loan           1,19,32,985

2.1 The Assessing Officer referred the matter of determination of the Arm's Length Price (ALP) of the International Transaction to the Ld. Transfer Pricing Officer (TPO). After considering the transfer pricing study of the assessee and submission on the issues raised, the Ld. TPO rejected the benchmarking done by the assessee for the interest on loan advanced to the AE and applied Weighted Average Cost of Capital (WACC) to determine the arm's length price following his own order for assessment year 2012-13. The Ld. TPO also observed that, the assessee did not charge interest on receivables from the AE. The Ld. TPO examined the invoices raised during the year and outstanding at the year-end from its AE and treated the delayed payment received on such invoices as unsecured loan advanced to the AE, for the period of the delay in respect of the payment beyond the industry standard period and also in respect of invoices raised in earlier years which remains unpaid, on a daily basis of six-month LIBOR rate along with 400 basis point as the most appropriate comparable uncontrolled price (CUP) for calculation of transfer pricing adjustment. The Ld. TPO also allowed set off for the amount paid beyond 30 days while calculating interest payable on receivables and thereby making an adjustment of Rs.1,35,21,926/-on account of outstanding receivables. In this manner, the Ld. TPO computed the transfer pricing adjustment as under:

(ii) The loan offered by CITI bank was priced with the base rate of LIBOR but the appellant had arbitrarily fixed the rate of interest @ 5.5% , thus, for correct analysis of conversion of LIBOR rate into INR rate, through currency swap should have been performed.

3.4 The Ld. DRP upheld the adjustment but restricted the rate of interest to 7.74% as against 13.27% by holding that 6 months LIBOR for the period as 4.72%, therefore, the average rate should have been adopted at 7.74%.

3.6 The ld. DR, on the other hand, relied on the order of the TPO and DRP.

3.7 We have heard the rival submission and perused the relevant material on record. In the TP documentation for the instant year, the appellant had submitted that the transaction was at Arm's Length Price on the basis that the AE's bank interest rate was LIBOR+2% on loan raised from "CITI bank" and since average rate of one month LIBOR for the year was 0.23, therefore, average rate charged by CITI bank is 2.23%, which is less than the interest charged @ 5.5% by assessee for loan advanced to AE, and therefore the transaction is at ALP by applying the CUP method. The TPO/DRP in the impugned order have merely borrowed from the order for assessment year 2012- 13 and not rejected the aforesaid analysis done by the appellant in any manner. On the contrary, the learned CIT(A) in the order for Assessment year 2012-13 had held as under:

"The assessee had entered into a loan agreement dated 10.12.2007 with Act. The terms of the agreement mentioned that the borrower shall pay interest on all amounts disbursed and outstanding under the loan agreement at simple rate of 5.50% per annum. The borrower shall repay the principal of each disbursement after a period of 3 years. The borrower may from time to time prepay all or a minimum principal amount of USD 25000.

The assessee earned Rs. 29,34,855/- as interest on loan during the year. The assessee applied CUP method for comparing the international transaction; whereas the TPO accepted the method but has applied rate of interest of 13/27% on the loan advanced to determine the arms length price. The appellant company would like to submit that the interest rate of 13.27% determined by the TPO as the most reasonable and appropriate rate is not based on a valid comparable. ACT is paying interest rate at the rate of Libor+2% on loan taken by it from Citi bank. The average rate of one month LIBOR for the year was 0.23 and to which a spread of 2% is added so average rate charged by Citi bank is 2.23% whereas interest charged by Parveen to ACT for loan given by it is 5.5%. From the above, the transactin can be considered to be at arm's length from an Indian transfer pricing perspective.