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2019 (11) TMI 1045 - ITAT MUMBAITP Adjustment - interest on debentures invested in the Associated Enterprise (AE) - India–Mauritius tax treaty - HELD THAT:- No doubt, Chapter X containing the TP provisions is in the nature of anti avoidance provision to prevent avoidance/evasion of tax in relation to transaction between related parties. However, when the income itself is not chargeable to tax by virtue of the provision contained in the Tax Treaty, there is no occasion for any tax avoidance/evasion. In a recent decision in case of DCIT (International Taxation) Vs. M/s TMW ASPF i Cyprus Holding Company Limited [2019 (8) TMI 1430 - ITAT DELHI] the Coordinate Bench while considering identical issue of taxability of interest income on accrual basis by applying TP provisions held only the interest which has actually been received can only be subject matter of taxation and no TP adjustment can be made on some hypothetical receivable amount which was contingent upon certain event which has actually not been taken place during the year. The aforesaid decision of the Coordinate Bench squarely applies to the assessee’s case, since, not only the facts involved are more or less common but the relevant provisions of the applicable DTAAs i.e. Article 11(1) of both India–Mauritius and India–Cyprus treaties are identically worded. No contrary decision has been brought to our notice by the learned Departmental Representative. Even, the Revenue is unable to prove that interest on CCDs was actually received by the assessee. Therefore, we hold that the addition made on account of transfer pricing adjustment is unsustainable as the assessee has actually not received any interest income, hence, would be protected by Article 11(1) of India–Mauritius tax treaty. Since, the treaty provision is more beneficial to the assessee as per section 90(1) of the Act, it will override all other provisions of the Act. Additions made are deleted. - Decided in favour of assessee.
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