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2018 (5) TMI 1774 - AT - Income TaxAddition of interest payable/paid by the Appellant on Fully & Compulsorily Convertible Debentures (FCCD's) as issued by it to its Associated Enterprise (AE) - addition u/s 153A on account of interest on FCCDs - Held that:- In the present case, it is an admitted fact that the assessee filed the original return of income for the year under consideration on 30.09.2009 which was processed u/s 143(1) on 05.09.2010 and the time period to issue the notice u/s 143(2) had already expired before the search took place on 29.10.2013. During the course of search, no incriminating material was found relating to the FCCDs which were already shown by the assessee in its regular books of accounts. AO/TPO made the addition on account of differential interest on FCCDs undertaken with the AE, in our opinion, no such adjustment could have been made to the income which was already assessed prior to the date of search. Although the assessment was not framed u/s 143(3) but an intimation was issued u/s 143(1) of the Act, however, the time to issue the notice u/s 143(2) of the Act has already expired before the search. Therefore, for the purposes of Section 153A r.w.s. 153C an intimation u/s 143(1) of the Act was also an order of assessment. Since no incriminating material was found during the course of search. The addition made by the AO u/s 153A on account of interest on FCCDs was not justified. Addition on account of differential rate of interest on FCCD - assessee applied the interest rate on the basis of SBI PLR rate plus 300 basis points for the reasons that the FCCDs being unsecured and hybrid/quasi equity instrument as compared to plain vanilla loan instrument - AO/TPO restricted the interest rate to 12.25% - Held that:- The variance in the rate of interest as per TPO/AO to be adjusted and added was 3.75% which was within the permissible range of 5% as permitted by second proviso to Section 92C(2). It is also relevant to point out that the percentage of 3% in the aforesaid proviso has been inserted by the Finance Act, 2012 w.e.f. 01.04.2013 and prior to that amendment, this percentage was at 5%. Since the difference is less than 5%, therefore, no addition on account of arm’s length price could have been made by the AO/TPO. As such on merit also, no addition could have been made. - Decided in favour of assessee
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