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2021 (4) TMI 1348 - AT - Income TaxTP Adjustment - benchmarking the interest payment - assessee has considered arms length value of interest at the rate of 11.96% - whether differential amount of interest not be considered for adjustment under ALP? - HELD THAT:- As the associate company invested in the assessee company by subscribing to fully convertible debentures considering the risk factors to invest in the start-up company like assessee company. It clearly indicate that it has invested only in fully convertible debentures and not regular debentures. It shows that the risk factor was already considered and mitigated to offset the risk element in investing in the assessee company, we are not in agreement with the submissions of the assessee that no Indian bank will invest in the start-up company like the assessee having the risk factors. It is not brought on record assessee has really approached any Indian bank for such proposal. It is in the interest of the associate enterprise to invest in the start-up companies, in which it has interest and wanted to expand the business in India. To invest in associated enterprise like assessee company, no parent company for that matter associate enterprises will analyze the risk factor similar to banks. As discussed above risk factor can never play an important element in benchmarking the transaction with the associate enterprises, it doesn’t matter how risky the venture is. Benchmarking has to be done based on the prevailing market rate which a normal bank would lend money with the minimum risk. Since the assessee has already mitigated the risk by investing in the fully convertible debentures when the risk is already mitigated one more time the same risk element cannot be considered for bench marking on the interest payment also. We are in agreement with the findings of the Ld CIT(A) therefore the grounds of appeal raised by the assessee in both the appeals are dismissed. Appeals filed by the assessee are dismissed.
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