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2022 (11) TMI 1323 - AT - Income TaxTP adjustment - interest expenditure incurred on the CCD's issued by it to its non-resident AE - re-charactering and concluding that CCDs issued by the assessee are in the nature of equity investments - HELD THAT:- The new section 94B of the I.T.Act is applicable with effect from 01.04.2018, and hence is applicable for the impugned assessment year, namely, A.Y. 2018-2019. Section 94B of the I.T.Act is different from transfer pricing provisions contained in sections 92 to 92F of the I.T.Act. The transfer pricing provisions deal with the determining the arm's length rate of interest payable on a debt-claim from an AE. In contrast, section 94B of the I.T.Act places a blanket threshold on the deductibility of interest paid, based on the profitability of the Assessee and not based on the debt-claim itself. Assessee did not comply with the provisions of section 94B of the I.T.Act to suo moto disallow the interest on CCD while computing the taxable income in the income tax return filed for the impugned AY (probably due to oversight). The assessee failed to appreciate that the same definition of AE as per sub section (1) and sub section (2) of section 94A is referred in section 94B of the I.T.Act and hence interest on CCD paid to PIL, who being a deemed AE as per the provisions of section 94A(2)(C) of the I.T.ACt, also comes under the purview of section 94B - In the light of the aforesaid reasoning and the impugned TP adjustment with respect to payment of interest on CCD is deleted. However, the disallowance is liable to be made u/s 94B of the I.T.Act. Appeal filed by the assessee is partly allowed.
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