TMI Blog2016 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable instruments and submitted the same as additional/supplementary analysis vide letter dated 27.04.2016 which indicated that the average coupon rate of comparable instruments issued in Real Estate Industry was 14.50% as compared to the average coupon rate of 12.39% of all the instruments issued during the year, which is evident from Annexure 1 attached with the letter dated 27.04.2016. The assessee had also claimed to have collected the details of interest rate offered by nationalized banks in India to the borrowers having similar credit rating as that of the assessee vide Annexure 4 of the letter dated 27.04.2016, first time before this bench of the Tribunal and as per the said document the average lending rate was computed at 13.66%, the assessee claimed that the international transaction of payment of interest on CCD’s entered into by it was at arm’s length. Since the aforesaid documents furnished by the assessee first time before the Tribunal are relevant to resolve the present controversy and the assessee had reasonable cause not to furnish the same before the authorities below because those were not available at the time of framing the assessment or the proceedings be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Rules, 1962, and conducting a fresh economic analysis to determine the arm's length price in contravention of Rule 10B(1)(a) r/w Rule 10B(2). 6. That the AO/ DRP/ TPO has erred, in law and in facts, in arbitrarily disregarding the actual transaction undertaken and structured by the appellant without fully appreciating the business and economic reasons of such transaction. 7. The AO/DRP/TPO has erred on facts and in law in applying L1BOR rate considering the rupee denominated Compulsorily Convertible Debentures (CCDs) as External Commercial Borrowings (ECBs) instead of rupee denominated CCDs. The DRP failed to appreciate that borrowings were made in the Indian currency and therefore interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has been taken. 8. Without prejudice, the AO/DRP/TPO has erred on facts and in law in not allowing the benefit of risk factor and other expenses like commitment fees, prepayment fees, foreign currency risk hedging cost, withholding taxes etc. 9. Without prejudice to the above grounds, the AO has erred on the facts and in law, in adding the disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, the AO noticed that the assessee had undertaken the following international transactions: Name of AE Nature of Transaction Value(Rs.) Method Brahma Opportunities D. Ltd. Allotment of Share 9999850 CUP Brahma Opportunities D. Ltd. Receipt of Share Capital Money subsequently allotted as Equity Share Capital during FY 2011-12 619999800 CUP JM Asian Cyprus B. Ltd. Allotment of 12% compulsory convertible debenture 70866571 CUP Neptune Asian Cyprus A Ltd. Allotment of 12% compulsory convertible debenture 45698476 CUP 6. The AO referred the matter to the Transfer Pricing Officer u/s 92CA of the Act. The TPO passed the order dated 28.01.2015 and proposed the adjustment of ₹ 8,29,55,458/- on account of Arm s Length Price. In the present case, the assessee during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic market. Thus as can be seen from above, while borrowing money by X (in India) from Y (outside India), the interest rates are benchmarked with LIBOR and the interest rate above LIBOR is decided by the stand alone credit rating of X. On the contrary, no company in India would like to invest in the form of loan outside India and that also without security as the interest returns in India would be higher than those prevailing in developed markets. Thus while lending money by X (in India) to Y (outside India), the interest rates would be bench marked against those prevailing in India for investing in corporate bonds (which are without security). Thus the benchmarking rate for lending would be different from that of borrowing. 8. The ld. Counsel for the assessee submitted that the TPO himself stated in his order that prevailing market conditions, volatility, period, forward premium, period of loan, USD/INR forward premium/discount, availability of foreign currency, cost of rupee resource, credit rating etc. were important factors which needed appropriate adjustments while determining the ALP and that the basic principle to be followed is that the currency in which the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cotton Naturals (I) Ltd., ITA No. 233/2014 (Del. HC) CIT Vs Tata Autocomp Systems Ltd., ITA No. 1320/2012 (Mum. HC) Bharti Airtel Ltd., ITA No. 5816/Del/2012 (ITATDel) M/s Aithent Technologies Pvt. Ltd. Vs ITO, ITA No. 3647/Del/2007 (ITAT Del) 9. It was contended that the adjustment had been proposed in violations of the law and thus, ought to be deleted. It was contended that the assessee has also carried out analysis on BSE database, which provides the details of comparable instruments. The assessee requested to admit the same as an additional/supplementary analysis vide letter dated 27.04.2016. The said analysis indicated that the average coupon rate of comparable instruments issued in Real Estate Industry is 14.50% as compared to the average coupon rate of 12.39% of all the instruments issued during the year. A reference was made to Annexure 1 of the letter dated 27.04.2016. It was further submitted that the assessee produced the details of interest rate offered by nationalized banks in India for the borrowers having similar credit rating as of the assessee and the average lending was computed at 13.66%, which again support and substantiate the arm s l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment which was recommended by the TPO. It was also submitted that the ld. DRP has considered all the objections of the assessee and only thereafter directed the AO to make the adjustment on account of ALP. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the assessee had furnished the additional evidences for the first time before this bench of the Tribunal, those were not available at the time of proceedings before the TPO/AO/DRP. The new evidence now furnished by the assessee, go to the root of the matter and are very much relevant to resolve the present controversy i.e. as to whether the borrowing was the External Commercial Borrowings or not, it is also not clear as to whether the assessee claimed the deduction of the interest paid on issuance of Compulsorily Convertible Debenture in its return of income. In the present case, the assessee carried out analysis on BSE database which provides the details of the comparable instruments and submitted the same as additional/supplementary analysis vide letter dated 27.04.2016 which indicated that the average coupon rate of comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
