TMI Blog2017 (1) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... at issuance of CCD is part of FDI being quasi-equity in nature and considering the same as a loan would be completely against regulations laid by DIPB, RBI and FEMA. It is to be reiterated that issuance of CCDs was denominated in Indian Rupees and not foreign currency. Therefore, TPO has erred in considering LIBOR as benchmark rate which is in complete contradiction to the principles on the issue. Thus we agree with the assessee’s contentions that the CCDs cannot be categorised as a loan and LIBOR plus two hundred basis points benchmark cannot be accepted on the facts of the case. Adopting the benchmark rate in Indian context, assessee has justified the ALP not only on the basis of SBI PLR, which was at 12.26% for the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest @ 12% on the CCDs amounting to ₹ 5,22,64,414/-. During the transfer pricing proceedings, the assessee benchmarked the weighted average rate of Prime Lending Rate (PLR) as per the State Bank of India (SBI), which was at 12.26%. Since the rate of interest paid by it is lesser than SBI PLR, Assessee has maintained that its rate of interest paid is consistent with arm s length standard from the Indian TP Regulations perspective. The Ld.TPO however, did not agree with assessee s contentions. He has considered the CCDs as loan and benchmarked the interest rate at LIBOR plus 200 basis points, thereby determining Arm s Length Price [ALP] at ₹ 1,29,10,335/- and made an adjustment of ₹ 3,93,54,079/-. 3. The AO made the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2, the Appellant raises the following grounds of appeal: 3 On facts and in the circumstances of the case and in contrary to law, the Learned transfer Pricing Officer ('TPO')/Ld. AO has erred in going beyond the scope to re-characterize the Compulsory Convertible Debentures ('CCD') as loan for benchmarking the international transaction of interest payments on CCD and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/Ld. AO. 4 On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO/Ld. AO erred and subsequently Hon'ble DRP further erred in upholding the action of Ld. TPO/Ld. AO by not appreciating the fact that CCDs are consumed in India and interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing case law in support of the stand that the AO was not justified in treating the draft assessment order as a final order and such a course of action is not a curable irregularity; therefore, the draft assessment order should be treated as bad in law: i. Vijay Television (P) Ltd., WP Nos. 1526 1527 of 2014 [369 ITR 113] (Madras); ii. Lionbridge Technologies Pvt. Ltd., ITA No. 1041/Mum/2015 [62 taxmann.com 48] (Mumbai-Trib); iii. Zuari Cement Ltd., [WP No. 5557 of 2012] (AP High Court) Assessee submits that it is a legal issue and it can be taken at any stage even though the issue is not pressed before the CIT(A). At the same time, he urged that the issue arising out of Ground Nos. 3 to 6 is covered in favour of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sun Pharmaceuticals Ind. Ltd., in ITA No. 1589 1592/AHD/2011. It was further submitted that TPO also erred in benchmarking the transaction with reference to LIBOR plus when both TPO as well as DRP accepted that the loans were given in Indian Rupees. Accordingly, SBI s PLR rate should have been benchmarked rather than LIBOR plus. Ld. Counsel relied on the principles laid down by the Hon'ble Bombay High Court in the case of CIT Vs. Tata Autocomp Systems Ltd., ITA No. 1320 of 2012 (374 ITR 516) (Bombay) to submit that rate of interest should be determined based on the country where the amount/loan is received/consumed. Ld. Counsel placed on record the comparison of facts between assessee s case and the above referred CIT Vs. Tata Autoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI effective from 01- 04-2010 also indicate that issuance of CCD is part of FDI being quasi-equity in nature and considering the same as a loan would be completely against regulations laid by DIPB, RBI and FEMA. It is to be reiterated that issuance of CCDs was denominated in Indian Rupees and not foreign currency. Therefore, TPO has erred in considering LIBOR as benchmark rate which is in complete contradiction to the principles on the issue. The following judicial precedents supports that the rate interest has to be considered in the currency in which loan has originated: i. India Debt Management Pvt. Ltd., IT(TP)A No. 7518/Mum/2014; ii. CIT Vs. Cotton Naturals (I) Ltd., ITA No. 233/2014 (Del.HC); iii. M/s. Brahma Center Developme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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