TMI Blog2020 (8) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... ined interest rate applicable to the currency concerned in which the loan has be repaid. In the present case the lending rate is in SBI Prime Lending Rate + 300 basis point, which at the time of investment was 14.75% + 300 = 17.75%. In fact, the DRP in A.Y. 2014-15 allowed this claim of assessee. Thus, the AO/TPO and DRP were not correct in using LIBOR based interest rate to bench mark international transaction of payment of interest on FCCDs denominated in Indian Rupees. - Decided in favour of assessee. - I.T.A. No. 1749/DEL/2017 - - - Dated:- 26-8-2020 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Appellant by : Sh. Vishal Kalra Sh. S. S. Tomar, Advs Respondent by : Sh. Surender Pal, CIT(DR) ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the order dated 30/12/2016 passed by the Deputy Commissioner of Income Tax, Circle 3 (2), New Delhi, u/s 143(3) read with Section 144C (13) for Assessment Year 2012-13. 2. The grounds of appeal are as under:- Appeal against the order under section 143(3) read with section 144C of the Income Tax Act, 1961 ( The Act ) dated December 30, 2016 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4C and 234D of the Act. 2. The assessee company was incorporated in India on 2/3/2012 and is engaged in the business of development sale and advisory of realistic related activities. The return of income declaring income at ₹ 13,40,080/- and business loss of ₹ 3,83,98,509/- was filed on 24/11/2012 by the assessee. A reference was made to the TPO u/s 92CA of the Income Tax Act, 1961 and the Transfer Pricing Officer (TPO) on 6/1/2016 passed an order wherein adjustment of ₹ 1,86,06,021/-attributed to the difference in Arms Length Price of the international transaction entered by the assessee with associated enterprises was made. The assessee filed objection before the Dispute Resolution Panel (DRP) and the DRP upheld the transfer pricing adjustment made by the TPO. Thereafter, the Assessing Officer passed assessment order dated 30.12.2016 thereby assessing the income at loss of ₹ 1,84,52,413/-. 3. Being aggrieved by the assessment order, the assessee filed the present appeal before us. 4. The Ld. AR submitted that in the year 2014-15 i.e. subsequent assessment year, the DRP has allowed the claim of the assessee towards payment of interest on Foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Investment Corporation Limited Ors. vs. Securities and Exchange Board of India Anr. [Civil Appeal No. 9813 of 2011] dated August 31, 2012 while assigning the jurisdiction to SEBI as an equity instrument . The Ld. AR submitted that it is an undisputed fact that the assessee has entered into a transaction in domestic currency. FCGPR filed with RBI evidencing that the payment was received in INR. The Ld. AR submitted that in various judicial precedents it has been established that the rate of interest has to be considered in the currency in which loan has originated. In the Assessee s case, FCCDs are issued in INR, the rate of interest should be benchmarked using Indian rates. The Hon ble Delhi High Court in the case of CIT(A) Vs. Cotton Natural (I) Pvt. Ltd. [ITA No. 233/2014] held that the interest rate should be market determined interest rate applicable to the currency concerned in which the loan has to be repaid. The Hon ble Bombay High Court in the case of Pr. CIT vs India Debt Management (P.) Ltd. [ITA No. 266 of 2017] relying on the above mentioned Hon ble Delhi High Court judgment, held that the interest rate should be market determined interest rate applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally mentioned that the decision of the TPO is in accordance with the decision of the Hon ble Delhi High Court in case of Cotton Naturals India Pvt. Ltd. (2015) 55 Taxman.com 523 (Delhi). 6. We have heard both the parties and perused the material available on record. It is pertinent to note that during the year, the assessee company had issued 64,08,999 number of Fully Convertible Debentures (FCD) of ₹ 100/- each @ 17.75% per annum to SA Mallika Ventures Ltd., Cyprus i.e. Associated Enterprises) and the amount paid/payable towards interest to the said AE was ₹ 2,34,84,098/- during the year. The said amount of ₹ 2,34,84,098/- has been computed by the assessee company having regard to the arm s length price as per the provisions of Section 92C of the Income Tax Act, 1961. The subscription amount received by the Assessee was INR 540,899,900 as per clause 4 of Investment agreement dated 20.01.2012. The said amount has been computed by the assessee company having regard to the Arms Length Price, as per the provision of Section 92C of the Income Tax Act, 1961, as per the provisions and Government Orders that is exchange control regulations in force as mentioned in Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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