TMI Blog2021 (9) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... justment(s) relating to assessee's interest payments benchmarked at SIBOR rates. - ITA Nos. 187 & 2225/Hyd/17 - - - Dated:- 18-8-2021 - S.S. Godara, Member (J) And Laxmi Prasad Sahu, Member (A) For the Appellant : Nitesh Joshi, AR For the Respondents : P. Chandra Sekhar, DR ORDER Per S. S. Godara, JM These two assessee's appeals for AYs. 2012-13 2013-14 arise against the ACIT, Circle-17(1), Hyderabad's assessments dated 19-12-2016 and 25-10-2017 framed in furtherance to the Dispute Resolution Panel ('DRP')-1, Bengaluru's directions dt. 31-10-2016 and 23-08-2017 in F. No. 45 293/DRP-BNG/2016-17, involving proceedings u/s. 143(3) r.w.s. 92CA(3) and u/s. 144C(5) and r.w.s. 144C(13) of the Income Tax Act, 1961 [in short, 'the Act']; respectively. Heard both the parties. Case files perused. 2. We are informed at the outset that the assessee's identical sole substantive grievance canvassed in both these assessment years seeks to reverse the learner lower authorities' action making Arm's Length Price (ALP) adjustments of ₹ 1,03,57,890/- and ₹ 1,09,31,000/-; respectively regarding interest paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Tribunal for the said year, as the rate at which interest was paid on FCD for the said year was lower than the rate of interest applicable to the borrowing in foreign currency. The difficulty that arises in the present appeal is that based on the conclusions reached by the Tribunal for AY 2011-12, the Revenue is arguing that for the present years also the rate at which interest should be paid on the FCD has to be benchmarked based on SIBOR. 3. The issues which arise for consideration of the Tribunal, in the present case, are as stated hereafter:- a. Whether the amount borrowed by the Appellant by issue of FCD is in Indian currency? b. Whether the arm's length rate of interest on such borrowing shall be the rate of interest prevailing in India as the borrowing is in Indian currency and the amount has been received/consumed in India? c. Whether in the facts and circumstances of the present case, the Tribunal would be justified in holding that the arm's length rate of interest on borrowing by way of FCD should be based on the rate of interest prevailing in India despite its order for AY 2011-12? 4. Since the issue involved in the appeals for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowing in Singapore dollar has been specifically brought out in note (ii) thereto. Attention is also invited to Note - 27 in the Additional information to the financial statements (see page 39 of the Factual Paperbook) wherein expenditure incurred in foreign currency in respect of interest on ECB borrowing is reflected. These show that if the FCD was issued in foreign currency then a similar disclosure would have been made in respect of the same. c. In case of ECB, the amount of SGD 43,00,000 has been converted into Indian rupees for the purpose of disclosure in the Financial Statements. In accordance with Accounting Standard 11, the same has been revalued on each Balance Sheet date. The same has been revalued as on 31 March 2012 -- going up from ₹ 1,521.55 lakhs as on 31 March 2011 to ₹ 1,740.53 lakhs on 31 March 2012 (see Note 5 in Financial Statements for AY 2012-13 -- Refer Page 32 of the Factual Paper Book for AY 2012-13). On the one hand, the FCDs have been consistently shown at ₹ 1,700 lakhs in the Financial Statements (see Page 32 of the Factual Paper Book for AY 2012-13) because the same have been issued in Indian Rupees and hence are not requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 and 28 of the Case Law Paperbook) 9. In the following cases the Court/Tribunal were concerned with borrowing by way of issue of debentures in Indian currency by Indian assessee, where the rate of interest prevailing in India has been used for the purposes of bench marking. Pr. CIT v. India Debt Management (P.) Ltd. (see paragraphs 2 to 6 at pages 25 to 28 of the Case Law Paperbook) Adama India (P.) Ltd. v. DCIT (see paragraphs 8 and 9 at pages 47 to 49 of the Case Law Paperbook) Adama India (P.) Ltd. v. ITO (see paragraphs 7 to 7.8 at pages 68 and 69 of the Case Law Paperbook) 10. In case of Adama India (P) Ltd. v DCIT (referred to above) decided by the Hyderabad Tribunal, the Indian entity had issued CCDs in Indian Rupees and the Hon'ble Tribunal, relying on the earlier year's order, has held that the interest on CCDs should be benchmarked on the basis of SBI Prime Lending Rate Issue C 11. I Though, unfortunately, the distinction between ECB borrowing in foreign currency and FCD borrowing in Indian currency was not specifically brought out before the Tribunal for AY 2011-12, a bare perusal of the said order shows that it has pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce vs. Delameter (A.M.Y. at page 18) a judge ought to be wise enough to know that he is fallible and, therefore, eveready to learn; great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead and courageous enough to acknowledge his errors . 13. Some of the cases discussed above have been decided post the Tribunal Order which also includes a decision in case of Adama India (P.) Ltd. v ITO wherein co-ordinate bench of Hyderabad Tribunal has decided the matter in favour of the assessee and hence the same needs to be considered while deciding this issue. The following table shows the date of these rulings: Sr. No Name of the case Date 1 Pr.CIT v. India Debt Management (P.) Ltd (417 ITR 103) (Bom) 15 April 2019 2 Adama India (P.) Ltd v. ITO (109taxmann.com 338) (Hyderabad Tribunal) 3 July 2019 14. Alternatively, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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