9911796707
TMI Blog2021 (9) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of Rs. 1,03,57,890/- and Rs. 1,09,31,000/-; respectively regarding interest paid to overseas Associated Enterprises (AEs) of Fully Convertible Debentures (FCDs). 3. The Revenue next sought to highlight the fact of the learned lower authorities; right from the Transfer Pricing Officer's (TPOs) to the DRP, have adopted judicial consistency in light of the very issue finalized in preceding A.Y. 2011-12 that the assessee's interest payment has to be benchmarked as per "SIBOR" rates involving international currency than those adopted in the domestic banking sector. 4. Learned counsel on the other hand has filed a detailed note urging us not to adopt judicial consistency in the impugned twin assessment years as under: "1. The aforesaid appeals were heard by the Tribunal on 22.06.2021 with inter-alia liberty being given to the Appellant to file a brief synopsis of its submissions. The only ground involved in the present appeals is determination of arm's length rate of interest payable by it on the Fully Convertible Debentures (FCD) denominated in Indian currency issued to Devgen Pte Ltd., Singapore. Apart from the FCD, the Appellant had also borrowed External Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2011-12? 4. Since the issue involved in the appeals for both the years is the same, the facts relating to AY 2012-13 have been referred to. The brief facts, as may be relevant, for disposal of the issue arising in the present appeals are as stated hereafter:- a. On 01.04.2009, the Appellant had issued 1,70,00,000 FCDs of face value INR 10 each aggregating to Rs. 17,00,00,000 which was subscribed by Devgen Pte Ltd., Singapore. As per the terms and conditions of issue, the Appellant was under an obligation to pay interest thereon at the rate of 4% for the first two years and thereafter at the rate of 12% from the third to the fifth year. The present appeals relate to the third and the fourth year when the interest has been paid at the rate of 2%. For assessment year 2011-12 (being the second year) such interest was paid at the rate of 4%. The interest is to be paid in Indian rupees. b. It is an undisputed position that the Appellant has paid interest at the rate of 11.70% on amounts borrowed from HDFC bank by it. It pleaded that this should be treated as an internal CUP (see the submission as recorded by the DRP in the fourth bullet point at page 2 of its order and the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence are not required to be revalued on each Balance Sheet date. On the other hand, the ECB has been availed in foreign currency and is required to be repaid in foreign currency. Hence, the same has been revalued on each Balance Sheet date in accordance with Accounting Standard 11 (see Note 5 on Page 32 of the Factual Paper Book for AY 2012-13 and Note 26 on Page 39 of the Factual Paper Book for AY 2012-13). d. This fact is also brought out in the Transfer Pricing Study Report which was filed with the TPO by letter dated 25.05.2015 (see pages 211, 212, 225 and 240 to 244 of the Factual Paperbook). A perusal of pages 240 to 244 shows that the Appellant had benchmarked the interest on FCD by comparing the same with debentures issued by Indian companies, details whereof were obtained from NSDL. To corroborate the same the Appellant had also relied on the State Bank of India prime lending rate. e. Form 3CEB obtained by the Appellant from its Chartered Accountant under section 92E of the Act also brings out this distinction (see page 11 of the Factual Paperbook) 6. The Ld. DR in the course of hearing had relied upon observations of the DRP for AY 2013-14 to say that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the borrowings are in foreign currency. In that year no Miscellaneous Application/Appeal was filed by the Appellant as the Tribunal had upheld the DRP's order holding the rate of interest paid for the said year was at arm's length. Even if the said distinction was brought out, the Tribunal's conclusion would not have changed because the rate of interest prevailing in India was higher than such rate of interest prevailing in Singapore. 12. In this regard, your attention is invited to the judgment of the Hon'ble Apex Court in Sri Agasthyar Trust v. CIT 236 ITR 23 (see pages 171 to 177 of Case Law Paperbook 2), wherein the Apex Court in its earlier order in East India Industries (Madras) (P) ltd. v. CIT 64 ITR 611 which was a case of a donor to the trust, based on amendment to the object of the Trust, had held that it is not charitable as one of the amended object vas not charitable. In the subsequent proceeding which arose in the case of the Trust it was claimed before the Tribunal that the amendment on which the Hon'ble Apex Court relied upon was not effective as there was no power to carry out such amendment (see paragraph 3 at page 174 and paragraph to at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ascertain the correct factual position and then apply the applicable legal position". 5. We have given our thoughtful consideration to the preceding rival submissions and find no substance in assessee's stand. This is for the precise reason that the learned co-ordinate bench earlier order (supra) had already upheld assessee's interest payments benchmarked as per "SIBOR" rates in Revenue's appeal (AY. 2011-12). This taxpayer has sought to pinpoint a distinction in the impugned assessment year that since the learned earlier co-ordinate bench had agreed with its contentions having adopted SIBOR + interest benchmark, it did not deem it fit to invoke Section 254 rectification jurisdiction. And that the debentures in issue involve domestic currency only. The Revenue, on the other hand has invited our attention to the fact that the learned lower authorities have already declined the very argument on the ground that the impugned sum pertaining to the assessee's debentures had been received in foreign currency only. 5.1. Be that as it may, the fact remains that the assessee had adopted the very SIBOR+benchmark all along in all preceding assessment years which stands ac ..... 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