TMI Blog2022 (11) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... due to oversight). The assessee failed to appreciate that the same definition of AE as per sub section (1) and sub section (2) of section 94A is referred in section 94B of the I.T.Act and hence interest on CCD paid to PIL, who being a deemed AE as per the provisions of section 94A(2)(C) of the I.T.ACt, also comes under the purview of section 94B - In the light of the aforesaid reasoning and the impugned TP adjustment with respect to payment of interest on CCD is deleted. However, the disallowance is liable to be made u/s 94B of the I.T.Act. Appeal filed by the assessee is partly allowed. - IT(TP)A No. 794/Bang/2022 - - - Dated:- 10-11-2022 - SHRI GEORGE GEORGE K, JM AND SHRI LAXMI PRASAD SAHU, AM For the Appellant : Sri.Sriram Sheshadri, Advocate For the Respondent : Sri.K.Sankar Ganesh, JCIT DR ORDER Per George George K, JM : This appeal at the instance of the assessee is directed against final assessment order dated 14.07.2022 passed u/s 143(3) r.w.s. 144C of the I.T.Act. The relevant assessment year is 2018-2019. 2. The assessee had raised three grounds, however, during the course of hearing, the assessee had only raised submissions with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO passed an order u/s 92CA(3) of the I.T.Act (order dated 31.07.2021) proposing transfer pricing adjustment of Rs.13,89,60,371 towards interest paid by the assessee on Compulsory Convertible Debentures (CCDs). Pursuant to the TPO s order, draft assessment order was passed on 23.09.2021 u/s 143(3) r.w.s. 144C of the I.T.Act incorporating the above mentioned TP adjustment proposed by the TPO. The A.O. also proposed corporate tax disallowance of loss on valuation of CCDs. 4. Aggrieved by the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP) on 21.10.2021. The DRP vide its directions dated 08.06.2022 upheld the adjustment proposed by the TPO and confirmed the corporate tax disallowance. Pursuant to the DRP s directions, the impugned final assessment order was passed on 14.07.2022. 5. Aggrieved by the final assessment order, the assessee has filed the present appeal before the Tribunal. The learned AR submitted that the lower authorities has exceeded the jurisdiction in re-charactering and concluding that CCDs issued by the assessee are in the nature of equity investments. It was further submitted by the learned AR that the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is incorporated under the laws of Cyprus and is engaged in the business of investment in the construction development and allied sectors in India. On applying the provisions of section 92A(2)(c) of the I.T.Act, PIL shall be deemed to be an Associated Enterprise ( AE ) of the assessee , as loan advanced by PIL (subscription to CCDs) constitutes not less than 51 percent of the book value of the total assets of the assessee. For the year under consideration, the average interest rate is 5% and the assessee incurred interest expenditure of INR 13,89,60,371 (i.e. 13.90 Crores) on the said CCDs issued. 7.2 The assessee benchmarked the international transaction with respect to payment of interest on CCD using external CUP method by using the CapitaLine Plus, ACE TP and NSDL databases. Pursuant to the search process adopted by the assessee, 14 companies containing 22 CCD transactions were identified as comparable to the assessee's transaction. Since the rate of interest paid by the assessee to PIL is less than the median of the rates of the interest paid in the above comparable transactions identified i.e. 11%, the transaction with respect to payment of interest on CCD, assessee tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance placed by the lower authorities on the decision of the Ahmedabad Tribunal (Special Bench) in the case of Ashima Syntex Limited reported in 100 ITD 247, holding that issue in dispute in Ashima Syntex (supra) is regarding expenditure incurred on issue of convertibles whereas in the present case the issue is regarding allowability of interest expenditure on convertible debentures for the preconversion period and therefore the decision of Special Bench of the Tribunal in Ashima Syntex does not support the contention of the Revenue. We also place reliance on the following judicial pronouncements, which have upheld the same view: (i) Besix Kier Dabhol SA 26 taxmann.com 169 (Bom.) (ii) Embassy One Developers Pvt. Ltd. 65 taxmann.com 238, ITAT Bangalore. (iii) IMS Health Analytics Services Pvt.Ltd. TS-811-HC2012 (Bangalore Tribunal) (iv) TE Connectivity Services India Pvt. Ltd. in IT(PT)A No.191/Bang/2022 (v) Amanora Future Twoers Pvt. Ltd. 144 taxmann.co. 7.5 In light of the aforesaid judicial pronouncements, we delete the TP adjustment with respect to interest on CCD, contending CCD is equity. 7.6 However, the Finance Act, 2017 introduced a new section 94B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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