9911796707
TMI Blog2023 (12) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued from time to time and served on the assessee. In response, the assessee submitted details through ITBA portal. Considering the international transaction entered into by the assessee, the Ld. AO made a reference to the Ld. Transfer Pricing Officer [TPO] by ACIT, Circle-1, Kakinada vide letter dated 16/09/2019 after obtaining approval of the Ld. Pr. CIT-2, Visakhapatnam. The Ld. TPO observed that the assessee entered into the following transactions with the Associated Enterprises [AEs] as per the 3CEB filed by the assessee: International transactions Amount Received /Receivable (Amount in INR) Amount paid /payable (Amount in INR) INR Denominated Non-convertible Debentures 27,00,00,000 _ Interest payable on INR Denominated Non-convertible Debentures _ 69,23,836 The Ld. TPO observed that the assessee has issued Nonconvertible Debentures (NCDs) amounting to Rs. 27 Crores to the AEs and has been benchmarked following the other method. The Ld. TPO also observed that with respect to the payment of interest on the issue of NCDs and was benchmarked following the CUP method. The assessee in order to identify similar uncontrolled transactions made search in the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antech Solar Energy (India) Private Limited INE850S08124 8% NSDL 4. Welspun Renewables Energy Private Limited INE296N08022 8% NSDL 5. Omc Power Private Limited INE240W08013 8% NSDL 6. Nabha Power Ltd 8.3% CDSL 7. Jsw Energy Limited INE121E07320 8.65% BSE 8. Jhajjar Power Limited INE165K07050 8.7% BSE 9. Jhajjar Power Limited INE165K07068 8.7% BSE 10. Jhajjar Power Limited INE165K07035 9.91% BSE 11. Jhajjar Power Limited INE165K07043 9.91% BSE 12 Marikal Solar Parks Private Limited INE469T08022 10% NSDL 13. Marikal Solar Parks Private Limited INE469T08030 10% NSDL 14 Reliance Power Limited 10.2% CDSL 15 Reliance Power Limited INE614G08061 10.2% BSE 16 Reliance Power Limited INE614G07022 10.6% BSE 17 Reliance Power Limited INE614G07030 10.6% BSE 18 KnBijapura Solar Energy Private Limited INE137W08011 10.75% NSDL 19 Kn Indi Vijayapura Solar Energy Private Limited INE138W08019 10.75% NSDL 20 KnMuddebihal Solar Energy Private Limited INE139W08017 10.75% NSDL 21 KnSindagi Solar Energy Private Limited INE147W08010 10.75% NSDL 22 Sei Sun Power Private Limited INE596W08018 13.25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Value Value Number of comparables 25 25 35th Percentile 9th Entry 8.30% Median 13th Entry 8.95% 65th Percentile 17th Entry 10.30% The Ld. TPO thereafter arrived at a Median of 8.95% and issued a show cause notice dated 4.3.2020 requesting the assessee to show cause as to why the interest rate of 8.95% should not be considered as ALP for calculating interest payable on NCD. Accordingly, the Ld. TPO proposed an adjustment by computing the difference between the interest adopted by the assessee @13% and the median computed @ 8.95%, thereby arriving at an addition of Rs. 21,67,041/- [Rs. 69,23,836 - Rs. 47,66,795]. The assessee did not respond to the show cause notice and therefore another notice was issued to the assessee on 16/12/2020 by providing an opportunity to file any objection on or before 22/12/2020. Since there was no response from the assessee, the Ld. TPO made an adjustment of Rs. 21,57,041/- u/s. 92CA(3) of the Act. Based on the order of the Ld. TPO, the Ld. Assessing Officer passed the draft assessment order vide DIN and Order No. ITBA/AST/F/144C/2021-22/1032686293(1), dated 26/04/2021. Aggrieved by the Draft Assessment Order, the assessee raised its ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR argued that the Non-Convertible Debentures were unsecured and hence higher rate of interest of 13% is applied considering the risk factors involved. The Ld. AR vehemently objected to the filters selected by the Ld. TPO and submitted that the Ld. TPO failed to apply filter, i.e all secured / unsecured while determining the list of comparables. The Ld. AR further submitted that the Ld. TPO failed to distinguish between the rate of interest applicable for secured and unsecured debt instruments. The Ld. AR further submitted that these objections were raised before the Ld. DRP and the Ld. DRP has failed to consider the same. Further, the Ld. AR also submitted that the Ld. TPO also erred in considering the comparable companies in the Wind Sector whereas the assessee operates in Solar Power Sector. The Ld. AR placed reliance on the ratio laid down in the decision of the Coordinate Bench of ITAT, Bangalore in the case of Vena Energy KM Wind Power (P.) Ltd vs. DCIT reported in [2022] 141 taxmann.com 557 (Bangalore - Trib.) [07-07-2022] wherein it was held that "one of the key criteria for determining the interest rate is the risk involved. When the loan is unsecured, the risk in high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 679 (Surat. Trib.) held as follows: "Where the assessee issued FCCDs which were unsecured in nature, company which issued debenture which was secured in nature could not be included in the list of comparables of the assessee company." Further, the Bangalore Tribunal in the case of Vena Energy KN Wind Power (P.) Ltd (supra) has held as follows: "12......One of the key criteria for determining the interest rate is the risk involved. When the loan is unsecured the risk is higher and there would be a higher rate of interest charged for the loan. Applying this logic the assessee has justified the interest charged at 14.70% with that of the third party borrowings where the interest is charged between 11.05% to 12.50%. This contention of the assessee has merits as the assessee has taken loan in the form of non-convertible unsecured debentures which has a higher risk factor as it is unsecured. Even applying the contention of the of the TPO that debenture has repayment on maturity and loan has periodical repayment justifies higher rate of interest charged for debenture in the commercial sense." 5. The Revenue has not brought any material / case / any contrary decision before u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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