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TMI Blog2024 (12) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ication Number ("DIN") on the body of the communication and consequently rendering the Impugned Order illegal, invalid and liable to be set aside. 2.2. Draft Order dt. 05.03.2013 and the consequential final order dated 10.04.2013 passed by the Ld. AO in the original assessment proceeding, i.e., the first round prior to the remand, is illegal, without jurisdiction, contrary to the provisions of the Income Tax Act, 1961, barred by limitation and hence liable to be set aside. 2.3. Impugned Order dt. 27.12.2023 passed by the Ld. AO is illegal, without jurisdiction, barred by limitation, contrary to the provisions of the Income Tax Act, 1961, and hence liable to be set aside. 2.4- The Impugned Order passed by the Ld. AO manually, and without affixing a digital signature as mandated by the binding instructions and circulars Central Board of Direct Taxes ('CBDT') is invalid and hence is liable to be quashed. 3. TRANSFER PRICING GROUNDS 3.1 The lower authorities erred in determining the ALP of the international transaction of payment of interest on Compulsory Convertible Debentures ("CCDs") at 12.5%, and a TP adjustment of INR 4.38 crores on the basis of the said ALP. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2009-10, the Assessee filed its return of income declaring a loss of Rs. 1,00,31,508/- and the said return was picked up for scrutiny assessment. During the assessment proceedings, upon a reference to the TPO, the TPO passed an order dated 29.01.2013, recharacterizing the CCDs as equity and determined the ALP of the international transaction at 'NIL' and proceeded to make a TP adjustment of Rs. 21,26,25,004/-. The matter was carried in appeal by the Assessee to the ITAT, which came to be disposed off vide an order dated 26.11.2020, with a direction to the TPO to consider the CCDs as a debt instrument and to thereafter determine the ALP of the international transaction of payment of interest on the CCDs. Subsequently, the TPO passed an order dated 24.11.2022, rejecting the benchmarking analysis undertaken by the Assessee and determined the arm's length interest to be at 11.27%: Accordingly, the TPO determined the ALP of the interest paid on CCDs at 11.27% and made an adjustment of Rs. 6,04,80,001/- being the excess rate of interest paid by the Assessee. Initially, the Assessing Officer passed a draft assessment order dated 27.03.2023, incorporating the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies having issued the securities in the FY 2007-08 -included 5. Companies issuing unsecured securities - included 6. Companies issuing the securities in fixed coupon type - included 7. Companies issuing securities whose maturity period is more than 15 years - included A.5. Comparables selected by TPO and interest rate of the companies: Sl. No. Name of the Company Interest rate 1. Ireo Pvt. Ltd. 15% 2. Indian Instruments Finance Co. Ltd. 8.82% 3. Esplande Developers Pvt. Ltd. 10% Average 11.27% A.6. Computation of arm's length interest rate by the TPO and the adjustment made: Particulars Arm's length coupon rate of the comparables (A) 11.27 Interest rate charged by the taxpayer to its AE (B) 15.75 Excess rate of interest charged by taxpayer (C = B - A) 4.48 Interest paid by the taxpayer during the year @ 15.75% Rs. 21,26,25,004/- Interest to be paid @ 11.27% Rs. 15,21,45,002/- Excess Interest paid by the taxpayer / TP Adjustment Rs. 6,04,80,001/- B. DIRECTIONS ISSUED BY DRP: Briefly, the directions issued by the DRP are as follows: i. The DRP accepted the contentions of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Espalande was with its associated enterprises, and therefore the said transaction does not fall within the meaning of "uncontrolled transaction". On that count alone, this company is liable to be excluded from the final list of comparables. B. Lack of data: He submitted that details of the issue of the CCDs by this company is not available, and therefore the factors and circumstances behind charging of interest at 10% cannot be determined. For instance, it is not clear which class of equity shares the debentures would be converted into, since the company has issued equity shares of classes A1, A2, B1, B2 and C. Therefore, since there is lack of data available to determine the comparability of the debenture, the company ought to be excluded from the final list of comparables. C. Functionally dissimilar: He submitted that this company is a special purpose entity formed for the development of a project known as "RMZ Esplanade". Since it is a special purpose entity, it is possible that the debentures issued also are for a specific and limited purpose, which is unlike the case of the Assessee, and therefore the interest paid on the debentures by this company cannot be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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