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TMI Blog2018 (9) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 points basis while calculating the interest rate. In view of the fact that the variance does not exceed 5% for the FCCDs issued during the FYs 2008-09 and 3% for the FCCDs issued subsequently interference by the Ld. TPO with the value of the international transaction. The addition, therefore, cannot be sustained and shall be directed to be deleted. We accordingly direct the learned AO/TPO to delete the same. - I.T.A. No. 7025/Del/2017 - - - Dated:- 14-9-2018 - SHRI R.S. SY AL, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER For The Appellant : Shri Sanjiv Supra, FCA For The Respondent : Ms Princy Singla, Sr DR ORDER PER K. NARASIMHA CHARY, JM Challenging the assessment order dated 23.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on fully and compulsorily convertible debentures (FCCDs) as issued during FY 2011-12 Twilzon Ltd. 17.75% p.a 1,19,79,213 3. For the AY 2012-13 assessee filed their return of income on 27-11-2012 declaring a total income of ₹ 62,20,62,060/- which they revised subsequently on 27.6.2013 declaring an income of ₹ 62,11,39,113/-. However, there was a search and seizure operation u/s 132 of the Income-tax Act, 1961 (for short the Act ) on 3C group of companies on 29.10.2013 in which the assessee was also covered. In compliance with the notice dated 11.11.2014 issued u/s 153A of the Act, the assessee filed their return declaring an income of ₹ 62,11,39,110/-. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been in accordance with the Security Holders Agreement entered into by the assessee and the AEs and the same was at arm s length rate. Assessee further contends that the economic analysis undertaken by the assessee for justifying such rates of interest was correct and acceptable but the authorities below failed to appreciate the fact that FCCDs being hybrid instruments i.e. a mix of debt and equity, carried a higher risk and hence could not be compared with a plain vanilla loan or bond instruments/arrangements. It is further contended that the interest rate by adopting PLR of SBI plus 300n basis points was in accordance with FEMA regulations. 8. Further contention of the assessee is that the specific provisions of the Act in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sstt. Year 2008-09 but insofar as the issuance of FCCDs on 2.1.2009 is concerned, they are covered by the interest rate of 12.25% whereas the earlier three transactions were covered by the interest rate of 13%. On this score, she justifies restrictions by the learned TPO at 12.25%. 11. At the outset, on consideration of the facts admitted by both the parties, we are of the considered opinion that the learned TPO made a factual mistake in taking the interest at SBI PLR at 12,.25% in respect of the FCCDs issued on 8.12.2008, 16.12.2008, 22.12.2008 and 2.1.2009. However, in respect of FCCDs issued on 2.1.2009, learned TPO had rightly taken the SBI PLR at 12.25%, as such, the application of the interest at 12.25% for the FCCDs issued on 8.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Therefore, the SBI PLR plus 300 basis points over it was reasonable and on the arm s length, particularly when the same was permissible under Foreign Exchange Control Regulations. The AO/TPO, however, restricted the interest rate to 12.25%. The variance in the rate of interest as per TPO/AO to be adjusted and added was 3.75% which was within the permissible range of 5% as permitted by second proviso to Section 92C(2) of the Act. It is also relevant to point out that the percentage of 3% in the aforesaid proviso has been inserted by the Finance Act, 2012 w.e.f. 01.04.2013 and prior to that amendment, this percentage was at 5%. In the present case, since the difference is less than 5%, therefore, no addition on account of arm s length pric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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