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TMI Blog2023 (12) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee. Further, when the companies in the Wind / Thermal Power Sectors are excluded, the 65th percentile worked to 14.25% which is over and above the interest rate paid by the assessee company. As relying on V R Surat (P.) Ltd [ 2023 (8) TMI 631 - ITAT SURAT] and Vena Energy KN Wind Power (P.) Ltd [ 2022 (12) TMI 712 - ITAT BANGALORE] Revenue has not brought any material / case / any contrary decision before us. Therefore, respectfully following the above decisions, we are of the considered view that the rate of interest charged by the assessee company is at Arm s Length basis and therefore the ground No. 1 2 raised by the assessee are allowed. - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Assessee : Ms. Karishma R. Phatarphekar For the Revenue : Dr. Satyasai Rath, CIT-DR ORDER PER S. BALAKRISHNAN, ACCOUNTANT MEMBER : This appeal is filed by the assessee against the final assessment order passed U/s. 143(3) r.w.s 144C(13) r.w.s 144B of the Income Tax Act, 1961 [the Act] vide DIN No. ITBA/AST/S/143(3)/2021-22/1040122408(1), dated 25/02/2022 for the AY 2017-18. 2. Brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee considered the interest rate of 13% paid by the assessee is within the arm s length range which is below the 65th percentile. It was also observed by the Ld. TPO that as per the debenture subscription agreement the NCDs unlisted, unrated, unsecured, redeemable, taxable. As per the agreement the interest rate was fixed @ 13% per annum. The assessee received the subscription on 18/01/2017 and hence paid interest for the period of 72 days commencing from 18/1/2017 to 31/3/2017 @ 13% amounting to Rs. 69,23,836/- and deducted the TDS of Rs. 10,67,625/-. On examination of the TP documents for benchmarking the transaction, the Ld. TPO concurred with the CUP method as the most appropriate method under the given facts of the case. The Ld. TPO also observed that the assessee s selection of final comparables is inappropriate and arbitrary. The Ld. TPO rejected the ALP determined by the assessee and then proceeded to determine the ALP in accordance with section 92C(1) and 92C(2) of the Act. The Ld. TPO selected the comparables based on the following criteria: Step Description No. of companies 1 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E 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 Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 8.00 7 INE850S08124 Cleantech Solar Energy (India)Private Limited 8.00 8 INE607M07024 Tata Power Renewable Energy Limited 8.30 9 INE607M08022 Tata Power Renewable Energy Limited 8.30 10. INE211W08204 Amplus Solar Power Private Limited 8.50 11 INE813H07085 Torrent Power Limited 8.95 12 INE813H07093 Torrent Power Limited 8.95 13 INE813H07101 Torrent Power Limited 8.95 14 INE473U07024 SEI Venus Private Limited 9.50 15 INE474U07030 SEI Diamond Private Limited 9.50 16 INE614G08061 Reliance Power Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA(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 objections before the Ld. Dispute Resolution Panel [DRP]. The Ld. DRP considering the objections raised by the assessee observed that the NCDs are issued to the controlling entity of the assessee-company and hence whether it is unguaranteed or unsecured it will not make any difference and thereby dismissed the objections raised by the assessee in this regard. Aggrieved by the order of the Ld. DRP, the assessee is in appeal before us with the following grounds of appeal: Payment to interest on NCDs 1. On the facts and circumstances and in law, the Ld. AO and the Ld. TPO under the directions of the Hon ble DRP, erred in rejecting the appellant s benchmarking analysis which demonstrated that payment of interest on NCDs was at arm s length and conducting a fresh benchmarking exercise. 2. Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. AO and the Ld. TPO, under the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 higher and there would be a higher rate of interest charged for the loan. The Ld. AR also relied on the decision of ITO vs. VR Surat Pvt Ltd by coordinate Bench of Surat reported in 152 taxmann.com 679 (Surat Trib.). The Ld. AR therefore pleaded that benchmarking done by the assessee shall be accepted as its ALP. Per contra, the Ld. DR submitted that the NCDs were issued to 100% holding companies and hence whether it is a secured or unsecured will not make any difference. The Ld. DR also further submitted that it shall be considered as secured NCDs only and therefore the Ld. TPO has rightly considered the same. Countering the arguments of the Ld. DR, the Ld. AR submitted that the AEs should be considered as a third party and it is illogical to consider the relationship of the holding and subsidiary companies for the purpose of secured and unsecured transactions. 4. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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