9911796707
TMI Blog2024 (12) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), Bangalore passed u/s 143(3) r.w.s. 144C(13) r.w.s. 254 of the Income Tax Act, 1961 (in short The Act ) for the assessment year 2009-10 dated 27.12.2023. The assessee has raised following grounds of appeal: 1. GENERAL GROUND 1.1. The lower authorities have erred in finalizing an order of assessment which suffers from legal defects such as being contrary to the provisions of the Act, barred by limitation, devoid of merits and contrary to facts on record and applicable law and as such is liable to be set aside. 2. JURISDICTIONAL GROUNDS 2.1. The Ld. DRP has erred in issuing an invalid DRP directions without quoting a valid electronically generated Document Identification 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial year 2007-08, the Assessee had issued 13,50,00,000 CCDs having face value Rs. 10/- each to GBL, a non-resident company, carrying an interest rate of 15.75%. In its transfer pricing study, the Assessee benchmarked the payment of interest towards CCDs by using Comparable Uncontrolled Price ( CUP ) method, to justify the arm s length nature of the transaction. The Assessee identified two comparables and arrived at an arithmetical mean of comparable interest rate at 11%. Further, the Assessee determined a risk adjustment of 4%, and on this benchmarking analysis, the payment of interest at 15.75% was concluded to be at arms length. For the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... netic Motor Company Limited 11% 2. Saurashtra Cement Limited 11% Arithmetic Mean 11% Plus risk adjustment 4% Arm s length interest rate of the comparables 15% Note: The TPO rejected all the comparables selected by the Assessee. A.4. Filters applied by the TPO: Step Description Companies rendering Information technology enabled services selected 1. Companies in the asset classes- Corporates - included. 2. Companies having active security bonds included 3. Companies using Indian Rupee as currency for their securities included 4. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 92C of the Act read with Rule 10B of the Rules, the arm s length price of an international transactions is to be determined by having regard to the prices charged/paid in a comparable uncontrolled transaction. The term uncontrolled transaction is defined in Rule 10A(ab) of the Rules as a transaction between enterprises other than associated enterprises. He submitted that the transaction undertaken 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided with the details of the search process vide a show cause notice dated 22/10/2022. Hence the contention of the Assessee that no details of the search process were provided to it are not correct. 2.1.4.4 The Assessee contended that the Prime lending rate of the SBI at 12.93% should have been adopted by the TPO and he should have allowed a risk adjustment of 4%. 2.1.4.5 We have perused the Assessee's arguments. The TPO has identified proper comparables after adopting CUP as the Most Appropriate Method and during the search process included those key words such as Unsecured, for payment risk, Rupee for Payment Currency and coupon type as Fixed which is what the Assessee has also used. Hence to say that the TPO did not consider the risks involved as the CCDs are unsecured is not correct. 7.1 Admittedly, there was no adjudication of the above issue raised by assessee by ld. DRP independently and it has been adjudicated by the ld. DRP in a wholesome manner without touching the issue raised by assessee in proper manner. Hence, it is appropriate to remit this issue to the file of ld. DRP to consider the argument of the ld. A.R. and decide accordingly. The issue in dispute in gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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