2019 (3) TMI 1805 - AT - Income Tax

Tribunal Orders Removal of Adjustments on Interest for FCCDs Issued to AEs, Deeming Rates Reasonable and Permissible.

M/s Granite Gate Properties Pvt Ltd Versus The A.C.I.T Central Circle -6 New Delhi

M/s Granite Gate Properties Pvt Ltd Versus The A.C.I.T Central Circle -6 New Delhi - TMI Issues:Adjustment on account of interest payable/paid by the assessee on Fully and Compulsorily Convertible Debentures (FCCDs) issued to Associated Enterprises (AEs) under section 153A r.w.s 144C of the Income-tax Act, 1961 for A.Ys. 2013-14 and 2014-15.Analysis:Issue 1: Adjustment on interest payable on FCCDs:The assessee's appeals contested the adjustment made by the Transfer Pricing Officer (TPO) on interest payable on FCCDs issued to AEs. The TPO believed that the 300 basis points above the base rate PLR charged by the assessee was excessive and disallowed a significant amount. The TPO's adjustments totaled to Rs. 10,70,37,882. The assessee's objections before the Dispute Resolution Panel (DRP) were unsuccessful.Issue 2: Tribunal's consideration of the matter:The Tribunal considered the identical issues in the assessee's previous case for A.Ys. 2009-10 to 2011-12 and ruled in favor of the assessee. The Tribunal noted that the FCCDs were issued in previous years, and no fresh issuances occurred during the years under consideration. The Tribunal analyzed the interest rates applied by the assessee and the adjustments made by the TPO, comparing them to the Arm's Length Price (ALP) based on SBI PLR rates.Issue 3: Tribunal's decision and reasoning:Citing previous judgments, the Tribunal emphasized that the interest rate applied by the assessee, including the 300 basis points, was reasonable and within the permissible range. The Tribunal highlighted that the variance in interest rates did not exceed the permissible limits set by law. As no distinguishing decision favoring the revenue was presented, the Tribunal directed the Assessing Officer/TPO to delete the adjustments made on interest payable on FCCDs.Conclusion:The Tribunal allowed the assessee's appeals in ITA Nos. 7026 & 7027/DEL/2017, directing the deletion of the impugned adjustments on interest payable on FCCDs. The decision was based on the reasoning that the interest rates applied by the assessee were reasonable and fell within the permissible range, as established by previous judgments and legal provisions.This detailed analysis covers the issues related to the adjustment on interest payable on FCCDs in the given legal judgment delivered by the Appellate Tribunal ITAT DELHI.