TaxTMI 
TaxTMI 
2016 (9) TMI 106
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....sfer Pricing Officer (TPO) suffers from jurisdictional error as the AO has not recorded any reasons in respect of an international transaction prior to making such references order based on which he reached the conclusion that it was 'necessary or expedient' to refer the matter to the Transfer Pricing Officer ('TPO') for computation of the arm's length price ('ALP'), as required under section 92CA(1) of the Income Tax Act, 1961 ('Act'). 4. The AO/ DRP/ TPO have erred on facts and in law in disallowing the part of interest paid by the appellant on the ground that the interest @ 12% paid by him on Compulsory Convertible Debenture during the year do not satisfy the arm's length principle envisaged under the Act and is excessive. 5. That the AO/ DRP/ TPO has erred, in law and in facts, by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Income-tax Act, 1961 ('Act') read with the Income Tax Rules, 1962, and conducting a fresh economic analysis to determine the arm's length price in contravention of Rule 10B(1)(a) r/w Rule 10B(2). 6. That the AO/ DRP/ TPO has erred, in law an....
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....Convertible Debenture did not satisfy the arm's length principle and application of LIBOR rate considering the rupee denominated Compulsory Convertible Debenture as External Commercial Borrowings instead of rupee denominated Compulsory Convertible Debentures. The assessee vide Ground Nos. 10 to 12 has stated that the evidence produced had not been properly considered and judicially interpreted and that the opportunity of being heard to place the evidence/details on record to substantiate its claim was not provided during the course of assessment proceedings. 5. The facts of the case in brief are that the assessee company was incorporated on 28.5.2010 and during the year under consideration was engaged in the business of promotion, construction and development of the commercial complexes comprising of retail and commercial office complex. The assessee e-filed return of income on 30.11.2011, declaring Nil Income. During the course of assessment proceedings, the AO noticed that the assessee had undertaken the following international transactions: Name of AE Nature of Transaction Value(Rs.) Method Brahma Opportunities D. Ltd. Allotment of Share 9999850 CUP Brahma Opportun....
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....ject the benchmarking approach of the assessee nor he proposed to introduce any fresh benchmarking approach of his own. It was further submitted that the transaction of payment of interest to AEs was shown an international transaction as the assessee had lent interestITA free loan to its AEs. He drew our attention towards page no. 10 of the PTO's order wherein it has been noted as under: "Indian companies go for External Commercial Borrowings as the interest rates on ECB loans are generally cheaper than the prevailing interest rates in the domestic market. Thus as can be seen from above, while borrowing money by X (in India) from Y (outside India), the interest rates are benchmarked with LIBOR and the interest rate above LIBOR is decided by the stand alone credit rating of X. On the contrary, no company in India would like to invest in the form of loan outside India and that also without security as the interest returns in India would be higher than those prevailing in developed markets. Thus while lending money by X (in India) to Y (outside India), the interest rates would be bench marked against those prevailing in India for investing in corporate bonds (which are without securi....
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....re, the TPO erred in considering LIBOR as a benchmark rate, which is in complete contradiction to the facts of the case. It was contended that RBI Circular No. 09/2011 dated 01.07.2011 permits use of LIBOR rates within permissible range for issue of ECB not for INR denominated borrowings and there is judicial precedents supporting the interest rates to be considered for currency in which loan has originated. The reliance was placed on the following case laws: * India Debt Management Pvt. Ltd., IT(TP)A No. 7518/Mum/2014 * CIT Vs Cotton Naturals (I) Ltd., ITA No. 233/2014 (Del. HC) * CIT Vs Tata Autocomp Systems Ltd., ITA No. 1320/2012 (Mum. HC) * Bharti Airtel Ltd., ITA No. 5816/Del/2012 (ITATDel) * M/s Aithent Technologies Pvt. Ltd. Vs ITO, ITA No. 3647/Del/2007 (ITAT Del) 9. It was contended that the adjustment had been proposed in violations of the law and thus, ought to be deleted. It was contended that the assessee has also carried out analysis on BSE database, which provides the details of comparable instruments. The assessee requested to admit the same as an additional/supplementary analysis vide letter dated 27.04.2016. The said analysis indicated that the av....
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.... adjustment because the assessee had not claimed any deduction of the interest paid on issuance of the CCDs in its return of income. A reference was made to page nos. 682 to 684 of the assessee's paper book, which is the copy of return of income. 12. In his rival submissions the ld. CIT DR reiterated the observations made by the TPO and the DRP in their respective orders and further submitted that the international transactions were not at arm's length, therefore, the AO rightly made the adjustment which was recommended by the TPO. It was also submitted that the ld. DRP has considered all the objections of the assessee and only thereafter directed the AO to make the adjustment on account of ALP. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the assessee had furnished the additional evidences for the first time before this bench of the Tribunal, those were not available at the time of proceedings before the TPO/AO/DRP. The new evidence now furnished by the assessee, go to the root of the matter and are very much relevant to resolve the present controversy i.e. as to whether the borro....