TaxTMI 
TaxTMI 
2021 (1) TMI 282
X X X X Extracts X X X X
X X X X Extracts X X X X
....,394. Ground No. 2: Non-acceptance of the order passed by the Hon'ble Bench in AY 2013-14 wherein the Hon'ble Bench had held the interest income as capital in nature, required to be netted off against the project cost 2. On facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP has grossly erred in not following the order passed by the Hon'ble Bench in AY 2013-14 in Appellant's own case, despite admitting that the facts for AY 2015-16 are exactly the same as AY 2013-14. 2.1 On the facts, in the circumstances of the case & in law, the interest income amounting to Rs. 19,62,91,587 accruing to the Appellant in the captioned assessment year, be considered as a capital receipt not chargeable to tax in light of the various judicial precedents including the Hon'ble Supreme Court 2.2 On facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP has erred in not appreciating that if the interest expense was to be capitalized in the cost of the ongoing project, the interest income, being inextricably linked with the ongoing project, was to be allowed to be set off against cost of project and not separately taxed under th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfer pricing additions made on a protective basis 6. On facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP has erred in making a transfer pricing adjustment amounting to Rs. 8,14,74,438 on a protective basis without appreciating that the transfer pricing adjustments have been made on interest expenses which have been capitalized by the Ld. AO/ Hon'ble DRP and thus, there would be no impact on the assessed income for the impugned year. 7. On facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP have erred by rejecting the economic analysis undertaken by the Appellant which is in accordance with provisions of the Act, despite the fact that the international transaction was continuing in nature and the same economic analysis was accepted by the Ld. AO/TPO in the earlier years; 8. On facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP have erred by including the Non-Convertible Debenture ('NCDs') issued by Bright Buildtech to its Associated Enterprise ('AE') even though the same NCDs had non-comparable terms and conditions; 9. On facts in the circumstances of the case and in law,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 in Virtuous Pvt. Singapore Retail Ltd., 15% 190,22,75,000 FCCDs ssued FY 2012-13 in Virtuous Pvt. Ltd. Retail 8% 470,67,75,160 Redeemable NCDs issued in FY 2014- 15 Argos Holdings P. Ltd., Singapore 12% 448,00,00,000 Total 1268,88,35,660 4. Out of the above funds, the assessee made investment amounting to Rs. 616,87,44,043/- during the year under consideration. The detail of investment made by the assessee and interest income thereon is tabulated below: S.No. Investment Investment as on 31st March, 2015 (Rs.) Interest Income (Rs.) 1. Investment in fixed deposit 5,07,59,81,796 18,84,01,175 2. Investment in mutual funds 1,09,27,62,247 8,44,56,793 3. Interest on nter-corporate deposit - 78,90,412 Total 6,16,87,44,043 28,07,48,380 5. For the year under consideration, the assessee filed its return of income electronically u/s. 139(1) of the Act on 30.11.2015 declaring a total loss of Rs. 9,26,83,394/-. The return of income of the assessee was selected for scrutiny assessment u/s. 143(3) of the I.T. Act under reference u/s. 92CA(1) of the Act was made to the TPO. TPO vide order dated 20.09.2018 made adjustment of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king progress. The Ld. AR further submitted that in AY 2014-15 the CIT(Appeal) followed the order of the Tribunal and deleted similar additions made by the Assessing Officer. The Ld. AR submitted that the present assessment year i.e. AY 2013-14 is continued year and the factual aspect remains the same. 8. The Ld. DR relied upon the assessment order and the order of the DRP. 9. We have heard both the parties and perused all the relevant material available on record. The facts are identical in the present assessment year to that of AY 2014-15. The funds raised by the assessee are inextricably linked with setting up of its mall at Bangalore and, therefore, the interest earned by the assessee by parking the said funds temporarily with bank cannot be treated as 'Income from other sources'. Since the income was earned in a period prior to commencement of business, it was in the nature of capital receipt and, therefore, it would result in reduction in the capital work-in-progress. It is pertinent to note that in the present year, the assessee received the amount on account of interest on fixed deposits in bank. Under expenses incurred on interest cannot be considered as income o....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... AR relied upon the decision of the Tribunal in case of MP Ramachandran Vs. DCIT 32 SOT 592 (Mum.) as well as Suresh K Jajoo Vs. ACIT 39 SOT 514 (Mum.). The Ld. AR submitted that a protective assessment has not discussed about the substantive assessment being made in the assessment order but has simply proceeded to make the protective assessment in the hands of the assessee. Without prejudice to the same arguments, the Ld. AR further submitted that during the FY 2011-12, the assessee issued 19,02,27,500/- unsecured FCCDs of INR-10 each at par. These FCCDs carry an interest @ 15% for the FY 2014-15. The summary of the terms of FCCDs is reproduced below: Particulars Description Aggregate Quantity 190,227,500 Face Value INR 10 Issue Price INR 10 Coupon Rate 15 percent for FY 2014-15 Security Unsecured Conversion Terms 1 Equity Share for 100,000 FCCDs Conversion Period Within ten years from the date of allotment of the FCCDs 11. Considering the nature of transaction and the availability of data pertaining to an identical transaction, CUP method was considered as the most appropriate method in determining the arm's length nature of the International transaction. A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after excluding Bright Buildtech comes at 15.58%. Thus, the transaction of the assessee in relation to payment of interest on FCCDs should be considered at arm's length. The DRP in its directions for AY 2013-14 had excluded NCDs from the final list of comparables. The Ld. AR further submitted that the TPO has erred in concluding that the economic analysis of the assessee using internal CUP method with range concept is flawed. The Ld. AR further submitted that the company has not used internal CUP method and the benchmarking was performed by using external comparables from Bloomberg and NSDL databases. The TPO erroneously concluded that range concept is not applicable in CUP method and rejected the economic analysis carried out by the assessee. The Ld. AR pointed out that CBDT introduced Rule 10CA vide notification dated 19.10.2015 relating to determination of ALP where application of most appropriate method results in more than one price. Exceptions to the range concept as laid down by Rule 10CA(4) which states that the range concept shall not apply where the most appropriate method is as per clause (d) and clause (f) of Section 92C(1) of the Act i.e. Profits Split Method and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermitted to be an adjusted against pre-operative expenses. This decision of the Delhi High Court is dated 5/3/2014 which is later to the decision in case of India Oil Panipat Power Consortium Ltd. Case. The Ld. DR submitted that in this case CIT(A) Vs. Bokaro Steel Ltd. 236 ITR 315 was distinguished and Kutthikoli Chemicals and Fertilizers Ltd. Vs. CIT(A) 227 ITR 172 (S.C.) was relied upon and followed. The Ld. DR submitted that the Tribunal's decision for Assessment Year 2013-14 in assessee's case did not discuss the decision of Jurisdictional High Court in case of Indian Vaccines Corporation Ltd. (Supra) which is also on the same issued and a more recent decision. The important distinction in case of Indian Oil Panipat Power Consortium Ltd. case is that there were legal issue due to which funds were lying unutilized and interest burden on going. Thus, to partially get rate of interest, burden borrowed funds, the assessee has temporarily part these funds. However, in present assessee's case, neither there is any present legal issue nor the funds are part temporarily in the FDR and other instruments. Apparently funds Assessment Year in FDRs for more than 3 years which f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....menced and assessee could not make out the case that the funds were not at all directly or indirectly linked to the business of the assessee. The Ld. AR has made the submissions that a search for the interest paid on debentures by the broadly comparable companies engaged in the development of real estate was conducted for set off 34 comparable transactions. The range of interest rate charged in the comparable uncontrolled transactions is 15% to 18.50% with the median of 17.45%. Since the interest paid by the assessee @ 15% p.a. is within the arm's length range. The International transaction relating to payment of interest on FCCDs is at an arm's length. But from the perusal of the order of the TPO it can be found that the TPO rejected the approach and economic analysis of the assessee without giving any specific reasons and determined an arm's length interest rate of 0.717% and proposed to compare the same with the interest of 15% p.a. paid by the assessee on the FCCDs and thereby proposing an adjustment to the income of the assessee. Further, it can be seen that the contentions of the Ld. AR that the TPO has inappropriately considered Bright Buildtech as a comparable a....