AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 282
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....otective basis) as against the returned loss of Rs. 9,26,83,394. 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, wa....
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....2 of the Act, without appreciating that such expenses are revenue in nature and allowable under the provisions of the Act. Ground No. 6: Transfer 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 Buildtec....
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.... as on date Applicable Interest rate Amount (in INR) Equity with share premium Virtuous Retail Limited, Mauritius - 159,97,85,500 FCCDs ssued FY 2011-12 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 ....
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....rder dated 26.07.2019 in favour of the assessee on this issue. The Tribunal held that the Assessing Officer should treat the interest income as capital in nature and reduce the same from the cost of the ongoing project. The Tribunal directed the Assessing Officer to treat the interest income as capital in nature and netting the same against the project cost/capital working 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 wa....
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....tted that the protective assessment is entirely bad in law. The Ld. AR submitted that a protective assessment could be made only as a precautionary measures where the tax authorities may not be sure as to who would pay the tax on the income which has arisen. An assessment can be considered as protective only when there is substantive assessment and thus, the substantive assessment must be made before protective assessment is made. The Ld. 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 Iss....
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....orizon cannot be taken as the comparable since Clear Horizon is an AE of Bright Buildtech. The benchmarking results of the comparables taken by the TPO after excluding Bright Buildtech are given as under: S.No. Company Name Coupon Rate 1. Kapstone Constructions Pvt. Ltd. 21.3% 2. Flicker Project Pvt. Ltd. 13% 3. Ashiana Landcraft Realty Pvt. Ltd. 14% 4. Ashiana Landcraft Realty Pvt. Ltd. 14% Average 15.58% 12. The average of comparables taken by the TPO 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 m....
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....rated as a Company with object of manufacturing human vaccines and it received substantial financial grant. It invested said funds and promoter's capital with bank under portfolio management scheme under which assured return was granted by link. The assessee adjusted interest income on said bank deposited against pre-operative expenses relating to a project. Since investment had nothing to do with the project and there was no inextricable link between investment and project interest income could not be permitted 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 ....
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....ness was commenced and the decision in case of Indian Vaccine (Supra) has not been considered in assessee's own case for Assessment Year 2013-14 by the Tribunal. The Ld. DR more specifically distinguished the decision of India Oil Panipat Power Consortium Ltd. which was relied by the Tribunal in A.Y. 2013-14. Though the Ld. AR in his submission tried to refute those distinction, was not able to succeed because of the fact that in the present assessee's case in this Assessment Year, the business has commenced 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 pe....