TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 789
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....w of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making an adjustment of Rs.26,58,12,530/- as income in the hands of assessee company on account of notional interest, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in considering/appreciating the following submissions of the assessee. * That the return filed for the year under consideration has not been treated as non-est/nullity in the eyes of law. * That the assessee company is incorporated outside India and no income accrued or arose or deemed to accrues or arise in India to the assessee company and thus the assessee company is not liable to file Income Tax Return in India. * That no interest was 'paid' to the assessee company. * That the impugned interest income is not taxable in view of the provisions of DTAA between India and Cyprus as the amount was never paid by AE's. Therefore, the reference made to TPO was illegal, the adjustment proposed by the TPO is illegal and consequently the addition made by Ld. AO is also illegal. 4. That having regard to t....
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.... TPO charged the interest on FCDs as the same rate of 15% as was being charged prior to 01/01/2009. The income generated during the year under consideration was only interest income on FCDs which was offered to tax at the treaty rate of 10%. Thus, the TPO has determined the Arms Length Price and made adjustment of Rs.26,58,12,530/- in following manners:- Name of the A.E No. of FCD Face Value Date of Issue No of days Interest@15% Total interest charged ALP of interest on FCD Opening Balance 10891745 1089174500 365 163376175 163376175 ARVPL 22247 2224700 29.08.2012 213 194737 194737 ERVPL 8238045 823804500 02.06.2011 297 100549289 100549289 ERVPL 174400 17440000 30.08.2011 212 1519430 1519430 SRVPL 14359 1435900 06.06.2011 293 172989 172898 Total Adjustment 265812530 5. The assessment order came to be passed on 18/04/2016 u/s 143(3) r.w.s 144C(3) of the Act in continuation with the order passed by the TPO. Aggrieved by the assessment order dated 18/04/2016, the assessee has preferred an appeal before the CIT(A). The Ld.CIT(A) vide order dated 31/07/2019 has confirmed the action of the A.O. in making adjustment of Rs.26,58,12,530/- o....
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....cting States through exchange of letters. 4. The term " interest" as used in this Article means income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor 's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, "Trough a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is....
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....eal is dismissed. " 13. We have also gone through the order of the Co-ordinate Bench of ITAT in the case of DCIT Vs. TMW ASPF i Cyprus Holding Company Ltd. in ITA No. 879/Del/2016 dated 09.08.2019. 14. In the appeal filed by the revenue against the order of the ld. DRP reads as under: "( i) Whether on the facts and in the circumstances of the case, the DRP erred in holding that as per Article 11(1) and (2) of Indo- Cyprus DTAA, interest income is chargeable to tax on paid basis when the usage of the word 'paid' always includes 'payable' and vice versa. ( ii ) Whether on the facts and in the circumstances of the case, the DRP erred in observing that it has been judicially held in various case laws relied upon by the assessee that as per Article 11(1) and (2) of Indo- Cyprus DTAA, interest income is chargeable to tax on paid basis when there are no such findings in any decision cited by the assessee before the Hon'ble DRP." 15. While adjudicating the core issue, it was held as under: India Cyprus DTAA Ar ticle 11(1) of India-Cyprus DTAA: " Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxe....