TaxTMI 
TaxTMI 
2023 (12) TMI 1162
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....ough email. Subsequently, notice U/s. 142(1) was issued from time to time and served on the assessee. In response, the assessee submitted details through ITBA portal. Considering the international transaction entered into by the assessee, the Ld. AO made a reference to the Ld. Transfer Pricing Officer [TPO] by ACIT, Circle-1, Kakinada vide letter dated 16/09/2019 after obtaining approval of the Ld. Pr. CIT-2, Visakhapatnam. The Ld. TPO observed that the assessee entered into the following transactions with the Associated Enterprises [AEs] as per the 3CEB filed by the assessee: International transactions Amount Received /Receivable (Amount in INR) Amount paid /payable (Amount in INR) INR Denominated Non-convertible Debentures 27,00,00,000 _ Interest payable on INR Denominated Non-convertible Debentures _ 69,23,836 The Ld. TPO observed that the assessee has issued Nonconvertible Debentures (NCDs) amounting to Rs. 27 Crores to the AEs and has been benchmarked following the other method. The Ld. TPO also observed that with respect to the payment of interest on the issue of NCDs and was benchmarked following the CUP method. The assessee in order to identify....
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....ivate Limited INE850S08116 8% NSDL 2. Cleantech Solar Energy (India) Private Limited INE850S08108 8% NSDL 3. Cleantech Solar Energy (India) Private Limited INE850S08124 8% NSDL 4. Welspun Renewables Energy Private Limited INE296N08022 8% NSDL 5. Omc Power Private Limited INE240W08013 8% NSDL 6. Nabha Power Ltd 8.3% CDSL 7. Jsw Energy Limited INE121E07320 8.65% BSE 8. Jhajjar Power Limited INE165K07050 8.7% BSE 9. Jhajjar Power Limited INE165K07068 8.7% BSE 10. Jhajjar Power Limited INE165K07035 9.91% BSE 11. Jhajjar Power Limited INE165K07043 9.91% BSE 12 Marikal Solar Parks Private Limited INE469T08022 10% NSDL 13. Marikal Solar Parks Private Limited INE469T08030 10% NSDL 14 Reliance Power Limited 10.2% CDSL 15 Reliance Power Limited INE614G08061 10.2% BSE 16 Reliance Power Limited INE614G07022 10.6% BSE 17 Reliance Power Limited INE614G07030 10.6% BSE 18 KnBijapura Solar Energy Private Limited INE137W08011 10.....
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....17 Renew Solar Power Private Limited 11.35 19 INE154W08040 Amplus Power Solutions Private Limited 14.25 20 INE420T08207 Amplus Power Solutions Private Limited 14.25 21 INE018V08072 Vena Energy Solar India Power Resources Private Limited 14.30 22 INE154W08032 Amplus Power Solutions Private Limited 14.30 23 INE154W08057 Amplus Power Solutions Private Limited 14.30 24 INE154W08107 Amplus Power Solutions Private Limited 14.30 25 INE420T08181 Amplus Power Solutions Private Limited 14.30 Value Value Number of comparables 25 25 35th Percentile 9th Entry 8.30% Median 13th Entry 8.95% 65th Percentile 17th Entry 10.30% The Ld. TPO thereafter arrived at a Median of 8.95% and issued a show cause notice dated 4.3.2020 requesting the assessee to show cause as to why the interest rate of 8.95% should not be considered as ALP for calculating interest payable on NCD. Accordingly, the Ld. TPO proposed an adjustment by computing the difference between the interest adopted by the assessee @13% and the median computed @ 8.95%, thereby arriving at an ....
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....ion of penalty under section 270A 5. On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings U/s. 270A of the Act. The above grounds are independent and without prejudice to one another. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal, so as to enable the Hon'ble Income Tax Appellate Tribunal to decide this appeal according to law." 3. The only issue arising out of the above grounds is with respect to benchmarking of the interest rate on NCDs, whereas the other issues are consequential. In this regard, the Ld. AR argued that the Non-Convertible Debentures were unsecured and hence higher rate of interest of 13% is applied considering the risk factors involved. The Ld. AR vehemently objected to the filters selected by the Ld. TPO and submitted that the Ld. TPO failed to apply filter, i.e all secured / unsecured while determining the list of comparables. The Ld. AR further submitted that the Ld. TPO failed to distinguish between the rate of interest applicable for secured and unsecured debt instruments. ....
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....dered view, the relationship of a holding / subsidiary is not the criteria for determining the interest with respect to secured / unsecured debt instruments. We find from the submissions of the Ld. AR that when the filters of secured or guaranteed are applied in the list of comparables, the rate of interest and the 65th percentile worked out to 14.25% which is over above the interest rate paid by the assessee. Further, when the companies in the Wind / Thermal Power Sectors are excluded, the 65th percentile worked to 14.25% which is over and above the interest rate paid by the assessee company. The Coordinate Bench of Surat in the case of ITO vs. V R Surat (P.) Ltd reported in [2023] 152 taxmann.com 679 (Surat. Trib.) held as follows: "Where the assessee issued FCCDs which were unsecured in nature, company which issued debenture which was secured in nature could not be included in the list of comparables of the assessee company." Further, the Bangalore Tribunal in the case of Vena Energy KN Wind Power (P.) Ltd (supra) has held as follows: "12......One of the key criteria for determining the interest rate is the risk involved. When the loan is unsecured the risk ....