TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 687
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....international transaction of interest paid on borrowing from AE's. The AO made reference to TPO for determination of Arm's Length Price ('ALP') of international transactions in terms of section 92CA of the Act. The TPO vide order dated 28.02.2023 passed u/s 92CA(3) of the Act had proposed ALP adjustment of Rs. 1,60,21,483/- on the international transactions reported by the assessee. Thereafter, AO passed the draft assessment order u/s 144C(1) of the Act wherein variation has made by the TPO were not proposed and total income of the assessee was proposed to be assessed at Rs. 20,32,29,093/-. 3. Against the said order, assessee preferred objections before the DRP, who vide its order dated 28.06.2024 has rejected the objections raised by the assessee and confirmed the findings given by the TPO/AO. Thereafter, the AO passed the final assessment order wherein addition of Rs. 1,60,21,483/- has been made towards ALP adjustment and total income was assessed at Rs. 20,32,29,093/-. Further the AO has charged tax at normal rate of tax, however, the claim of the assessee was that it had opted for concessional rate as per section 115BBA of the Act which was not accepted by the lower authorit....
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....mstances of the case and in law, the Ld. AO erred in denying the benefit of the lower tax regime of 22 per cent opted by the Appellant u/s 115BAA(5) of the Act, and computing tax liability on the returned income at a rate of 30 per cent, due to filing of Form 10-IC beyond the date specified u/s 139(1) of the Act. 5.2. That the delay in filing of Form 10-IC beyond the stipulated time is a procedural matter, and the substantive right of the Appellant to avail the lower tax rate ought not to be denied on technical grounds. Without prejudice to Ground No. 5 above: 6. Ground No. 6: Denial of tax rate of 25 per cent 6.1. On the facts and circumstances of the case, the Ld. AO erred in computing the income-tax liability at the rate of 30 per cent instead of 25 percent applicable on the Assessee under the normal provisions of the Act. 6.2. In doing so, the Ld. AO did not consider the turnover of the Appellant for FY 2017-18 in accordance with Part 1, Paragraph E of the First Schedule of Finance Act 2020 while computing the tax liability. 7. Ground No. 7: That on the facts and in the circumstances of the case and in law, the Ld. AO erred ....
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.... require any verification from the Assessing Officer and, therefore, the additional grounds of appeal taken by the assessee are admitted by respectfully following the order of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra). 9. We first take the additional grounds of appeal taken by the assessee for adjudication as it goes to the root of the issue challenged by the assessee regarding ALP adjustments of international transactions pertaining to interest on non-convertible debentures ('NDCs') paid @ 12% to its AE namely Osiris Holding Pte Ltd. The assessee has prepared transfer pricing documentation and computed ALP rate of interest of this transactions @ 13.8% as per external comparable uncontrolled price method. The ld. AR submits that the entire amount of interest paid to its AEs of Rs. 7,69,03,118/- was disallowed by the assessee in the computation of income being excess paid or payable in excess of 30% of profits in terms of section 94B(2) and the same was added back to the total income of the assessee and due taxes were paid. Therefore, there is no occasion for the Assessing Officer to again make adjustment payment of such interest as no interest ....
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....expense arising out of an international transaction. In absence of a claim, the question of expense being at arm's length rate would not arise. It is a well settled principle that a disallowance cannot be imposed in absence of a claim of expenditure/deduction in the first place 8.7. It is submitted that it is a well settled judicial principle that the amount on which taxes have already been paid cannot be taxed twice. Reliance in this regard is placed on the judgement of Apex court in the case of Mahaveer Kumar Jain V. Commissioner of Income Tax (Supreme Court) [Civil Appeal No. 4166 of 2006] wherein the Apex Court had laid the principle that unless otherwise stated an amount cannot be taxed twice. [LPB page nos. 14 to 19) 8.8. Reliance in this regard is placed in the following judicial precedents: -ITO (Exemption) vs. Rajasthan Cricket Association [2025] 171 taxmann.com 25 (Jaipur-Trib) wherein the Hon'ble tribunal held that where a charitable trust made a provision for expense but did not claim the amount as applied income during the year, question of disallowance of provision did not arise [LPB page nos. 1 to 8] -Sunil Dhirubhai Patel ....
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....dersigned, following the principle of natural justice, this additional ground of the assessee should not be admitted by the Hon'ble ITAT as the same was never raised by it before the lower authorities (TPO, AO and DRP). 1.2 Without prejudice to the above, as argued by the undersigned, the objective and context of the TP provisions under the Act and those of section 94B of the Act are completely different and they operate in separate realms. The main purpose of the TP provisions, which include sections 92, 92C and 92CA, is to allow the AO to refer international transactions and specified domestic transactions (SDTs) to the TPO to determine the arm's length price (ALP) of such transactions. The TPO assesses whether the prices in such transactions between AES are at arm's length in accordance with the methods, processes and rules laid down in this regard. The AO then uses the TPO's determination to compute the assessee's total income. 1.3 However, the main purpose of section 94B, which is a thin capitalization rule in line with the OECD/G20 BEPS Action 4, is to prevent an entity from shifting profits out of India through excessive interest payment....
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....t years (AYs) and deducted, subject to 30% EBITDA limitation in such future years. However, such carry forward mechanism does not exist under TP provisions. 1.6 The above makes it abundantly clear that once there is an international transaction or SDT, application of the TP provisions is mandated under the Act for determination of their arm's length price. It may happen that both sets of provisions (TP provisions and section 94B) can apply to the same transaction. Also, compliance with one does not automatically guarantee compliance with the other. 1.7 In specific context of interest (though the scope of TP provisions is much wider than that of section 94B), TP provisions (section 92 to 92F) would ensure that the interest rate charged between AEs is at arm's length whereas section 94B imposes an additional cap on the deductible interest amount based upon a percentage of the borrower's earnings. The interest amount should first satisfy the arm's length principle under TP provisions, and if the interest rate is found to be non-ALP, appropriate adjustment is made to bring it to ALP. Section 94B puts specific limitation regarding the deductible interes....
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....der IP provisions as redundant as far as international transaction of interest is concerned. This is contrary to the letter and spirit/intent of the law which mandates application of TP provisions in respect of international transactions and SDTs for determination of their ALP. Also, the assessee's ground/contention is not a correct interpretation of the law by any stretch of imagination. 1.10 Having regard to the above, the assessee's aforesaid additional ground that the AO has grossly erred in making a reference to the TPO in respect of interest paid to AE despite the fact that the assessee had in the return of income suo motu disallowed and added back the entire amount of interest paid to AE u/s 94B of the Act, is without any substance and merit, and it is requested that the same may be dismissed by the Hon'ble ITAT. 2. Ground No.1: Impugned order is non est and barred by limitation as per section 153 of the Act: As the assessee submitted that it has withdrawn this ground, no comments are made by the undersigned in this regard as the ground stands withdrawn by the assessee. Ground No. 2 and Ground No. 3 The Id. A red in completing assessmen....
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.... that "there is no such thing as res judicata in income-tax matters". 3.3 As regards the assessee's contentions regarding inclusion of certain comparables by the TPO, the TPO has discussed at length the reasons for inclusion of these comparables - Dhan Laxmi Bank Ltd. and Nisha Developers Pvt. Ltd. on page 8-11 of his order (page 49-52 of the submission of factual and legal paper book). The main reasons discussed by the TPO include similarity of tenor, similarity of credit rating of these comparables in public domain, issuance of their instruments in the same year as that of the assessee, etc. 3.4 It is pertinent to highlight that considering the assessee's submissions made in pursuance of the show cause notice issued by the TPO, the TPO excluded one of his comparables Mahavir Finance (India) Ltd. which the TPO had proposed to include in his show cause notice issued to the assessee (page 46 and 52-53 of the submission of factual and legal paper book). This also shows that the TPO has given due consideration to the assessee's contentions. 3.5 Coming to the DRP's order dated 28.06.2024, the DRP has also discussed this issue quite elaborately....
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.... by applying SBI PLR which is applicable in case of secured borrowings therefore, functions and risks of the two instruments are different, the TPO has rejected the assessee's contentions in this regard. 4.2 As regarding the DRP's directions on this issue, the DRP vide its order dated 28.06.2024 has discussed this issue quite elaborately at paras 7.2, 7.4 and 7.5 of its order (page 71. page 73 and page 75 of the paper book submitted along with Form No. 36). The DRP has held that SBI PLR is a standard rate which is used for benchmarking when interest rate cannot be culled out. In the assessee's case, in the TP documentation, the assessee himself had Mentified the margin on the basis of arithmetic average interest rate of comparables. This method was also applied by the TPO with new set of comparables. Thus, acceptance of the assessee's contention by the DRP would tantamount to cherry-picking what is favorable to the assessee's own cause. The DRP has further held that when a specific rate through external CUP has been determined, there is no point in using a standardized method in Form of SBI PLR. 4.3 It is relevant to mention that by advocating ....
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....in filing Form 10-IC by the assessee without any reason remains unexplained. 5.5 The Hon'ble Supreme Court in the case of B.M. Malani v. CTT (2008) 174 Taxman 463306 ITR 196 (SC) has held that in the word the genuine hardship, genuine means not fake or counterfeit, real not pretending. The Hon'ble Supreme Court further held that another well known principle namely, a person cannot take advantage of his own wrong may also have to be borne in mind. 5.6 In the instant case, the assessee has failed to explain any reason for the said delay. As discussed above, the COVID situation is already factored into the due date extension given by CBDT in this regard. The case laws relied upon by the assessee to support its claim are distinguishable on facts, and are not applicable to the assessee's case. In these cases, it was held that there was bona fide reason for the delay. 5.7 In view of the above, it is requested that the assessee's aforesaid ground may be dismissed by the Hon'ble ITAT. 6. Having regard to the above, it is requested to uphold the order of the AO and the TPO and dismiss the appeal of the assessee." 11. The assessee fi....
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.... highlighted portions of Page 12 of the TAR for AY 2020-21 (enclosed as Annexure 1) and Page 13 of the TAR for AY 2021-22 (enclosed as Annexure 2 b. No Claim of Brought-Forward Interest in Subsequent Years: - i. The Ld. DR's inference that the Appellant has claimed the benefit of Section 94B(4) carry-forward in subsequent years is legally and factually unsustainable. For A.Y. 2021-22 and AY. 2023-24, the Appellant claimed deductions of Rs. 84,02,457 (Rs 5,23,07,123 Rs. 4,39,04,666] and Rs. 14,99,458 [Rs 39,22,639 Rs 24,23,181) respectively. ii. These amounts were claimed and allowed as deduction out of AE-related interest for A.Y. 2021-22 and A.Y 2023-24 respectively, out of total interest costs of Rs. 5,23,07,123 and Rs. 39,22,639 for the relevant years. They do not represent a set-off of any brought-forward disallowed interest under Section 94B(4), The computation of income clearly demonstrates that no benefit of the carry-forward amount was utilized (Kindly refer to the computation for A.Y. 2021-22 at Annexure 3 and A.Y. 2023-24 at Annexure 4 5. In light of the documentary evidence annexed herewith, it is evident that the observations made....
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....of appeal taken by the assessee are thus allowed. 15. Since we have already allowed the assessee's additional grounds of appeal, the other grounds of appeal No.2 to 4 taken on the merits on the issue of transfer pricing adjustments on interest paid on NCD's become academic. 16. Ground of Appeal No.1 taken by the assessee is not pressed, thus, dismissed. 17. Grounds of appeal No. 5 to 5.2 are with respect to levy of tax by denying the benefit of lower rate of tax of 22% applicable u/s 115BAA(5) of the Act for the reason that Form No. 10-IC was filed beyond the due date of filing of return. 18. Heard both the parties and perused the materials available on record. In the instant case, originally return of income was processed u/s 143(1) of the Act, wherein tax was charged @ 30% which was rectification vide order dated 16.12.2024 and the tax was charged @ 25% by observing that assessee is a domestic company and its gross receipts during the previous does not exceed Rs. 400 Crs. However, the benefit of concessional rate of tax as provided u/s 115BAA(5) was allowed. During the course of hearing our attention is invited to the order of Ld. CIT(A) in the case of assessee itself....