AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 105
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....OR documentary evidence filed at the appellate stage, without recording satisfaction as required under Rule 46A(2) and without affording the Assessing Officer an opportunity to examine OR rebut such evidence as mandated under Rule 46A(3). 3. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that interest paid 10% by the assessee on Non-convertible Debentures at arms-length price by considering/comparing with Prime Lending Rate (PLR) instead of Marginal Cost of Funds based Lending Rate (MCLR), when MCLR is the prevalent and RBI-mandated benchmark for lending rates during the assessment year under consideration. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in not appreciating the fact that PLR has been replaced by MCLR (from April, 2016) therefore, comparing with PLR for A.Y.2017-18 contrary to the prevailing market practices and RBI guidelines. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that interest paid @ 10% by the assessee on Non-convertible Debentures at arms length price by considering/comparing with t....
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....amined this issue for determination of the ALP and accepted the rate of interest at 10% on these NCDs issued to the AE of the assessee at arm's length. Thus, he has submitted that the CBDT has also accepted the ALP of interest on rupee denominated NCDs at PLR plus 500 basis. He has thus submitted that the issue is covered as per the earlier Order of the TPO. 5. We have considered the rival submissions as well as relevant material on record. At the outset, we note that for the assessment year 2014-2015 i.e., the first year after issuing the NCDs in question in rupee denomination, the TPO has examined this issue of ALP of interest @ 10% on these NCDs vide Order dated 18.10.2017 passed u/sec. 92CA(3) of the Act placed at Page nos.65 to 70 of the paper book. The relevant findings of the TPO in Para nos.6.1 to 6.1.4 are as under: "6.1. Interest paid on Non Convertible Debentures: During the financial year under consideration, the taxpayer has paid an amount of Rs. 6,11,97,006/- to their parent company Oikocredit towards interest @ 10% on Non Convertible Debentures. In the TP Report, the taxpayer submitted that the company has paid interest 10% on the Non Convertible....
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....tion certificate of Oikocredit. 6.1.4. The submissions of the taxpayer have been perused. From the submissions, it is observed that NCDs received by the taxpayer company from its AE were in Indian rupee denominated. Hence, SBI PLR applicable. However, since, the interest rate paid by the taxpayer 10% pa is below the rate of SBI PLR 14.75% p.a, no adverse inference is drawn and hence no adjustment is proposed on this transaction." 5.1. Thus, it is manifest from the record that this issue was taken up by the TPO for the assessment year 2014-2015 for determination of the ALP on the NCDs issue by the assessee to its AE at the interest rate of 10% and the TPO found the said interest rate at arm's length by considering the SBI PLR @ 14.75%. The learned CIT(A) for the year under consideration while passing the impugned order has considered this issue at Para-VI as under: "VI. SUMMARY OF DECISION: Before going into the merits of the case the grounds dealing with technical or procedural issues are discussed here. 2. The order of the NFAC is illegal and against the law in so far as it is passed without allowing the appellant to file its objections to th....
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....terest is subject to the limits notified u/s. 194LD of the Income Tax Act. The rate notified by the Central Government through notification dated 29.7.2013 is 500 basis points above SBIs base Rate of interest. Accordingly to the notification the Return of Interest notified is 13.75%, whereas the appellant company incurred interest rate of only 10%. The rate of interest paid is thus within the limit fixed by the Central Government. The interest on NCDs incurred by the appellant company was also accepted to be at arm s length rate of interest by the TPO in his order for the A.Y 2014-15, in the case of the appellant company. Without appreciating these facts on the records, the AO and the TPO proceeded to determine the arm s length interest at Nil and disallowed in the Faceless Assessment the whole of interest of Rs. 8,27,24,756/- incurred by the appellant company. The ALP which can be adopted is the rate at which assessee had paid the interest which is 10%, where as maximum interest rate fixed by CBDT on NCDs is base note of SBI + 500 basis points vide notification dated 29.7.2013. From the perusal of the notification, it is noticed that the notification deals with providing ....
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....es of the case and particularly when the TPO already examined the ALP of the interest on NCDs issued to the AE for the assessment year 2014-2015, we do not find any error/illegality in the impugned order of the learned CIT(A) qua this issue. Hence, we do not find any merit in the appeal of the Revenue. 6. In the result, appeal of the Revenue is dismissed. C.O.No.4/Hyd./2026 - A.Y.2017-2018: 7. The assessee has raised the following grounds in its cross objections: 1. "The order of the learned CIT (Appeals), in so far as it is against the appellant and contrary to the facts and provisions of law. 2. The learned CIT (Appeals), erred in adopting the Interest payable on NCDs during the year relevant to Assessment Year 2017-18 at Rs. 6,11,97,006 in place of the correct amount of Rs. 8,27,24,756. 3. The learned CIT (Appeals), erred in holding that there is an Interest amount of Rs. 3,68,70,610 on CCDs during the year under consideration, whereas no Interest on CCDs was incurred by the appellant company during that year and the learned CIT (Appeals) is not justified in holding that an amount of Rs. 3,68,70,610 is to be disallowed in this year by way of I....