TaxTMI 
TaxTMI 
2026 (6) TMI 366
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....of directions of Dispute Resolution Penal-1 (DRP) Mumbai dated 08.10.2025 for Assessment Year (AY) 2022-13. The assessee has raised following grounds of appeal: (1) That the final assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B by Ld. AO making a Transfer Pricing adjustment of Rs. 76,45,48,200/- is bad in law, contrary to facts, arbitrary, and liable to be deleted. (2) That the finding of the learned TPO that the "though the nomenclature of instrument is compulsorily convertible debentures, but a detailed analysis of the contractual terms reveal that the actual substance of the instrument is an equity instrument" is factually incorrect, legally misconceived and wholly untenable. (3) That the authori....
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....andatory requirement under Rule 10B. The ALP determined therefore has no supporting economic rationale. (8) That in making the aforesaid proposed addition the learned Assessment Unit, Income Tax Department has also erred in referring the matter to the learned TPO u/s 92CA of the Act on the following amongst other grounds, rendering the order of the TPO as unsustainable both in law and on facts: a) As none of the pre-conditions laid down under section 92C(3) of the Act were satisfied, there was no occasion for determination of arm's length price by the AO and the value of the international transactions ought to have been accepted, b) As the reference made by the learned AO to the learned TPO is not in accordanc....
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....e on the TPO/DRP findings, without adjudicating the Assessee specific submissions or explanations, rendering the order arbitrary, perverse and unsustainable. (12) That the Appellant craves leave to add, amend, modify, substitute or withdraw any of the above technical grounds at the time of hearing. 2. Brief facts of the case are that assessee-company is engaged in business of money exchange/foreign exchange services as authorised dealer. The assessee is also registered with Reserve Bank of India (RBI). The assessee filed its return of income for assessment year (A.Y.) 2022-23 on 29.11.2022 declaring Nill income. The case was selected for scrutiny. The assessee while filing return of income reported certain international transact....
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....wed. It was also held that the substance of transaction is different from its form. The nomenclature of instrument is Compulsory Convertible Debenture, but a detailed analysis of contractual term reveals that the actual substance of the instrument is an equity instrument. The TPO vide its order dated 25th January 2025 determined ALP of interest at the Nil, resulting into transfer pricing adjustment of Rs. 76.45 crore. 3. On receipt of order of TPO, the AO passed draft assessment order on 26th February 2025 proposing addition of Rs. 76.45 crore. The copy of draft assessment order dated 26.02.2025 was served upon the assessee. The assessee filed its objection before Dispute Resolution Penal (DRP). The DRP upheld the adjustment suggested by....
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....sment Centre, dated 16th September 2022, * 2019(8) TMI 554, ITO versus CAE Flight Training (India) Private Limited dated 25 July 2019, * 2023(7) TMI 1148, Religare Finevest West Ltd versus DCIT dated 13 July 2023, * 2025 TMI 1506, Goldman Sachs India Finance Private Ltd versus Income tax Department, 22 August 2025, * 2025(1) TMI 446, Stahl India Private Limited versus DCIT dated 10 December 2024. 5. The learned AR of the assessee further submits that superior courts have also held that expenditure incurred on issuance of CCDs are also allowable and that such expenditure incurred on issuance is relatable to debt obligation (for CCD) and not for equity. To support such view, the learned AR of the assesse....
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....e. We find that there is no dispute that during the relevant financial year under consideration, the assessee issued CCDs of Rs. 849.49 Crore to Ebix Asia Holding Inc, Mauritius at an interest @ 9% per annum. The assessee paid total interest of Rs. 76.45 Crore. To substantiate ALP of such interest payment the assessee furnished its TPSR in Form-3ECB. We find that TPO disregarded the benchmarking of the transaction and other objections of assessee for making reference for ALP by holding that that CCDs are equity-like and therefore, interest could not be allowed. It was also held that the substance of transaction is different from its form. The nomenclature of instrument is Compulsory Convertible Debenture, but a detailed analysis of contract....