TaxTMI 
TaxTMI 
2026 (9) TMI 1058
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....oordinate Bench in assessee's appeal being ITA No. 6766/Mum./2025, for the assessment year 2021-22. 2. During the hearing, the learned Authorised Representative ("learned AR") submitted that once agreed with the submissions of the assessee that the Compulsory Convertible Debentures ("CCDs") issued by the assessee to its associated enterprises are in the nature of the debt and only to follow the requirement of the Indian Accounting Standard ("Ind AS") - 32, the debt and equity component of CCDs were presented in the financial statement, the Coordinate Bench exceeded its jurisdiction by restoring the matter to the file of the Transfer Pricing Officer ("TPO") for benchmarking the interest paid by the assessee on CCDs. The learned AR submitt....
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....eposit taking systematically important Non-Banking Finance Company ("NBFC") registered with the Reserve Bank of India ("RBI") and is engaged in the business of lending and investing in pass-through certificates, public sector/corporate bonds, debentures, certificate of deposits and commercial paper. During the year under consideration, the assessee entered into an international transaction of payment of interest in respect of CCDs issued to its associated enterprises during the financial years 2017-18 to 2019-20. The assessee benchmarked the transaction by adopting the CUP Method and considered information for corporate debt instruments for the financial year. As the interest rates on the comparable debt instruments and CCDs issued by the a....
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....aracter of equity. 5. The relevant findings of the Coordinate Bench, vide order 22/08/2025, are reproduced as follows: - "33. Therefore, we are of the considered view that the TPO as well as the learned DRP erred in placing reliance upon the financial statement of the assessee, which was drawn as per the mandate of Ind AS-32, for arriving at the conclusion that the CCDs issued by the assessee include an equity component. ....... ...... 37. Having carefully analysed the aforesaid decision of the Hon'ble Supreme Court, we are of the considered view that the same has been rendered in a different factual matrix, wherein by the express agreement inter se the parties, the CCDs issued were ab initio considere....
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....tter to the file of the AO/TPO for de novo benchmarking of the international transaction pertaining to payment of interest by the assessee on CCDs issued to the associated enterprises. The relevant findings in this regard are as follows: - "40. Thus, as per the provisions of the aforesaid Rule, the "Other Method" shall be the method which takes into account the price which has been or would have been charged or paid for the same or similar uncontrolled transaction between non-associated enterprises. However, in the present case, the TPO, without searching for similar uncontrolled transactions between non-associated enterprises, proceeded to benchmark the international transaction. As we have arrived at the conclusion that the CCDs ....
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....see's appeal is allowed." 7. As per the assessee, the ALP of the interest paid on the debt component was already accepted by the TPO and the said fact was acknowledged and recorded by the Coordinate Bench in its order. In this regard, for completeness of facts, it is relevant to note the following findings of the TPO vide order dated 92CA(3) of the Act: - "The interest rate of 9.75%, 10.75% and 13.25% for CCDS issued in FY 19-20. FY 18-19 and FY 17-18 respectively on the debt component of the CCDs can be considered as ALP for the year under consideration. But interest on equity component would not have been paid by any non-AE in uncontrolled transaction. Thus, downward adjustment to the price of the interest transaction, to the ....