INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Adjustment on account of international transaction of payment of interest on CCDs and specified domestic transaction of payment of interest on debentures to AEs -

Assessee-company reported international transaction of payment of interest on CCDs and Specified Domestic Transaction (SDT) of payment of interest on debentures to its AEs. It applied CUP method to demonstrate that the international transaction and the SDT were at ALP. TPO observed that the assessee availed funds from its related concerns as share capital but wrongly classified them as debentures/CCDs for claiming interest deduction and such financing by the related concerns was a shareholders' activity. Thus, the TPO re-characterized the transactions of issue of debentures/CCDs as that of issue of equity shares and held that no interest payment was called for and accordingly made TP adjustment. Held: In view of Tribunal decision in assessee's own case for immediately preceding assessment year on similar issue, the assessee rightly issued debentures and CCDs to its AEs and AO was not justified in re-characterizing the transactions of issue of debentures/CCDs as that of equity shares. Further, as regards the ALP determination, the matter was remanded to AO/TPO with a direction to re-compute the ALP of the transactions of payment of interest on debentures/CCDs.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 254(1)

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