ADAMAS BUILDERS PRIVATE LIMITED ,BENGALURU vs. DCIT, CIRCLE-2(2), BENGALURU

ITTPA 2478/BANG/2024Status: DisposedITAT Bangalore15 April 2026AY 2021-2214 pages
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What were the facts?

The assessee, Adamas Builders Pvt. Ltd., filed its return for Assessment Year 2021-22, reporting business and other income. The return was selected for scrutiny. The assessee had made international transactions involving payment of interest on Compulsorily Convertible Debentures (CCDs) to an associated enterprise, Adamas BLR Assets PTE Ltd. The assessee's transfer pricing study adopted the Comparable Uncontrolled Price (CUP) method, benchmarking the 15% interest rate on CCDs against data from NSDL, adjusted by adding 300 basis points to a 12% median rate, referencing RBI guidelines. The Transfer Pricing Officer (TPO) rejected the CUP method, considering SBI Prime Lending Rate (SBI PLR) of 12.27% as the benchmark, and proposed an adjustment. The Dispute Resolution Panel (DRP) upheld the TPO's approach. The assessee's appeal is against the assessment order dated 24 October 2024, passed by the Deputy Commissioner of Income Tax, Circle – 2(2), Bangalore, pursuant to DRP directions.

What did the Tribunal hold?

The Tribunal held that the revenue authorities' determination of interest payment based on SBI PLR or LIBOR plus a markup is inappropriate for hybrid instruments like Compulsorily Convertible Debentures (CCDs). These benchmarks are relevant for straightforward loan transactions and do not account for the unique features of CCDs, such as optional or mandatory convertibility into equity, lack of a defined repayment schedule, longer tenure, obligation to convert, and different enforcement/liquidation rights. The Tribunal found that the OECD Transfer Pricing Guidelines (2022) and Rule 10B(2) of the Income Tax Rules mandate a detailed delineation of financial transactions, considering contractual terms, functions, assets, risks, economic circumstances, and market conditions. The TPO and DRP failed to consider these aspects and the Income Tax Rules and OECD Guidelines. The Tribunal also noted that the Transfer Pricing Study Report (TPSR) lacked details on the terms and conditions of the comparables used. Therefore, the issue of determining the arm's length price (ALP) of the interest paid on CCDs is restored to the Assessing Officer for reference to the TPO. The TPO is directed to consider the 'options realistically available' to both parties. Grounds 3 and 4 are allowed. Grounds 1, 2, 5, and 6 are dismissed as general, premature, or consequential.

What were the issues?

1. Whether the assessment order passed by the National Faceless Assessment Centre is bad in law and in facts, as per Section 143(3) read with Sections 144C(3) and 144B of the Income-tax Act, 1961. 2. Whether the Dispute Resolution Panel (DRP) and Assessing Officer (AO)/Transfer Pricing Officer (TPO) erred in rejecting the benchmarking analysis conducted by the Appellant in its transfer pricing study. 3. Whether the DRP/AO/TPO erred in considering LIBOR as the benchmarking rate for the interest paid on Compulsory Convertible Debentures (CCDs) instead of considering State Bank of India’s Prime Lending Rate (SBI PLR), as per Section 92C of the Act. 4. Whether the DRP/AO/TPO erred in not adding 300 basis points spread on the SBI PLR rate to be used. Assessee's Contentions: - The assessment order is bad in law. The benchmarking analysis was correct. LIBOR is not the appropriate benchmark; SBI PLR with a 300 basis points spread should be considered. The interest paid at 15% is at arm's length. Revenue's Contentions: - The TPO rejected the CUP method and adopted 'Other method' using SBI PLR at 12.27%. The assessee failed to prove comparability. RBI approval does not set the ALP. An adjustment was made for the difference between the actual interest paid (15%) and the benchmark (12.27%).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(3),Section 144B,Section 92C,Section 92CA(3),Section 115JB,Section 234,Section 270A,Section 143(1),Section 143(2),Section 144(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH: BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

For Appellant: Smt. Tanmayee Rajkumar, Advocate
For Respondent: Dr. Divya K. J, CIT(DR)(ITAT)
Hearing: 22.01.2026Pronounced: 15.04.2026

Per Prashant Maharishi, Vice President:

1.

Adamas Builders Pvt. Ltd. (the assessee/appellant) has filed IT(TP)A No. 2478/Bangalore/2024 for the Assessment Year 2021–22, contesting the Assessment Order issued by the Deputy Commissioner of Income Tax, Circle – 2(2), Bangalore (the learned Assessing Officer). The order, dated 24 October 2024, was passed in accordance with directions provided by the learned Dispute Resolution Panel (learned DRP).

2.

The assessee has raised by the following grounds of appeal:

 Generic grounds Assessment and reference to the Learned Transfer Pric

The order continues below.

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