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Income Tax Appellate Tribunal, Hyderabad DB-B Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice- & Shri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2021-22) INVESCO (INDIA) (P) Ltd Vs. Dy.CIT Hyderabad Circle 2(1) PAN:AACCH8216L Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: CAs Shri K.C.Devdas, Kranthi Pallivelu & Mrudulatha राज� व �ारा/Revenue by:: Dr. Narendra Kumar Naik, CIT(DR) सुनवाई की तारीख/Date of hearing: 10/09/2025 घोषणा की तारीख/Pronouncement: 08/10/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by M/s. Invesco (India) (P) Ltd, (“the assessee”), feeling aggrieved by the assessment order pass by the Learned Assessing Officer (“Ld. AO") u/s 143(3) r.w.s. 144C(13) r.w.s 144B of the Income Tax Act (“ the Act”), dated 29.10.2024 for the A.Y 2021-22.
The assessee has raised the following grounds of appeal:
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The brief facts of the case are that, the assessee is a company engaged in the business of providing Information Technology Enabled Services (“ITES”) to its various foreign subsidiaries (“AEs”). The assessee filed its return of income for Assessment Year 2021–22 on 14.03.2022 declaring a total income of Rs.18,49,97,465/-. In view of international transactions entered into during the year requiring determination of Arm’s Length Price (“ALP”), the case of the assessee was referred to the Learned Transfer Pricing Officer (“Ld. TPO”). Vide order dated 18.10.2023, the Ld. TPO suggested an upward adjustment of Rs.35,83,45,483/-.Thereafter, the Ld. AO passed a draft assessment order on 12.12.2023.
Aggrieved by the draft assessment order, the assessee filed objections before the Learned Dispute Resolution Panel (“Ld. DRP”). Pursuant to the directions of the Ld. DRP dated 13.09.2024, the Ld. AO finalized the assessment u/s 143(3) r.w.s. 144C (13) and 144B of the Act on 29.10.2024 by making an upward adjustment of Rs.33,90,99,385/- comprising of Rs.20,08,31,050/- on account of provision of ITES, Rs.36,28,335/- on account of interest on delayed receivables and Rs.13,46,40,000/- on account of interest on Compulsory Convertible Debentures (“CCDs”). Accordingly, a total addition of Rs.33,90,99,385/- was made by the Ld. AO.
Aggrieved with the order of the Ld. AO, the assessee is in appeal before this Tribunal. At the outset, the Learned Authorised Representative (“Ld. AR”) submitted that the ground nos. 1, 2 and 14 raised by the assessee are general in nature and the assessee is not Page 6 of 24 pressing the ground nos. 9, 10 and 12, which do not require any separate adjudication. Therefore, the same may be dismissed. Accordingly, the ground nos. 1, 2, 9, 10, 12 and 14 of the assessee are dismissed being not pressed.
Under ground no. 3, the Ld. AR contended that the Ld. TPO has erred in including domestic revenue and expenditure while computing the operating margin. It was submitted that the ALP has been determined only for international transactions relating to supply of ITES to foreign AEs, therefore, domestic revenue and expenditure have no relevance in the computation of operating margins. The Ld. AR further argued that though this issue was raised, the Ld. TPO did not give any specific finding. The Ld. DRP also, without any reasoning, simply upheld the approach of the Ld. TPO. The Ld. AR emphasized that when ALP is determined for international transactions, the operating margin arising from such international transactions alone should be compared with those of comparables. Thus, inclusion of domestic revenue and expenditure has resulted in distortion of operating margin and is contrary to the settled principles of transfer pricing. Accordingly, the Ld. AR prayed before the Bench to make a suitable direction to the Ld. AO/TPO to exclude domestic revenue and expenditure while computing the operating margin.
Per contra, the Learned Departmental Representative (“Ld. DR”) placed reliance on the orders of the Ld. AO/TPO. It was submitted that no interference is warranted as the lower authorities
Page 7 of 24 have adopted a consistent approach and the operating margins were computed on the entity-level basis, which according to the Ld. DR, reflects the true profitability of the assessee.
We have carefully considered the rival submissions and perused the material available on record. The issue under consideration is limited to whether the domestic revenue and expenditure should be excluded while computing the operating margin for determination of ALP in respect of international transactions relating to provision of ITES. On perusal of the order of the Ld. TPO, we find that no specific reasoning has been given while including domestic revenue and expenditure. Similarly, the Ld. DRP has also not rendered any finding, except stating that the approach adopted by the Ld. TPO is appropriate. We find merit in the submissions of the Ld. AR that ALP is to be determined with reference to international transactions alone. In our considered view, the domestic transactions are not to be mixed with international transactions for computing operating margins. Inclusion of domestic revenue and expenditure results in distortion of the profitability from international transactions, thereby vitiating the comparability analysis. Accordingly, we direct the Ld. AO/TPO to recompute the operating margin of the assessee after excluding domestic revenue and domestic expenditure, and thereafter determine the ALP afresh.
Ground No. 4 of the assessee is related to the working of related Party Transaction (“RPT”) Filter. In this regard, the Ld. AR submitted that the assessee in its Transfer Pricing (“TP”) study
Page 8 of 24 applied a 25% RPT filter, whereby any company having aggregate related party transactions in excess of 25% of sales was rejected as a comparable. The assessee had computed this filter by aggregating related party revenue and related party expenditure, and dividing the same by the total revenue. It was further contended that in the assessee’s own case for Assessment Years 2017–18 and 2018–19, the Ld. TPO had applied the same method of working, i.e., aggregate basis. However, for the year under consideration, the Ld. TPO has changed the approach by computing RPT filter separately for revenue and for expenditure. The Ld. AR argued that such a change in methodology is not permissible in the absence of any change in facts or law. In support of this contention, reliance was placed on the decision of the coordinate bench of Bangalore Tribunal in the case of Toyota Kirloskar Motor Pvt. Ltd. vs. ACIT [147 Taxmann.com 558], wherein it was held that the RPT filter has to be computed on an aggregate basis by considering both revenue and expenditure together. The Ld. AR therefore submitted that the action of the Ld. TPO in altering the method is contrary to the rule of consistency and deserves to be set aside.
Per contra, the Ld. DR supported the order of the Ld. AO/TPO and submitted that separate computation of RPT filter for revenue and expenditure is in line with a more accurate assessment of related party influence. It was contended that the action of the Ld. AO/TPO is justified and no interference is called for.
We have considered the rival submissions and perused the material available on record. The short issue for adjudication is whether the RPT filter should be computed on aggregate basis or separately for revenue and expenditure. It is not disputed that, in the assessee’s own case for AYs 2017–18 and 2018–19, the Ld. TPO had applied the aggregate method of computation of RPT filter. In the year under consideration, however, without assigning any cogent reason or pointing out any change in facts or law, the Ld. TPO has changed the methodology by adopting separate computation for revenue and expenditure. We are of the considered view that in the absence of any change in facts or law, the principle of consistency must be followed. Once the methodology has been accepted in earlier years and there being no distinguishing feature in the present year, the same method should be applied. Our view also finds support from the decision of Bangalore Bench of the Tribunal in Toyota Kirloskar Motor Pvt. Ltd. vs. ACIT (supra), wherein at para nos.28 & 28.1 of its order, the Tribunal has held as under:
“28. Ground Nos. 3 & 4 is related to RPT Filter as contested by the AR of the assessee as per his written synopsis. A similar issue has been decided by the coordinate bench of the Tribunal in assessee's own case in vide order dated 18-8-2021 for assessment year 2013-14 by holding as under:- "7.4 We have heard rival submissions and perused the material on record. There is nothing on record to suggest how RPT ratio has been calculated for all the comparable companies. The learned AR has argued that the TPO in order to retain Tata Motors Ltd. and Maruti Suzuki India Limited has deviated and adopted a new mechanism for computing RPT ratio. On a query from the Bench how RPT ratio has been calculated for other comparables, the learned AR has unable to point out the same. The RPT ratio has to be consistently calculated on an aggregate
Page 10 of 24 basis taking the ratio of RPT income plus RPT expenses by sales. The said position was adopted by the Revenue in the past years. In this regard, the TPOs order in assessee's own case for assessment year 2007- 2008 has been placed on record. A perusal of the same it is clear that RPT ratio has been calculated taking both RPT income transactions plus RPT expenses transactions on aggregate basis. On the facts of this case, it is not clear how RPT ratio has been calculated for Tata Motors Limited vis-à-vis other comparable companies. Therefore, this issue is restored to the files of the A.O. The A.O. is directed to calculate RPT ratio on an aggregate basis taking the ratio of RPT income plus RPT expenses by sales across the board for all the comparable companies (including Tata Motors Ltd. and Maruti Suzuki India Limited." 28.1 On perusal of the order of the CIT (A), he has followed the order of the co-ordinate bench of the Tribunal in assessee's own case for the AY 2013-14 and directed the AO for fresh consideration as per his direction. Respectfully following the above judgment, we also direct the AO/TPO to calculate RPT ratio in above terms as per assessee's own case in the assessment year 2013-14 cited supra considering the direction of the CIT (A), accordingly, this issue is allowed for statistical purposes.”
On perusal of the above, we find that, the Tribunal has categorically held that RPT filter should be computed on an aggregate basis. Therefore, respectfully following the same, we direct the Ld. AO/TPO to recompute the RPT filter on aggregate basis across all comparables and thereafter rework the comparability analysis.
Under the ground nos. 5, 6 & 7 the assessee is seeking exclusion of Infosys BPM Limited, Sutherland Global Services Private Limited, Integra Software Services Private Limited and MPS Limited from the list of comparables. As regards exclusion of Infosys BPM Limited, the Ld. AR contended that this company fails the RPT
Page 11 of 24 filter if it is applied on an aggregate basis by considering both revenue and expenditure. It was further submitted that Infosys BPM Ltd cannot be compared functionally as it enjoys significant brand value and intangibles, giving it an advantage over captive service providers like the assessee. 13.1 With respect to exclusion of Sutherland Global Services Pvt. Ltd., it was submitted that this company too fails the RPT filter for AY 2019-20 if the aggregate method is applied. Hence, its margin for AY 2019-20 should be excluded while computing the average margin of comparables. 13.2 Regarding exclusion of Integra Software Services Pvt. Ltd. and MPS Ltd., the Ld. AR relied on the decision of this very Tribunal in the case of Infor India Pvt. Ltd. vs. DCIT [ITA No.1341/Hyd/2024, order dated 05.05.2025] for A.Y 2021-22. He submitted that, at para 14.3 of that order, the Tribunal has categorically held that both Integra Software Services and MPS Limited are not comparable to companies engaged in providing ITES. Relying on the said precedent, the Ld. AR prayed for their exclusion.
Per contra, the Ld. DR supported the inclusion of the aforesaid comparables and submitted that the Ld. TPO has rightly retained them in the final set.
We have carefully considered the rival submissions and examined the material available on record. As regards exclusion of Infosys BPM Limited, as already discussed in Ground No. 4, we have directed the Ld. AO/TPO to apply the RPT filter on aggregate basis. If Page 12 of 24 Infosys BPM Limited fails the 25% RPT threshold under the aggregate method, then it cannot be retained as a comparable. Accordingly, we direct the Ld. AO/TPO to exclude Infosys BPM Limited from the list of comparables if it fails the RPT filter. Since we are granting relief on the RPT issue itself, we do not propose to adjudicate separately on the functional comparability argument.
15.1 As regards the exclusion of Sutherland Global Services Pvt. Ltd., the assessee has claimed that this company fails the RPT filter for AY 2019–20 when computed on aggregate basis. In line with our earlier direction, we direct the Ld. AO/TPO to apply the aggregate method of RPT filter for AY 2019-20, and if Sutherland Global Services Pvt. Ltd. fails the test, its margin for AY 2019-20 shall be excluded while arriving at the average margin of comparables.
15.2 As regards exclusion of Integra Software Services Pvt. Ltd. and MPS Limited, we have gone through para nos.14.2 and 14.3 of the Tribunal’s order in Infor India Pvt. Ltd. vs. DCIT (supra), which is to the following effect:
“14.2 We have heard the rival contentions and gone through the records in the light of the submissions made by either side. We have gone through the Page Nos. 2332 to 2334 & 2337 of the paper book forming part of the annual financial statement of Integra and found that, Integra is engaged in Accounting, Health and E- Publishing services. We have also gone through Page Nos. 2356 to 2359 forming part of the annual financial statements of Vitae and found that Vitae is involved in Accounting, Auditing & Book keeping Services. We have also gone through Page Nos. 2376 to 2382 of the paper book forming part of the annual financial statements of MPS and found that MPS is involved in content development
Page 13 of 24 and transformation. We have also gone through Par No.6 of the decision of the Coordinate Bench of the Tribunal in the case of Rage Frameworks India (P) Ltd v/s ACIT (Supra), which is to the following effect: “6. We now proceed to deal with the assessee’s ground no.2.1 seeking to exclude the foregoing comparable companies in its Information Technology Enabled Services [in short “ITES”] segment. It emerges during the course of hearing that this tribunal’s recent coordinate bench’s order in Schlumberger India Technology Centre (P.) Ltd. vs. DCIT [2022] 142 taxmann.com 243 (Pune-Tribunal) has already excluded M/s. Manipal Digital Systems Private Ltd., Domes e-Data Private Ltd., and MPS Ltd., i.e. three of the above comparable entities as not functioning in “ITES segment”. The other entities included by the learned lower authorities i.e., Vitae International Accounting Services Private Limited, Access Healthcare Services Private Limited and Integra Software Services Private Limited are also found to be not engaged in the assessee’s segment since they have been carrying-out their business activities and deriving revenues from accounting, healthcare services and e-publishing services, respectively and, therefore, do not have even broader comparability in the segment in issue before us. This is indeed coupled with the fact that M/s. Integra Software Services Private Limited had undergone a merger scheme with M/s. Integra Infotech Private Limited as per the National Company Law Tribunal’s [in short “NCLT”] order to this effect in the relevant previous year. Faced with the situation, we direct the learned Transfer Pricing Officer [in short “TPO”] to exclude all the instant six comparables and compute the assessee’s arm’s length price [in short “ALP’] adjustment accordingly.” 14.3 On perusal of the above, we found that, the Coordinate Bench of the Tribunal in case of Rage Frameworks India (P) Ltd v/s ACIT (supra) held that Integra, Vitae and MPS are not comparable to the company engaged in ITES. Further, no contradictory evidence has been produced by the Revenue before us. Therefore, we hold that Integra, Vitae and MPS are not comparable to the assessee. Accordingly, we direct the Ld. AO/TPO to exclude Integra, Vitae and MPS from the set of comparables.”
Page 14 of 24 15.3 On perusal of the above, we found that it has been categorically held by the Tribunal that Integra Software Services Pvt. Ltd. and MPS Limited are not comparable to companies engaged in ITES. Respectfully following the same, we hold that Integra Software Services Pvt. Ltd. and MPS Limited cannot be considered as comparables for the assessee engaged in ITES. Accordingly, we direct the Ld. AO/TPO to exclude these two companies from the final set of comparables.
Under ground no.8, the assessee is seeking exclusion of the Iservices India Pvt. Ltd, Cheers Interactive India Pvt. Ltd, Maa Business Solutions Pvt. Ltd, R Systems International Ltd and Virinchi Ltd. However, the Ld. AR stated that the assessee is not pressing the exclusion of R Systems International Pvt. Ltd. With respect to inclusion of Iservices India Pvt. Ltd., the Ld. AR drew our attention to page no.35 of the order of the Ld. TPO, where the company was excluded by the Ld. TPO on the reasoning that it fails the RPT filter. However, according to the Ld. AR, this finding is factually incorrect. Referring to the related party disclosure of audited financial statements of Iservices, placed at page nos. 2269 and 2270 of the paper book, it was pointed out that the total related party transactions during the year are Rs.40,56,000/- (Rs.3,60,000/- + Rs. 36,96,000/-). He further submitted that the total turnover of the company is Rs.12,90,56,540/-. Therefore, the RPT works out to approximately 3% of turnover, which is well within the 25% threshold prescribed. It was contended that once the RPT filter is correctly applied, Iservices India Pvt. Ltd. passes the test and Page 15 of 24 therefore deserves to be included in the list of comparables. Accordingly, the Ld. AR prayed for a direction to the Ld. AO/TPO to include Iservices India Pvt. Ltd. in the final set of comparables. 16.1 As regards inclusion of Cheers Interactive India Pvt. Ltd the Ld. AR submitted that the Ld. TPO, at page 36 of its order, excluded this company on the reasoning that it failed the RPT filter. In doing so, the Ld. TPO considered RPT income of Rs.31,66,578/- and RPT expenses of Rs.19,93,10,091/-, and computed the percentage of RPT income and RPT expenses separately. Since the RPT expenses were computed at 29.72% of total revenue, the Ld. TPO concluded that the company failed the RPT filter. The Ld. AR contended that this approach is flawed because the Ld. TPO inadvertently included payments to key managerial personnel (KMP) under RPT expenses, thereby inflating the figure. While the RPT income figure was correctly taken, the RPT expenses figure was not correctly worked out. Inviting our attention to Note no. 30 related to disclosure of related party transaction of the audited financial statement of the company placed at page no. 2305 of the paper book, the Ld. AR pointed out that the company has disclosed total RPT expenses and RPT revenue aggregating to Rs.6,96,31,070/- and payment to KMP of Rs.13,28,45,599/-. Accordingly, the total related party transaction of the company are Rs.6,96,31,070/- only. Against the total revenue of Rs.77,87,85,213/-, the RPT percentage works out to approximately 9% on an aggregate basis. Hence, the company clearly passes the 25% RPT threshold. Accordingly, it was prayed
Page 16 of 24 that Cheers Interactive India Pvt. Ltd. be directed to be included in the set of comparables. 16.2 With regard to inclusion of Maa Business Solutions Pvt. Ltd. and Virinchi Ltd., the Ld. AR submitted that the assessee had included Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. in its TP study as valid comparables. However, both these companies were excluded by the Ld. TPO on the ground that they did not appear in the search process adopted by the Ld. TPO. It was argued that this reasoning is not factually sustainable, since the Ld. TPO restricted his search only to the ProWess database, whereas the assessee had carried out its search both in the ProWess as well as Capitaline databases. In the Capitaline search process, both Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. appeared as valid comparables. Therefore, the exclusion of these companies merely on the ground of “not appearing in search process” of the Ld. TPO is incorrect. Accordingly, the Ld. AR prayed for a direction to the Ld. AO/TPO to also carry out a search in the Capitaline database and if both these companies are found in the search results, to consider them for inclusion in the final list of comparables after applying the usual FAR analysis.
Per contra, the Ld. DR supported the order of the Ld. AO/TPO and submitted that the companies has been rightly excluded by the Ld. AO/TPO.
We have carefully considered the rival submissions and perused the material available on record. With regard to the Page 17 of 24 inclusion of Iservices India Pvt. Ltd, we have gone through the audited financial statements of Iservices India Pvt. Ltd., placed at page no. 2269 of the paper book. On perusal of the same, we find that the total related party transactions are Rs.40,56,000/- as against the turnover of Rs.12,90,56,540/-. Thus, the percentage of related party transactions works out to about 3 %, which is well below the 25% threshold. Therefore, the reasoning given by the Ld. TPO for exclusion of Iservices India Pvt. Ltd. on the ground of RPT filter is unsustainable. Once the correct computation is applied, the company passes the RPT test and is functionally comparable to the assessee. Accordingly, we direct the Ld. AO/TPO to include Iservices India Pvt. Ltd. in the final list of comparables, after due verification of figures from the audited accounts. 18.1 With regard to inclusion of Cheers Interactive India Pvt. Ltd., on perusal of the audited financial statements placed in the paper book (page no. 2305), we find that the total RPT expenses and RPT revenue aggregate to Rs.6,96,31,070/-. With total revenue of Rs.77,87,85,213/-, the percentage of RPT comes to approximately 9% when computed on an aggregate basis. Thus, we agree with the submission of the Ld. AR that the figure of 29.72% adopted by the Ld. TPO is a result of including payments to KMP under RPT expenses, which is not in line with the consistent methodology adopted. Once the correct working is applied, the RPT is well within the 25% threshold, and the company qualifies the RPT filter. Accordingly, we direct the Ld. AO/TPO to include Cheers Interactive
Page 18 of 24 India Pvt. Ltd. in the final list of comparables after due verification of the audited figures. 18.2 With regard to inclusion of Maa Business Solutions Pvt. Ltd. and Virinchi Ltd., we note that the Ld. TPO excluded both these companies solely on the ground that they did not appear in his ProWess database search. At the same time, the assessee has placed on record that both these companies are appearing in the search conducted through the Capitaline database, which is also a recognized source for transfer pricing analysis. In our considered view, exclusion of comparables merely on the ground of “not appearing in one database” cannot be sustained when they appear in another validly recognized database. What is relevant is whether the company satisfies the functional comparability (FAR) test and filters applied, and not the mere database in which it is traced. Accordingly, we direct the Ld. AO/TPO to carry out a fresh search in the Capitaline database, and if Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. are found therein, the Ld. AO/TPO shall consider their inclusion in the list of comparables after carrying out FAR analysis.
Ground No. 11 of the assessee is related to working of Interest on Delayed Receivables. In this regard, the Ld. AR submitted that the Ld. TPO has computed interest on overdue receivables from AEs by applying the State Bank of India (“SBI”) short-term deposit rate for the relevant financial year. It was contended that this approach is not sustainable, as the issue is squarely covered in favour of the assessee by the order of this Page 19 of 24 Tribunal in the assessee’s own case for AY 2017–18, in dated 30.06.2025. He submitted that, in that year, the Tribunal had held that the appropriate rate to be applied for benchmarking interest on receivables is LIBOR plus 200 basis points. Accordingly, the Ld. AR prayed that the same direction be followed in the year under consideration. The Ld. AR further submitted that the assessee has also requested that such notional interest be computed by applying a weighted average credit period. However, he fairly admitted that this request was specifically rejected by the Tribunal in the assessee’s own case for AY 2017–18 (Supra).
Per contra, the Ld. DR relied on the order of the Ld. AO/TPO.
We have considered the rival submissions and perused the material available on record. We have gone through the decision of this Tribunal in the assessee’s own case for AY 2017–18 (Supra), wherein at para no.14 of its order, this Tribunal has held as under:
“14. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The TPO has benchmarked interest receivable on trade receivables from AE by applying SBI short term deposit rate on the ground that, if the assessee had received the amount from the AE which would have reduced cost of borrowings in India which is always at Indian prime lending rate or short term deposit rate of Indian banks. It was the argument of the Counsel for the Assessee CA Sriram Seshadri, that, the assessee has allowed credit to it's AE which is a non- resident. Therefore, the benefits that the assessee derives from enjoying long credit period for payment of interest in respect of services has to be measured in terms of the interest that would have been incurred by the AE in the Page 20 of 24 country of residence. Since the receivable from AE is in foreign Currency from outside India, in our considered view, the internationally recognized rate of interest is appropriate for benchmarking interest receivable from AE. This legal position is supported by the decision of Hon'ble Bombay High Court in the case of Principal CIT 13, Mumbai vs., Tecnimont (P.) Ltd., (supra). Similar view has been taken by the ITAT Chennai Bench in the case of M/s. Serviont Global Solutions Ltd., vs., The ACIT, Corporate Circle-6(1), Chennai (supra). Therefore, we are of the considered view that, the Assessing Officer and TPO has erred in benchmarking the interest receivable on trade receivables from AE by applying SBI short term deposit rate. The DRP without appreciating the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of the Assessing Officer and direct the Assessing Officer/TPO to compute interest receivable on outstanding receivables from AE by applying LIBOR plus 200 basis points after allowing credit period of 30 days. In So far as the argument of the Learned Counsel for the Assessee on the issue of weighted average credit period, in when the TP0 is able to compute the exact number of days credit period, then, aggregating the invoices for the purpose of computing credit period is contrary to the procedure provided u/sec.92CA of the Income Tax Act, 1961. Thus, we reject the arguments of Counsel for the Assessee on the issue of computing the weighted average credit period”.
21.1 On perusal of the above, we found that this Tribunal in assessee’s own case has categorically held that LIBOR plus 200 basis points is the appropriate benchmark for determining arm’s length interest on delayed receivables from AEs. Therefore, respectfully following the said decision, we direct the Ld. AO/TPO to recompute the interest on overdue receivables by applying LIBOR + 200 basis points. As regards the assessee’s request for adopting a weighted average credit period, we note that this specific plea was considered and rejected by the Tribunal in assessee’s own case in AY
Page 21 of 24 2017–18 (Supra). Therefore, following the same, we reject the request of the assessee for adopting weighted average period.
Ground No. 13 of the assessee is related to Benchmarking of Interest on CCDs. In this regard, the Ld. AR submitted that the Ld. TPO has benchmarked the interest payable on CCDs by applying SIBOR (Singapore Interbank Offered Rate), whereas the assessee had adopted SBI Prime Lending Rate (PLR). It was argued that the issue is squarely covered by the decision of the Special Bench of this Tribunal in the assessee’s own case in & 506/Hyd/2022 for AYs 2015–16 and 2018–19. The Ld. AR invited our attention to para no. 23 of that order and submitted that the Special Bench has categorically held that where Fully Convertible Debentures (FCDs), Non-Convertible Debentures (NCDs), or other debentures are denominated in Indian currency, the appropriate benchmark for interest is the domestic SBI PLR, and not any foreign interbank rate. The Ld. AR therefore prayed that the same direction may be followed for the year under consideration.
Per contra, the Ld. DR relied on the order of the Ld. AO/TPO. However, he fairly accepted that the issue already stands covered by the Special Bench decision in the assessee’s own case, and accordingly left the matter to the discretion of the Bench.
We have carefully considered the rival submissions and perused the material available on record. The only controversy is whether interest payable on CCDs issued by the assessee should be benchmarked with reference to SIBOR or SBI PLR. In this regard, we
Page 22 of 24 have gone through the decision of Special Bench of this Tribunal in the assessee’s own case for AYs 2015–16 and 2018–19 (Supra), wherein at para no. 23 of its order, the Special Bench of this Tribunal has held as under:
24.1 On perusal of above, we find that the Special Bench of this Tribunal in the assessee’s own case for AYs 2015–16 and 2018– 19 (Supra),has categorically held that interest paid or payable on FCCDs/NCDs/other debentures denominated in Indian currency should be benchmarked by applying SBI PLR. In the present case, it is an admitted position that the CCDs issued by the assessee are Page 23 of 24 denominated in Indian currency. Therefore, respectfully following the binding decision of the Special Bench in assessee’s own case, we hold that SBI PLR is the appropriate benchmark. Accordingly, we direct the Ld. AO/TPO to recompute the arm’s length interest on CCDs by applying SBI PLR instead of SIBOR.
In the result, the appeal of the assessee is partly allowed for statistical purposes.