NATEMS SOLAR POWER PRIVATE LIMITED ,HYDERABAD vs. INCOME TAX OFFICER, WARD 16(1), HYDERABAD

Facts

Natems Solar Power Private Limited, engaged in solar energy, filed its return for AY 2020-21, which was selected for scrutiny. The Transfer Pricing Officer (TPO) proposed adjustments to the Arm's Length Price (ALP) for interest paid on Compulsorily Convertible Debentures (CCDs) and interest on supplier's credit in international transactions. The Dispute Resolution Panel (DRP) largely upheld these adjustments, leading to a final assessment order.

Held

The Tribunal vacated the transfer pricing adjustment on interest paid for INR-denominated CCDs, ruling that the benchmarking should be based on PLR, citing a Special Bench decision. It also vacated the adjustment for interest on supplier's credit, as the assessee had not claimed any deduction for it. Issues related to set-off of brought forward losses and recomputation of statutory interest were remanded to the AO, and penalty proceedings were deemed premature.

Key Issues

Whether the benchmarking for interest on INR-denominated CCDs should be based on PLR or LIBOR plus spread; Whether transfer pricing adjustments apply to interest on supplier's credit when no deduction is claimed; And procedural issues related to set-off of losses, book profit computation, and statutory interest.