QUBIX BUSINESS PARK PRIVATE LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE, PUNE

Assessment Year: 2020-21 Qubix Business Park Private V The Deputy Commissioner Limited, s of Income Tax, Circle-8, Plot No.2, Rajiv Gandhi Pune. INfotech Park, Phase-I, Behind Cognizant, Hinjewadi, Pune – 411057. PAN: AAACW2830P Appellant/ Assessee Respondent / Revenue Assessee by Shri Ajay Rotti – AR Revenue by Shri Prakash L Pathade – CIT(DR) Date of hearing 06/11/2024 Date of pronouncement 06/01/2025 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. Final assessment order is against the principles of natural justice and accordingly bad in law and liable to be quashed The National Faceless Assessment Centre (‘NFAC’) / Deputy Commissioner of Income Tax, Circle 8, Pune (‘Ld.AO’), has erred in law in passing the final assessment order under section 143(3) read with section 144C(13) read with section 144B of the Act (the 'impugned order') without providing the Appellant an opportunity of being heard, which is in violation of the principles of natural justice, and therefore liable to be quashed.

2. Interest on borrowings from Embassy Office Parks REIT amounting to INR 7,80,17,976 2.1 The Honorable Dispute Resolution Panel (‘Hon’ble. DRP’) has erred in upholding the order passed by Learned Transfer Pricing Officer (‘Ld.TPO’) wherein the Ld.TPO has rejected the benchmarking conducted by the Assessee by adopting ‘CUP’ method as the most appropriate method for determining the Arm’s Length Price (‘ALP’) of the Assessee with respect to interest paid on loan taken from Embassy office Parks REIT (‘EOP REIT’) as against ‘Other Method’ selected by the Assessee. 2.2 The Hon’ble. DRP has erred in upholding the order passed by Ld.TPO wherein the Ld.TPO has determined the arm’s length price with respect to interest paid on loan taken from Embassy office Parks REIT under ‘CUP method’ by adopting the interest rate of 8.95% on the borrowings availed from State Bank of India. 2.3 The Hon’ble. DRP has erred in upholding the order passed by Ld.TPO wherein the Ld.TPO has concluded that since an internal comparable is readily available in assessee’s case, CUP method is the most appropriate method to determine the arm’s length price of the subject transaction. 2.4 The Hon’ble. DRP and the Ld. TPO have erred in concluding that the borrowings from State Bank of India are comparable with borrowings from EOP REIT. 2.5 The Hon’ble. DRP has erred in holding that the benchmarking done by the Assessee is basis the lender (‘EOPREIT’) and no attempt has been made to benchmark by treating borrower as the tested party.

2.6 The Hon’ble. DRP/ NFAC / Ld.AO have erred in law and on facts in making an adjustment, by reducing the interest expense resulting in an increase in the profits on which the Assessee has claimed deduction under section 80-IAB of the Act, which is not in compliance with the provisions of section 80-IA(10) of the Act.

3. Incorrect Computation of Book Profits under Section 115JB of the Act in the computation sheet annexed to the impugned order 3.1 Notwithstanding the grounds taken in Point 1 and Point 2, The NFAC / Ld.AO erred in law and on facts in assessing the book profits under Section 115JB at INR 39,79,81,391 as compared to the book profits at INR 27,07,96,737 offered in the return of income. 3.2 The NFAC / Ld.AO erred in not providing the Appellant with an opportunity of being heard in response to the adjustments of book profits under section 115JB of the Act during the assessment proceedings and transfer pricing proceedings, thus violating the principles of natural justice. 3.3 The NFAC / Ld.AO has erred in carrying out adjustments to the computation of book profits under section 115JB of the Act in the computation sheet annexed to the impugned order, despite the absence of any such adjustments in the impugned order leading to the adjustment being bad in law and liable to be quashed.

5.2 The NFAC / Ld.AO has erred in not taking cognizance of the submissions made during assessment proceedings that adjustment carried out in the intimation under section 143(1) of the Act is on account of non-consideration of the revised Tax Audit Report filed by the Assessee.

6. Provisions of Chapter XIIB are independent and TP adjustments, if any, ought not be made to the deemed total income computation under section 115JB 6.1 The NFAC / Ld.AO has erred in law and on facts by carrying out the transfer pricing adjustment pertaining to interest paid to the computation of book profits under section 115JB of the Act. 6.2 Provisions of Chapter XIIB are independent and transfer pricing adjustments ought not be made to the computation of book profits under section 115JB of the Act.

7. Non grant of deduction under section 80-IAB on income from other sources and capital gains earned during the subject year The Hon’ble. DRP / NFAC / Ld.AO has erred in not granting a deduction under section 80-IAB of the Act on income from other sources and capital gains earned during the subject year 8. Erroneous levy of interest under section 234A of the Act The NFAC / Ld.AO erred in levying interest under section 234A of the Act, despite the Appellant filing its return of income within the prescribed due date.

9. Erroneous levy of interest under section 234B and 234C of the Act The NFAC / Ld.AO erred in levying interest under section 234B and 234C of the Act.

under section 274 read with 270A of the Act. 12. Relief 12.1 The Appellant prays that directions be given to grant all such relief arising from the preceding grounds as also all reliefs consequential thereto. 12.2 The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of appeal

, at any time before or during the hearing of the appeal.” Submission of ld.AR :

2. Ld.Authorised Representative(ld.AR) for the Assessee submitted that the main grounds are Ground No.2 and Ground No.7. Ld.AR pleaded only these grounds.

2.1 With reference to Ground No.7, Ld.AR submitted that the assessee had for the first time claimed before the DRP that Income from Other Sources and Capital Gain is also to be included as Profit eligible for deduction u/sec.80IAB of the Act. Ld.AR admitted that the said claim was not made before the Assessing Officer(AO) or in the Return of Income(RoI).

2.2 The relevant part of the written submission filed by the Ld.AR is reproduced here as under : Quote, “Ground no. 2 of the subject appeal Interest on borrowings from Embassy Office Parks REIT amounting to INR 7,80,17,976

Qubix has taken a loan from its Associated Enterprise, Embassy Office Parks REIT ('EOP REIT') at an interest rate of 12.5% p.a. This transaction qualifies as a 'specified domestic transaction". Further, Qubix has also availed an overdraft facility from the State Bank of India at an interest rate of marginal cost of funds based lending rate plus 0.40%, effectively resulting in interest at the rate of 8.95% p.a.

The Ld. TPO has erred in rejecting the benchmarking conducted by the Appellant for determining the arm's length of the interest on borrowings from Embassy Office Parks REIT and proceeded with considering the rate of interest of overdraft facility availed from the State Bank of India, i.e., 8.95% as the arm’s length of such interest expense. Further, the Ld.TPO has erred in concluding that the loan taken from Embassy Office Parks REIT, being an unsecured loan, is comparable with overdraft facility availed from the State Bank of India, being a secured loan.

In this regard, the Appellant wishes to place reliance on the following judicial precedents -

Decision of the Hon'ble Jaipur Tribunal in the case of Deputy Commissioner of Income tax, Central Circle-2, Jaipur vs M/s KsheerSagar Developers Pvt. Ltd., [ITA Nos. 1158 to 1162/JP/2019), wherein it has been held that unsecured loans taken from Associated Enterprises cannot be compared with loans taken from banks. We have enclosed a copy of the judgment as Annexure 1 (refer para 48 and 49 found on page 56 to 58 of the case law). Relevant extract from the judgement is provided below -

"48. After careful consideration of the matter and the written submissions the assessee we are of the view that TPO and the AO is not making an addition of Rs.1,83,73,764/- for the following reasons.

II. That the TPO is not correct in treating loan from related party as in the nature of secured loan. Nature of loan, being secured or unsecured, does not depend relationship with the person. It depend on the fact that whether such loan is backed up with some security or assets mortgaged etc. in simple terms With a secured loan, the lender can take possession of the collateral if you don't repay the loan as you have agreed. A car loan and mortgage are the most common types of secured loan. An unsecured loan is not protected by any collateral. Thus the loan from related party in undoubtedly unsecured and a slight higher rate of interest payment is justifiable.

Ground No.7- Non grant of deduction under section 80-IAB of the Act, on income from other sources and capital gains earned during the subject year.

The Appellant submits that the Hon'ble. DRP/NFAC/Ld. AO has erred in not granting a deduction under section 80-IAB of the Act on income from other sources and capital gains earned during the subject year (Page No. 371-373 of paperbook 2)

Further, we wish to submit that an approval was granted to the Company by the Government of India, Ministry of Commerce & Development (SEZ Section) for development, operation and maintenance of the sector specific SEZ for IT at Hinjawadi, Pune, Maharashtra vide No. F.2/274/2006-EPZ dated August 23, 2006. The SEZ developed by the Company was notified on October 03, 2007 (i.e., FY 2007-08). Accordingly, being a SEZ Developer, the Company is eligible to claim a deduction under section 80-IAB of the Act for 10 years in a 15-year period ending in FY 2021-22 (i.e., AY 2022-23). The Company claimed a deduction under section 80-IAB of the Act for the first time in AY 2019-20. Accordingly, the claim of deduction under section 80-IAB of the Act, is the second year of claim.

Reliance was placed on the decision of the Apex Court in the case of Commissioner of Income Tax-1 v. M/s Reliance Energy Ltd. 127 taxmann.com 69 [2021] (SC) wherein the Apex Court has held that the profit linked deduction is allowable to the extent of Gross Total Income of the taxpayer and need not be restricted to the extent of income under the head Profits and Gains from Business or Profession.

The relevant extract of the decision relied on by the Company has been reproduced below for the reference of the Hon'ble ITAT:

(1) of Section 80-IA of the Act. We hold that the scope of sub-section (5) of Section 80-IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating 'eligible business' as the 'only source of income. Sub- section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to 'business income. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase 'derived... from' in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act.'

We have enclosed a copy of the judgment as Annexure 3.

Further, we wish to submit that although the above decision was rendered in the context of section 80-IA of the Act, the same principles should equally apply to section 80-IAB of the Act as well.

We also wish to submit that the deduction under section 80-IAB of the Act, was not claimed in the return of income and this ground was also not taken in the course of the Assessment proceedings before the Ld. AO as the decision of the Apex Court was rendered after the draft assessment order was passed. However, this ground was taken before the Hon'ble DRP (page no 371 and 372 of the paperbook 2). The Hon'ble DRP did not adjudicate on this ground on the basis that it is not a variation proposed in the draft order. Further, the Appellant has claimed deduction under section 80-IAB of the Act on Income from Other Sources and Capital Gains in the subsequent assessment years.” Unquote.(emphasis supplied)

3.1 Ld.AR relied on the decision of Hon’ble Supreme Court in Commissioner of Income Tax-I Vs. Reliance Energy Ltd., [2022] 441 ITR 346 (SC) dated 28.04.2021.

Submission of ld.DR : 4. Ld.Departmental Representative(ld.DR) for the Revenue submitted that Assessee had not claimed deduction on Income from Other Sources and Capital Gains under section 80IAB of the Act in the Return of Income and in the Form No.10CCB. Ld.DR for the Revenue took us through the relevant pages of the Return of Income. Ld.DR relied on section 80A(5) of the Income Tax Act. Ld.DR submitted that conjoint reading of Section 80A(5) and Section 80AC makes it clear that Assessee has to claim the deduction in the Return of Income and the Return of Income shall be filed within the time mentioned in Section 139(1) of the Act. In this case, assessee has not claimed the deduction, neither in the Original Return of Income nor in the Revised Return of Income. The ld.DR further submitted that Assessee has not made the claim even before the Assessing Officer. Ld.DR submitted that DRP has jurisdiction only to adjudicate adjustment proposed by the Assessing Officer in the Draft Assessment Order. In this case, since there was no adjustment with reference to Section 80IAB, Assessee do not have any jurisdiction to file objection before the DRP. Ld.DR for the Revenue supported the order of DRP. Ld.DR also relied on the decision of Hon’ble Supreme Court in the case Wipro Limited.

Findings & Analysis : 5. We have heard both the parties and perused the records. Ground No.7 : 5.1 The basic facts pertaining to this ground are that assessee company filed Return of Income electronically for A.Y.2020-21 on 29.01.2021 declaring total income of Rs.2,98,77,590/-. Along with the said Return of Income, also filed Form No.10CCB. In the Return of Income, Assessee claimed deduction under section 80IAB of Rs.27,52,98,833/-. In the Audit Report filed in Form No.3CD, Assessee has shown deduction under section 80IAB as under : 33 Section-wise details of deduction, if any admissible Yes under Chapter VIA or Chapter III (Section 10A, Section 10AA)

S.No. Section Amount 1 80IAB 275298833 2 80G 1572505 5.2 Then, Assessee in Form No.10CCB has claimed deduction under section 80IAB of Rs.27,52,98,833/-. In the Form No.10CCB, Assessee has certified that profits and gains derived by the undertaking from the eligible business is of Rs.27,52,98,833/-.

5.3 Thus, the Auditors and Assessee has certified that profits and gains derived by the undertaking from the eligible business was of Rs.27,52,98,833/-, which was claimed as deduction u/sec.80IAB of the Act.

5.3.1 Even during assessment proceedings in response to notice u/s 142(1) the assessee vide letter dated 31May 2023 submitted to the Assessing Officer as under : “Qubix has claimed a deduction under section 80-IAB(1) of the Act amounting to INR 27,52,98,833 during the subject year, with respect to the profits and gains derived from business of developing a SEZ.”

5.4 During the Assessment Proceedings, the Assessing Officer in the Draft Assessment Order passed under section 144C(1) of the Act, dated 27.09.2023 in Para-7 held as under : “7. Considering the documents and submission made, the assessee’s claim under section 80IAB is accepted.”

5.5 Thus, in the Draft Assessment Order, Assessee’s claim of deduction u/sec.80IAB of Rs.27,52,98,833/- was allowed by the Assessing Officer. In the Draft Assessment Order, the Assessing Officer(AO) proposed Transfer Pricing Adjustment of Rs.12,11,73,734/-.

6.1 Aggrieved by the same, Assessee has filed appeal before this Tribunal. We have already reproduced all the basic facts pertaining to the issue of deduction under section 80IAB of the Act.

(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,— (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,— (i) the Dispute Resolution Panel; and (ii) the Assessing Officer.

(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if— (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub- section (2).

(4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub- section (3) within one month from the end of the month in which,— (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires.

(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.

(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—

(a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it.

(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),— (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.

(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub- section (5) for further enquiry and passing of the assessment order.”

7.1 Thus, the scheme of the section is that Assessing Officer has to prepare the Draft of the proposed assessment order. If Assessing Officer is proposing any variation which is prejudicial to the interest of the Assessee in the Draft Assessment Order, then Assessing Officer shall provide Draft Assessment Order to the Assessee. On receipt of the Draft Assessment Order, the Assessee has two options i.e. either he may accept the variation proposed; or may file objections against the impugned variations before the Dispute Resolution Panel within 30 days of receipt of Draft Assessment Order. The Dispute Resolution Panel after hearing the assessee, has to issue such direction with reference to the objections to the Assessing Officer to enable him to complete the assessment. The Assessing Officer then passes final assessment order as directed by the Dispute Resolution Panel.

7.2 Thus, as per Section 144C(2), the jurisdiction of the DRP is qua, objections filed by the Assessee qua variations proposed. As per Section 144C(8), the DRP’s directions are only with reference to variations proposed in the Draft Assessment Order. As per Section 144C(8), the DRP may confirm, reduce or enhance the variations proposed in the Draft Assessment Order. Thus, Section 144C(8) r.w.s. 144C(2) makes it very clear that DRP has jurisdiction only and only with reference to any variation proposed in the Draft Assessment Order by the Assessing Officer. The DRP cannot consider any other issue where there is no variation proposed in the Draft Assessment Order.

7.3 In the case of the Assessee admittedly there was no proposed adjustment qua deduction u/s 80IAB of the Act , hence , the DRP had no jurisdiction to Enhance OR Reduce the deduction claimed by the assessee in the Return of Income u/sec.80IAB of Rs.27,52,98,833/-. Therefore we uphold the order of the DRP on this issue. Accordingly ground number 7 raised by the assessee is dismissed.

7.4 We derive strength from the decision of Hon’ble Karnataka High Court in the case of GE India Technology Centre P. Ltd., Vs. ACIT.

7.4.1 The Hon’ble Karnataka High Court in the case of GE India Technology Centre Private Limited Vs. ACIT, Writ Appeal No.1010 of 2011(T-IT), order dated 05.07.2011 has held as under : “It is clear on a reading of the above said sub-Sections of 144C that the provisions of section 144C(5) ( wrongly reported as (4)) cannot be read de hors the power of the DRP under sub-Section (8) and while considering the power of DRP it is clear that while considering Section144C(1) regarding the draft proposal order or draft order is only applicable to eligible assessee as defined under sub-Section (15) that is in respect of the variations referred to above sub-Section arising as a consequence of the order of the Transfer Pricing Officer under sub- Section (3) of Section 92CA and even under Section 144C(8). The DRP may confirm, reduce or enhance the variations proposed in the draft order and wherefore the word eligible assessee in Clause (1) and (15) and the proposed draft order referred to under Clause 144c(1) and (8) will have to be given full meaning. It cannot lead to the conclusion that the Dispute Resolution Panel can affirm, reduce or enhance the variations proposed in the draft order and cannot go beyond the proposed draft order, failing which if it is held by accepting the contention of the revenue we will be expanding the provisions of the powers of DRP to a regular appeal to the Commissioner of Income-Tax against an order of assessment which is sought to be given up in view of the provisions of section 92C and Section 144C. The directions issued by the DRP under section 144C is binding on the assessing officer and against the said order of the assessing officer a direct appeal to the Income-Tax Appellate Tribunal. Wherefore we have to look into the proposed draft order in the present case to find out as to whether the directions issued by the DRP as per direction No.(iv) culled out above is valid and binding or not. It is clear from the proposed draft order that the appellant had claimed exemption of Rs.32,58,26,375/-. The proposed draft order annexed to the proposed draft referable to excess claimed under section 10A in a sum of Rs.44,49,280/- is arrived in the draft proposal order as follows: -

Particulars Rs. Total turnover of the undertaking (A) 305,31,27,853 Export turnover of the undertaking 305,31,27,853 Less: Communication Expenses 3,25,98,610 Travel Expenses in foreign currency 90,92,976 Adjusted Export turnover (B) 304,14,36,267 Profit of the Undertaking (C) 32,58,26,375 Exemption u/Section 10A (D – B/A x C 32,13,77,095 Less: Actually claimed (E) 32,58,26,375 Excess claimed (F-E-D) 44,49,280 Therefore it is clear from the proposed draft order that as per the proposed draft the Arms Length Price fixed by the TPO was accepted and the claim made by the appellant was reduced by Rs.44,49,280/- but in the proposed draft order there may be deduction of Rs.32,13,77,095/-. However, as per the direction issued by the DRP it is clear that the DRP has issued a direction to the assessing officer by holding that the appellant assessee is not entitled to any reduction under section 10A it would be binding on the Assessing Officer in view of the provisions of section 144C(13) and wherefore having regard to the facts and circumstances of this case that in a proposed draft order there was no proposal to hold that the assessee is not entitled to any benefit under section 10A of the Act and what was proposed was only rejection of the excess claim of Rs.44,49,280/- the direction issued by the DRP in wholly without jurisdiction and suffers from inherent lack of jurisdiction and amenable to judicial review under Article 226 of the Constitution of India.”

7.4.2 Thus, the Hon’ble Karnataka High Court held that DRP has no jurisdiction to consider any other issue where there is no variation proposed in the Draft Assessment Order.

7.5 It is observed that ITAT Mumbai Bench in of M/s.Dredging International N.V. Vs. ADIT(IT), Mumbai order dated 16.09.2011 had followed the decision of Hon’ble Karnataka High Court in the case of GE India Technology Centre Private Limited Vs. ACIT, Writ Appeal No.1010 of 2011(T-IT)[supra]. ITAT Mumbai Bench in the case of Dredging International N.V.(supra) held that DRP does not have jurisdiction to consider any other issue where there is no variation proposed in the Draft Assessment Order. ITAT Mumbai has also compared the Section 144B which has been deleted w.e.f. 01.04.1989 and the present section 144C of the Act.

8.1 The Hon’ble Bombay High Court in the case of Smt.Godavaridevi Saraf Vs CIT, 113 ITR 589(Bom) has held as under : Quote , “ Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question.” Unquote 8.2 Therefore, decision of Hon’ble Karnataka High Court (supra) is a binding precedence.

8.3 Therefore, we hold that Dispute Resolution Panel has no jurisdiction to consider any other issue where there is no variation proposed in the Draft Assessment Order. In this case, since there was no proposed variation in the Draft Assessment Order regarding deduction under section 80IAB of the Act; claimed by Assessee, the Dispute Resolution Panel was right in rejecting the objection raised by the Assessee on the ground that DRP do not have any jurisdiction since there was no proposed variation. Accordingly, the order of Dispute Resolution Panel is upheld on this issue. Accordingly, Ground No.7 of the Assessee is dismissed.

8.4 In the result, Ground No.7 raised by the Assessee is dismissed.

9.1 Therefore, even on this ground the Ground No.7 raised by the assessee is dismissed.

Ground No.2 : 10. Ground No.2 raised by the assessee is regarding the transfer Pricing Adjustment of Rs.7,80,17,976/-.

10.1 The basic facts pertaining this issue are that the Embassy Office Parks REIT holds 100% shares of Assessee company.

Embassy Office Parks REIT is a Trust. It is claimed that income of Embassy Office Parks REIT is exempt. The relevant paragraph related to this transaction of the submission of the assessee is reproduced as under : “Qubix Business Park Private Limited

Qubix Business Park Private Limited was incorporated on 5 January 1999. The Company is primarily engaged in the business of development, leasing and maintenance of commercial real estate and related interiors. The Company has constructed office buildings forming an IT Special Economic Zone (SEZ) in Hinjewadi, Pune. The operations of the Company comprise of real estate developments, leasing of commercial real estate and maintenance of the buildings.

Embassy Office Parks REIT ('EOP REIT')

EOP REIT is a Real Estate Investment Trust ("REIT") that was settled on March 30, 2017 at Bengaluru, Karnataka, India as an irrevocable trust under the provisions of the Indian Trusts Act, 1882, pursuant to a trust deed dated March 30, 2017 as amended on September 11, 2018. Embassy REIT was registered with SEBI on August 3, 2017 as a real estate investment trust under Regulation 3(1) of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations. 2014 ("REIT Regulations") having registration number IN/REIT/17-18/0001. Units of Embassy REIT were listed on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE") on April 1, 2019.

10.2 The Assessee has borrowed Rs.3,17,99,00,000/- Loan from its parent Embassy Office Parks REIT. The assessee has entered into Loan Agreement dated 11.03.2019 with Embassy Officer Parks REIT. The relevant paragraph of the Transfer Pricing Report is reproduced here as under : “b. Finance cost paid to related party Qubix and Embassy Office Parks REIT ('ÉOP REIT') have entered into a loan agreement dated March 11, 2019, pursuant to which Qubix has borrowed an amount. As per the agreement, the loan amount shall be utilised for the below mentioned purposes: Repaying (in full or in part) existing indebtedness of Qubix Repaying (in full or in part) deferred payment obligations, construction financing, financing acquisitions, refurbishment expenses and/or working capital requirements of Qubix, and General corporate purposes of the Borrower. Qubix pays interest on the aforementioned loan to EOP REIT at the rate of 12.5% per annum on the outstanding balance of the loan. Based on the information and documents provided by the Company and considering the data available, Other Method was selected as the most appropriate transfer pricing method for determining the arm's length price. The Company has relied on the arm's length review report dated April 2021, for determining the arm's length of the interest payment made on the loans availed Accordingly, it is reasonable to conclude that Qubix's said transaction with EOP REIT appears to be consistent with the arm's length standard from an Indian Transfer Pricing perspective. 10.3 Thus, as per assessee, the assessee has bench marked the impugned transaction by using “other method”. Assessee conducted a search for comparable debt instruments in the form of NCDs’ on NSDL and BSE database. Assessee selected some comparables, and justified the interest rate paid by assessee to its parent of 12.5% per annum. Ld.TPO rejected the benchmarking analysis done by the assessee. Ld.TPO mentioned in the order that assessee has overdraft facility from State Bank of India(SBI). Ld.TPO compared rate of interest charged by SBI which was `8.55% and proposed the Transfer Pricing Adjustment. Assessee filed objections before DRP. DRP upheld the benchmarking done by the TPO. However, DRP observed that there was arithmetical error while considering the one year MCLR Rate and accordingly, directed TPO to consider the rate of 8.95% per annum. Aggrieved by this direction, assessee filed appeal before this Tribunal.

10.4 In this case, it is an admitted fact that assessee has obtained a loan from its parent entity, as per the loan agreement dated 11.03.2019. The said loan is for a period of 15 years from the first drawn down date. There is no pre-payment penalty. As per Clause-8.1, the rate of interest shall be 12.5% per annum. However, as per Clause - 8.3, there is a provision to revise the interest rate.

10.5 The assessee has benchmarked this transaction using “other method”. Assessee has selected following comparables which are appearing on page 292 of the paper book : Name of Company Tenure Coupon Rate Joyville Shapoo Housing Private Limited 4 years 10.00% 3 years S. D. Corporation Private Limited 10.25% 3 years S. D. Svp Nagar Redevelopment Private 10.25% Limited 3 years Sunny View Estates Private Limited 10.50% 5 years Perungudi Real Estates Private Limited 12.00% 1 year Century Real Estate Holdings Private 16.00% Limited 3 years Arihant Aashiyana Private Limited 16.50% 1 year Vistaspaces Epc Private Limited 20.00% 10.6 It is observed that the details of the loan compared by the assessee are not available completely. Also, the assessee has selected comparables where tenure is from one year to five years only. Therefore, these comparables selected by assessee are not appropriate. Also, the method adopted is not appropriate. Therefore, we agree with the TPO in rejection of the method adopted by the assessee. However, TPO has compared the State Bank of India overdraft’s interest rates which is also inappropriate. The overdraft is always secured, whereas assessee’s loan is unsecured. Assessee’s loan is for a period of 15 years, whereas the Overdraft was for a short period. Therefore, TPO has erred in considering the SBI Overdraft Interest Rate. In these facts and circumstances of the case, since neither assessee, nor TPO has done a proper benchmarking analysis. We are of the opinion that a proper benchmarking analysis is required in this case, qua interest paid by assessee. Therefore, we set-aside the order of the TPO, to TPO/AO qua interest paid by assessee to its parent for denovo adjudication. The TPO/AO shall carryout a proper benchmarking analysis qua interest paid by assessee to its parents. We direct the TPO/AO to provide an opportunity of hearing to Assessee. Assessee shall provide necessary details before the TPO/AO. Accordingly, Ground No.2 raised by the assessee is allowed for statistical purpose.

10.4 In the result, Ground No.2 of the assessee is allowed for statistical purpose.

Ground No.8, 9 & 10 : 11. Ground No.8, 9 and 10 – these grounds are related to interest under section 234A, 234B and 234C. Assessing Officer is directed to verify assessee’s claim and recalculate interest, if any.

Accordingly, these Ground Nos.8, 9 and 10 are set-aside for statistical purpose.

11.1 In the result, Ground Nos.8, 9 and 10 raised by the assessee are allowed for statistical purpose.