Assesee is Era Realtors Pvt Ltd
Engaged in the real estate development and construction sector.
The AO made a significant addition of ₹ 116,92,92,850/- related to the issuance of CCDs and equity, treating it as an international transaction requiring an Arm's Length Price (ALP) adjustment. Consequentially, another ₹32.6 Crores was added for interest paid on these debentures.
Assessee’s Contentions | Revenue’s Contentions | Judgement |
|---|---|---|
Contended that CCD issuance was a quasi-capital transaction, not subject to Transfer Pricing (TP) provisions and agrued that TPO while determining the ALP at NIL, did not adopt any of the methods prescribed under Section 92C(1) read with Rule 10AB. | Supported the AO's stance, arguing that the assessee failed to obtain a proper valuation of shares before issuing the preferential CCDs to the investor. | ITAT held that the issuance of CCDs is quasi-capital in nature, and therefore, transfer Pricing provisions are not applicable. |
Submitted extensive documentation proving investor identity, creditworthiness, and transaction genuineness (agreements, RBI filings, bank records, CA valuation, etc.) and clarified CCDs were issued at face value with no premium. | Held that the interest paid on debentures as a direct consequence of the CCD issuance and thus also subject to adjustment. | ITAT noted that the TPO, in determining the ALP at NIL, did not adopt any of the methods prescribed under Section 92C (1) read with Rule 10AB, which is a prerequisite for a valid TP adjustment. |
Relied on High Court precedents (Vodafone, Equinox Business Park, Shell India Markets) stating Chapter X doesn't apply to share/quasi-capital issuance to foreign AEs. | Contented that each assessment year is distinct, thus the principle of res judicata doesn't apply, meaning the CIT(A)'s AY 2012-13 decision shouldn't automatically bind the current year. | ITAT affirmed the deletion of the TP adjustment related to the issuance of CCDs and the consequential deletion of interest on debentures. |
The Mumbai ITAT affirms the deletion of the transfer pricing adjustments concerning CCD issuance and associated interest payments.
