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ITAT remanded matter for determining interest rate on investment in debentures of related parties

June 17, 2019[2019] 106 169 (Hyderabad - Trib.)

TRANSFER PRICING : In case of investment in debentures of related parties, issue of rate of interest was remanded to file of Assessing Officer/TPO

• Assessee made investment in debentures of related parties and third party carrying interest at rate of 15.75 per cent - However, average rate of interest charged in similar circumstances by other company was 11.20 per cent - Further, DTAA between India and Cyprus allows same as 'income from other sources'. Assessee filed application for considering additional information which Assessing Officer did not accept for reason that no new evidence could be considered at stage after draft assessment order was passed. On appeal, Commissioner (Appeals) accepted additional evidence and directed Assessing Officer to compute interest at rate of 15.75 per cent and tax same at rate of 10 per cent

Held, that acceptance of additional evidence without giving Assessing Officer an opportunity to verify same was clearly in violation of Rule 46A of IT Rules. It was case of assessee that, for investments in debentures made in rupees , SBI PLR rate should be adopted. Thus, Matter was to be remanded.

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