Andromeda Sales and Distribution Private Limited Vs ACIT (ITAT Mumbai)
Summary: The Mumbai ITAT partly allowed the appeal of Andromeda Sales and Distribution Private Limited for AY 2022-23. The Tribunal held that Compulsorily Convertible Debentures (CCDs) could not be re-characterised as equity instruments merely because they were compulsorily convertible into equity at a future date. The Transfer Pricing Officer had treated the CCDs as equity, rejected the assessee’s CUP benchmarking and determined the arm’s length price of interest at Nil, resulting in an adjustment of Rs.7,78,12,548. Following the coordinate Bench decisions in Indorama Ventures Oxides Ankleshwar Pvt. Ltd. and EBIXCASH World Money Ltd., the Tribunal held that CCDs are to be examined as debt instruments till conversion. However, since the TPO had not independently examined the assessee’s comparability analysis, the issue was restored to the TPO for fresh determination of the arm’s length price in accordance with section 92C and Rule 10B, with adequate opportunity to the assessee. On the separate issue of bad debts of Rs.21,65,961, the Tribunal relied upon TRF Ltd. and CBDT Circular No. 12/2016 and held that actual write-off in the books, subject to section 36(2), was sufficient. The disallowance was deleted. The limitation ground was left open and the penalty ground was dismissed as infructuous.
