Home Credit India Finance Pvt. Ltd Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, considered an appeal filed by the assessee against the assessment order dated 26.07.2022 passed under Sections 143(3), 144C(13), and 144B of the Income Tax Act, 1961, in conformity with directions of the Dispute Resolution Panel (DRP) and the Transfer Pricing Officer (TPO). The assessee challenged various additions, primarily relating to transfer pricing adjustment on interest paid on non-convertible debentures (NCDs), disallowance of deduction for incentives, and computation of interest under Section 244A.
The assessee, a non-banking financial company engaged in retail financing, had declared income of ₹4.76 crore, whereas the Assessing Officer determined income at ₹9.19 crore. The dispute largely related to transfer pricing adjustment on interest paid on NCDs issued to associated enterprises. During the relevant year, the assessee paid interest of ₹255.23 crore on NCDs at rates ranging from 11.27% to 13.20%. The TPO selected certain comparables and determined the arm’s length price (ALP) of interest at 12.13%, proposing an adjustment of ₹4.85 crore for excess interest paid. The DRP partly reduced the adjustment, sustaining it only for certain instruments.
The Tribunal noted that, as per the filter applied by the TPO, only NCDs issued during the relevant financial year were to be considered for benchmarking. Consequently, certain NCDs treated as opening balances were excluded from transfer pricing adjustment. The Tribunal held that no adjustment could be made for these instruments, as they did not satisfy the TPO’s own criteria.
