HOME CREDIT INDIA FINANCE PRIVATE LIMITED,GURGAON V. DCIT, CIRCLE-1(1), GURGAON

ITA 2037/DEL/2022

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Home Credit India Finance Pvt. Ltd appealed against the assessment order for the Assessment Year 2018-19, which included adjustments made by the TPO regarding the arm's length price of interest on NCDs issued to its AEs. The TPO had adjusted the interest rates to 12.13% from the 12.51%-13.20% range paid by the appellant, leading to a significant addition to the appellant's income. The Tribunal found that the TPO had not adequately considered the appellant's benchmarking analysis using the Internal CUP method, which had been accepted in a previous assessment year. The Tribunal directed the TPO to reconsider the interest rate for one of the NCDs using the Internal CUP method and to pass a speaking order on the additional deduction claims for incentives granted to customers for timely loan repayments, which had been overlooked in the initial assessment.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840114 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2018-2019
• Appeal Filed On: 26-08-2022
• Other Referred Cases: Goetze India Ltd vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHARM VEER SINGH
• Assessee Lawyers: SACHIT JOLLY
• Keywords: Set aside; Transfer pricing; International transaction; Business expenditure; Initiation of penalty proceedings
• Section: 143(3); 244A; 37(1)

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 2037/Del/2022 (Assessment Year: 2018-19) Home Credit India Finance Pvt. Ltd, S-7, Second Floor, Manish Chambers 4, Plot No. 7, LSC, Sector-12, Dwarka, District Court Complex Dwarka, South West Delhi, India Vs. DCIT, Circle-1(1), Gurgaon (Appellant) (Respondent) PAN: AABCR6548L Assessee by : Shri Sachit Jolly, Sr. Adv Ms. Viyushti Rawat, ADv Revenue by: Shri Dharm Veer Singh, CIT(DR) Date of Hearing 10/12/2025 Date of pronouncement 27/02/2026 O R D E R PER M. BALAGANESH, A. M.: 1. The Assessee Home Credit India Finance Pvt. Ltd (hereinafter referred to as ‘assessee) by filing the present appeal sought to set aside the impugned assessment order dated 26.07.2022 passed by the Assessing Officer (AO) under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (for short ‘the Act’) inconsonance with the order passed by the Dispute Resolution Panel (DRP)-I, New Delhi dated 06.06.2022 u/s 144C(5) and order of TPO dated 31.07.2021 passed u/s 92CA(3) of the Act. 2. The assessee has raised the following grounds of appeal: – “1. That the Assessing Officer ('AO') erred on facts and in law in computing the income of the Appellant for the relevant Assessment Year Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 2 ('AY') at Rs.9,19,20,120/- as against income of Rs.4,76,82,060/- returned by the Appellant. 2. That the Transfer Pricing Officer (\"ТРО\") and Dispute Resolution Panel (\"DRP\") erred in making an addition of Rs.4,16,31,884/- to the income of the Appellant by computing the arm's length price (\"ALP\") of interest on non- convertible debentures (\"NCDs\") @ 12.13% as opposed to interest @ 12.51% - 13.20% paid by the Appellant. 3. That the DRP erred in not rendering findings on the alternate economic analysis submitted by the Appellant both before the TPO and DRP and instead remanding the matter for determination by the AO/TPO in violation of the mandate of Section 144C(8) of the Income tax Act, 1961 (the \"Act\") 4. That the TPO erred in alleging that the alternate economic analysis (internal CUP and external CUP) made by the Appellant was not submitted in the original proceedings before the TPO. 5. That TPO erred in making bald averments that the NCDs issued by the Appellant to its AEs were issued in completely different economic environment, different market conditions and on different agreements, without even faintly demonstrating the differences despite a specific direction by the DRP to pass a speaking order on it. 6. That the AO and the DRP erred in not allowing the claim for deduction of Rs.7,50,05,325/- made by the Appellant during the course of assessment proceedings towards incentives granted by the Appellant to customers on timely payment of loans. 7. That the AO erred in not adjudicating the claim of deduction of Rs.7,50,05,325/- towards incentives granted by the Appellant to customers on timely payment of loans despite specific direction by the DRP to consider the said claim. 8. That the AO erred in computing interest of Rs.1,55,95,128/- as opposed to interest of Rs.2,02,45,908/- allowable under Section 244A of the Act. 9. That the AO erred in initiating penalty under Section 270A of the Act.” 3. We have heard the rival submissions and perused the materials available on record. The assessee is a non-banking financial company (NBFC) duly registered with Reserve Bank of India (RBI) and is primarily engaged in the business of retail financing. The return of income for AY 2018-19 was electronically filed by the assessee company on 11.3.2019, declaring total Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 3 income of ₹4,76,82,060/- which was duly processed u/s 143(1) of the Act. Considering the international transactions carried out by the assessee, a reference u/s 92CA(1) of the Act was made to the Transfer Pricing Officer (TPO) for determination of Arm’s Length Price (ALP) of international transaction undertaken by the assessee with its Associated Enterprises (AE). 4. The brief profile as noted by the ld TPO in his order is as under: – Home Credit India Finance Pvt. Ltd. is a leading Non-Banking Financial Company (NBFC) in consumer finance lending. The company is committed to drive credit penetration and financial inclusion by offering large financial solutions that are simple, transparent and accessible to all. With largest penetration in sub Rs.10,000 category, Home Credit India has an employee base of over 15,000 and has been consistently expanding operations since its entry in 2011, with its operations spread over 179 cities across 20 States in India. The Company has a strong network of around 29,000 points-of-sale (PoS) and is growing with a customer base of around 9 million customers, driven by Pan-India expansion across major markets, a range of diversified and innovative products backed by superior customer experience. The Company provides easily accessible loans for products ranging from Mobile Phones, Laptops, Home Appliances, Electronics and Two Wheelers. 5. During the year under consideration, the assessee company has entered into the following international transactions:– Table-A International transaction Amount (INR) Method Used for Determining the Arm’s Length Price Software development cost Homer 221,374142 TNMM License fee 4150945 Other Method Software development cost-SAP software 28226515 TNMM IT maintenance fee(Homer & 146007608 TNMM Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 4 SAP software) Legal and Professional fees 80059305 TNMM IT support services for Homer software 8413186 TNMM Interest paid on Non- Convertible Debentures 2552354840 CUP Corporate Guarantee 15637398 Other Method Issue of share capital 9509999980 Other Method Software and IT services 163827779 Other Method IT maintenance fee of other software 92215367 Other method Reimbursement of expenses 30816428 Other method Reimbursement of SBLC charges 65005195 Other method 6. The dispute before us is with regard to interest paid on non- convertible debentures (NCDs). During the FY 2018-19, the assessee company paid interest amounting to ₹255,23,54,841/- on the NCDs issued to its AE at the interest rate range of 11.27% to 13.20%. The details of the same are as under: – Table-B 7. The 38 comparables chosen by the assessee for benchmarking the aforesaid international transactions were partially accepted by the ld TPO. The ld TPO proposed the filter as mentioned in page 8 of his order, which is to consider only those debt instruments which were issued during the FY 2017-18 in respect of comparable companies. Applying Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 5 this filter, out of 10 NCDs issued by the assessee, which is tabulated supra, the first 5 NCDs are opening balance and the same cannot be considered for benchmarking according to the filters applied by the ld TPO. The last 5 NCDs mentioned in the aforesaid Table B were issued during the FY 2017-18. Hence, as per the filter applied by the ld TPO, the interest rate on first 5 NCDs are to be accepted to be at Arm’s length price. The final comparables chosen by the ld TPO and the interest rate adopted thereon are as under: – S No. Company Coupon rate 1 Thirumeni Finance Private Limited 12.30% 2 Madura Microfinance Ltd 11.50% 3 Neo Growth Credit Pvt Ltd 12.60% Average 12.13% 8. The Arm’s length price adjustment proposed by the ld TPO are as under:- Table-C Sr. No . Party Name Loan Amount Interest Rate(in %) No. of Days Total Interest Interest at ALP Rate(12.13%) Pifference(Total Interest-lnterest at ALP) 1. AB4BV Bonds 1875000000 12.90 365 241875000 227437500 14437500 2. PPFC03BV Bonds 1875000000 12.50 365 234375000 227437500 6937500 3. PPFC03BV Bonds 2250000000 12.51 365 281475000 272925000 8550000 4 PPFC03BV Bonds 4000000000 13.20 159 230005479 211361095 18644384 48569384 9. The ld TPO proposed an adjustment of ₹ 4,85,69,384/- on account of excess interest paid to NCDs, to its AEs. Out of these 4 comparables, the ld Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 6 DRP deleted the ALP adjustment made in respect of PPFC03BV Bonds of ₹1,87,50,00,000/-. Hence, in the final assessment order, the ld TPO’s TP adjustment got sustained only for Sl Nos. 1, 3 and 4 of the aforesaid Table C. As per the filter applied by the ld TPO to consider only those comparable company where NCDs were issued during the FY 2017-18, the following NCDs would be completely outside the ambit of TP adjustment: – Sr. No. Name of the AE Face value of NCDs Coupon rate percentage 1. AB4BV Bonds 1875000000 12.90 2. PPFC03BV Bonds 2250000000 12.51 10. These two would be outside the ambit of TP adjustment and we order accordingly. Now what is left to be adjudicated is whether NCDs issued to AE PPFC03BV Bonds for ₹ 4,00,00,00,000/- with coupon rate of 13.20% could be considered to be at Arm’s Length. The assessee vide letter dated 29.07.2021 filed before ld TPO had given the working of benchmarking of interest of 6 comparable instruments by using Internal CUP method as the Most Appropriate Method (MAM). The assessee gave the working for its benchmarking as under: – Sr. No Particulars - Interest rate per annum (including processing fee) 1 IFMR Capital_6 13.58% 2 IFMR Capital_7 13.58% 3 Mahindra Finance 14.02% 4 Aditya Birla Sunlife AMC Limited 14.25% 5 Clix Capital Services Private Limited 14.32% 6 JM Financial Products Limited 14.45% Data place considered as per MY rule Range 3 35th percentile 14.02% Average of 3 & 4 Median 14.14% 4 65th percentile 14.25% Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 7 11. It was submitted that assessee had paid to its AEs the rate of interest on the NCDs in the range of 11.27% to 13.20% and since interest rate paid falls below the Arm’s length range of the comparable instruments (i.e. 14.02% to 14.25 %), median (i.e. 14.14%) of comparable instruments, the interest rate paid by the assessee can be considered to be at Arm’s length from Indian transfer pricing perspective. The assessee also furnished the working using External CUP method before the ld TPO on without prejudice basis in the same letter dated 29.07.2021. The assessee furnished the complete working of its benchmarking before the ld TPO using External CUP as MAM on without prejudice basis and submitted that the Arm’s length range of the comparable instruments worked out to be 12.96% to 13.30 % with a median of 13.10%. Since, the interest rate paid by the assessee (except 13.20%.) falls below the Arm’s length range of comparable instruments with median of 13.10% of comparable instruments, the interest rate paid by the assessee to its AEs can be considered to be at Arm’s length. 12. The ld TPO completely ignored the aforesaid contentions of the assessee and proceeded to make an adjustment on account of interest paid on NCDs as detailed hereinabove, which stood upheld by the ld DRP in respect of PPFC03BV Bonds for ₹ 4,00,00,00,000/- with coupon rate of 13.20%. We find that Internal CUP method adopted by the assessee before the TPO, by giving the due working thereon, had been accepted by the ld TPO in assessee’s case for AY 2020-21, vide order passed u/s 92CA(3) of the Act dated 28.07.2023. The said order is enclosed in pages 1170 to 1218 of the paper book-II. In fact, the ld DRP for AY 2018-19 in para 4.1 had specifically directed the ld TPO to consider the alternative approach adopted by the assessee by giving the fresh benchmarking analysis using Internal CUP to be examined on merits and pass a speaking order thereon. This direction was not even complied with by the ld TPO by stating that assessee Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 8 had not given any benchmarking analysis using Internal CUP. This statement is factually incorrect as assessee had indeed filed the benchmarking analysis using Internal CUP vide letter dated 29.07.2021, which is enclosed in page 392 of the paper book-1. Hence, in the interest of justice and fairplay, we direct the ld TPO to benchmark the PPFC03BV Bond instrument issued by assessee for ₹4,00,00,00,000 with coupon rate of 13.20 % by using Internal CUP as the MAM. As stated supra, there cannot be any TP adjustment in respect of AB4BV Bonds for Rs. 1,87,50,00,000/- with coupon rate of 12.90 % and PPFC03BV Bond for ₹2,25,00,00,000/- with coupon rate of 12.5% as they had not passed the filters applied by the ld TPO itself and they are opening NCDs and not NCDs issued during the year. With these directions, the Ground Nos. 2 to 5 raised by the assessee are allowed for statistical purposes. 13. Ground Nos. 6 and 7 raised by the assessee are only challenging the additional claim of deduction of ₹7,50,05,325/- made by the assessee before the assessment proceedings. 14. We have heard the rival submissions and perused the materials available on record. The assessee, being a NBFC, is actively engaged in the business of retail financing. In order to run its business operations smoothly, the assessee grants incentives to customers who abide to timely repayment of loans. During the subject year, the assessee created a provision for incentive to such borrowers on the basis of the trend analysis determined by the risk team. Such provision amounting to Rs. 9,13,38,520 being notional in nature was duly added back to the computation of income. The assessee incurred actual business expenditure amounting to Rs. 7,50,05,325/- in relation to the provision created. However, the assessee inadvertently did Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 9 not claim the said expenditure while filing the return of income. Accordingly, the assessee had filed an additional claim for incentives paid to customers amounting to Rs. 7,50,05,325/- for the subject year during the course of the assessment proceedings. 15. The aforesaid additional claim was rejected by the ld AO and assessee filed objections before the ld DRP. The ld DRP observed that since there was no discussion about the additional claim in the assessment order, it directed the ld AO to consider the submission of the assessee and pass a speaking order regarding taxability of the assessee’s claim as per the law. Assessee vide letter dated 16.02.2022 before the AO, explaining the nature of such claim of deduction of ₹7,50,05,325/- on account of incentive payment as allowable expenditure u/s 37(1) of the Act, which was reproduced by the AO in page 5 and 6 of the assessee’s final assessment order framed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act dated 26.07.2022. The ld AO merely relied on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd reported in 284 ITR 323(SC) stating that this claim was not made by the assessee in the return and the same cannot be entertained by him in the assessment. This action the ld AO is in complete contradiction to the directions of the ld DRP, which is binding on him. The act of the AO is contrary to the provisions of Section 144C(10) of the Act. However, in the interest of justice and fairlyplay, we deem it fit and appropriate to restore this Ground Nos. 6 and 7 to the file of the ld AO for de novo adjudication in accordance with law as in the decision in the case of Goetze India Ltd (supra) in last paragraph the Hon'ble Supreme Court specifically states that the appellate authority could always entertain a fresh claim made by the assessee even though the same was not made in the return. Hence, we admit the fresh claim made by the assessee and directed the ld AO to examine the same on merits only for the limited purpose of quantification of Printed from counselvise.com ITA No. 2037/Del/2022 Home Credit India Finance Pvt. Ltd Page | 10 claim of deduction, as this bench is thoroughly convinced that assessee would be entitled for deduction on payment basis in respect of incentive given to the borrowers for timely repayment of the loan. Accordingly, Ground Nos. 6 and 7 are allowed for statistical purposes. 16. The Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication. Ground No. 8 raised by the assessee is seeking correct interest u/s 244A of the Act on refund. The ld AO is directed to grant correct interest u/s 244A of the Act as per law. 17. Ground No. 9 raised by the assessee is challenging the initiation of penalty proceedings u/s 270A of the Act which would be premature for adjudication at this stage and hence dismissed. 18. In the result, the view of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 27/02/2026. -Sd/- -Sd/- (CHALLA NAGENDRA PRASAD) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27/02/2026 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Printed from counselvise.com "