DCIT (Central Circle) Vs Macrotech Developers Limited (ITAT Mumbai)
ITAT Mumbai held that Arm’s Length Price (ALP) of guarantee commission was determined at the rate of 0.3523% instead of 1.25%.
Facts- The assessee is engaged in the business of real estate, construction. AO during the course of assessment noticed that there are specified domestic transactions and also international transactions in the nature of guarantee. Accordingly, AO made a reference to the Transfer Pricing Officer (TPO) for determination of arm’s length price. The TPO passed an order u/s. 92CA(3) determining the total transfer pricing adjustment of Rs.4,32,22,246/- towards corporate guarantee given by the assessee towards security cum Guarentee given on senior notes and Tenancy Agreement. AO passed the assessment order incorporating the Transfer Pricing adjustment. AO, in addition to the TP adjustment also made a disallowance u/s. 14A, disallowance of expenses of director’s office and handover facility expenses and loan processing fees. AO also made adjustment of the disallowance u/s. 14A to the book profits computed u/s. 115JB.
The assessee preferred appeal before the CIT(A) against the final order of assessment. The CIT(A) deleted the TP adjustment and other disallowances made by AO. The revenue is in appeal before the Tribunal against the order of the CIT(A).
Conclusion- Held that the investments made by the assessee are funded out of the own funds of the assessee. It is a settled principle that when the own funds are more than the investments, no disallowance is warranted towards operating cost and therefore, we see no infirmity in the order of CIT(A) deleting the disallowance made u/s. 8D(2)(ii) read with section 14A.
Held by the co-ordinate bench in assessee’s own case in ITA No.2266 & 2239/Mum/2022 dated 17.04.2023 where the co-ordinate bench upheld guarantee commission @0.3523%. Respectfully following the above decisions of the co-ordinate bench, we do not see any infirmity in the findings given by the CIT(A).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals of the revenue are against separate orders of assessment by the Commissioner of Income-tax (Appeals)-57, Mumbai both dated 17/06/2022 for the assessment years 2016-17. The issues contended are common in both the appeals and hence, they were heard together and disposed off by this common order.
2. The issues and the grounds raised in both the appeals are tabulated as under:-
