Case Law Details
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.
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