DCIT Vs Macrotech Developers Limited (ITAT Mumbai)
ITAT Mumbai held that foreign exchange loss incurred by the assessee attributable to purchase of material is revenue expenditure and it cannot be included in the cost of project. Accordingly, the same is allowable as deduction.
Facts- Assessee is engaged in the business of real estate, construction and development. Assessee filed the return of income declaring total income of Rs.62,08,53,170/- and book profit u/s. 115JB of Rs.45,42,04,660/-. Subsequently, the return was revised on 29/03/2018 declaring Nil income after setting off all brought forward losses of Rs.21,37,37,597/-. The case was selected for scrutiny under CASS and the notices were duly served on the assessee. The revised return is filed due to the merger of M/s Suryakripa Constructions Ltd w.e.f. 01.04.2015 vide order dated 24.04.2017 of the National Company Law Tribunal (NCLT).
AO during the course of assessment noticed that there are specified domestic transactions and also international transactions in the nature of guarantee. Accordingly, the Assessing Officer 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) dated 28/06/2019 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 also made adjustment of the disallowance under section 14A to the book profits computed under section 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 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). Accordingly, this ground of the revenue is accordingly is dismissed.
Held that the foreign exchange loss cannot be included in the cost of project and accordingly should be allowed as a deduction. The ground of the revenue in this regard is rejected.
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 201 6-17. 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:-
