Manaveeya Development & Finance Private Limited Vs DCIT (ITAT Hyderabad)
Inflated EBITDA Under Ind-AS Triggers Revision: ITAT Hyderabad Upholds s.263 Action in s.94B Case
Hyderabad ITAT ‘A’ Bench, in Manaveeya Development & Finance Pvt. Ltd. vs. DCIT (ITA No.480/Hyd/2025, AY 2020-21, order dated 24.12.2025), dismissed the assessee’s appeal and upheld the revisionary jurisdiction exercised by the Pr. CIT u/s 263, holding that the original assessment suffered from complete lack of enquiry on a crucial issue under s.94B.
The assessee-company (an NBFC) had paid substantial interest to its Associated Enterprise (AE) and computed allowable interest u/s 94B by adopting an EBITDA of ₹162.29 crore, whereas the actual EBITDA was about ₹129.26 crore. This inflated EBITDA, arising from Ind-AS first-time adoption adjustments (including fair-value gains and capital gains on sale of equity shares), resulted in an excess allowance of interest of about ₹9.70 crore.
The assessment u/s 143(3) r.w.s. 144B was completed by accepting the returned income without any discussion or verification of this computation. On examination of records, the Pr. CIT issued a show-cause u/s 263, pointing out the discrepancy and the AO’s failure to examine whether Ind-AS fair-value gains and processing fees could be included in EBITDA for s.94B purposes.
The Tribunal held that the issue involved complex factual and legal aspects spanning multiple years, including the treatment of fair-value gains spread over three years under Ind-AS and their impact on EBITDA for interest-limitation rules. Since the AO had not made any enquiry at all, the order was rightly treated as erroneous and prejudicial to the interests of Revenue.
Rejecting the assessee’s defence, the ITAT affirmed that lack of enquiry (not merely inadequate enquiry) squarely attracts s.263, and the Pr. CIT was justified in setting aside the assessment for fresh examination. Consequently, the revision order was upheld and the appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
