ITAT Mumbai rejects rectification pleas on disallowance, book profit, transfer pricing adjustment

The Appellate Tribunal ITAT Mumbai dismissed the miscellaneous application seeking rectification of mistakes in the order dated 27-05-2020. The Tribunal rejected the pleas related to disallowance under section 14A, computing book profit under section 115JB, and transfer pricing adjustment on the provision of corporate guarantee. The Tribunal held that no rectifiable mistakes existed, and the decisions were in line with legal principles and previous rulings.

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Issues:
1. Rectification of mistakes in the order dated 27-05-2020 passed in ITA No.850/Mum/2015 under section 254(2) of the Income Tax Act, 1961.
2. Disallowance under section 14A of the Act regarding availability of surplus funds and interest expenditure.
3. Disallowance under section 14A r.w.r. 8D while computing book profit under section 115JB of the Act.
4. Transfer pricing adjustment on account of provision of corporate guarantee.

Analysis:

1. The assessee sought rectification of mistakes in the order dated 27-05-2020. The first mistake highlighted was regarding disallowance made under section 14A of the Act. The Tribunal had directed the assessing officer to verify the availability of surplus interest-free funds and delete the disallowance made under section 8D(2)(ii). The Tribunal observed that no rectifiable mistake existed as the assessee's argument was based on its preference, and there was no error in the Tribunal's order as per section 254(2) of the Act. The plea was declined.

2. The next issue raised was the Tribunal's decision on disallowance under section 14A r.w.r. 8D while computing book profit under section 115JB of the Act. The Tribunal agreed with the legal principle that no adjustment/disallowance can be made with reference to section 14A r.w.r. 8D while computing book profit under section 115JB. However, the assessing officer retained the power to make adjustments under Explanation 1(f) of section 115JB. As there was no apparent mistake on record, the plea was rejected.

3. The final issue concerned transfer pricing adjustment on the provision of corporate guarantee. The assessee contended that the provision of corporate guarantee to the AE did not fall under international transaction and the arm's length price of guarantee commission should be limited to 0.5%. The Tribunal, based on its earlier decisions, restricted the disallowance to 0.5% and presumed that the provision of corporate guarantee was an international transaction. As the Tribunal followed its previous decisions, there was no need for rectification or recall of the order.

In conclusion, the miscellaneous application seeking rectification of mistakes was dismissed by the Appellate Tribunal ITAT Mumbai on 20-08-2021.

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