TaxTMI 
TaxTMI 
2022 (9) TMI 1681
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....view of the relaxation granted by the Hon'ble Supreme Court, the delay in filing of appeal is condoned for the Asst Year 2016-17 and admitted for adjudication. 3. Both the parties mutually agreed before us that the issues in Asst Year 2016-17 may be taken as the lead case and the decision rendered thereon would apply with equal force for the Asst Year 2017-18 also in view of identical facts except with variance in figures. 4. The assessee has raised the following grounds of appeal before us:- Based on the facts and circumstances of the case, Mahindra Homes Private Limited (hereinafter referred to as the 'Appellant) craves leave to prefer an appeal against the order passed by the Additional / Joint/ Deputy / Assistant Commissioner of Income Tax/ Income tax Officer, National e-Assessment Centre, Delhi [hereinafter referred to as the learned AO] under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act), in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel (hereinafter referred to as the 'Hon'ble DRP). On the facts and in the circumstances of the case an....
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....d, risks assumed and assets utilized by the Appellant in relation to the international transaction of payment of interest on CCDs: 8. Erred in considering interest paid on loans that too not engaged in real estate industry but in the Oil & Gas and Infrastructure industries as comparable to interest on CCDs under Comparable Uncontrolled Price ('CUP) method without appreciating that the four conditions for application of CUP are not satisfied in these cases i.e. specific characteristics of the products being compared, functions performed, contractual terms and conditions prevailing in the market; 9. Without prejudice to the above, erred in re-characterizing the debt instrument of CCDs as a loan without appreciating the fact that the learned TPO cannot alter the characterization of nature of expenses as specified in the audited financial statements by statutory auditor, 10. Erred in not appreciating that the real estate industry filter is a critical filter for selection of comparable companies and not taking cognizance of the same despite the fact that the Appellant had submitted documentary evidences to substantiate the significance of application of th....
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....onate amount of advertisement and sales promotion expenses of Rs 5,31,49,583/- 18. Erred in not appreciating the fact that advertisement and sales promotion expenses were charged to the profit and loss account as per the accounting treatment enunciated in revised Guidance Note on accounting for real estate transactions issued by ICAI in 2012 and which has been accepted by the statutory auditor also; 19. Erred in considering the entire amount of advertisement and sales promotion expenses charged to the profit and loss account during the year amounting to Rs. 9,17,64,249/- as directly attributable to the project cost; 20. Erred in allowing only 42.08% of the advertisement and sales promotion expenses charged to the profit and loss account during the year by the Appellant as a deduction during the year and considering the balance amount of advertisement and sales promotion expenses as part of work in progress, thereby inventorizing the same to the total project cost; 21. Without prejudice to the above, erred in not allowing proportionate amount of advertisement and sales promotion expenses disallowed in the assessment order passed for the ear....
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....siness purpose of the Appellant (L.e. mainly towards development of land and consequent construction activities) and not for making investments in mutual funds; 30. Erred in considering the investments made in mutual funds under growth scheme (where no exempt dividend is received) while computing disallowance under section 14A of the Act read with Rule 8D of the Rules: 31. Without prejudice to the above, the Assessing officer while computing the disallowance under section 14A of the Act read with Rule 8D erred in not appreciating the fact that out of total interest expenditure of Rs. 113,04,77,919 Rs. 111.40,37,919 was already included in the cost of the project and hence, only the balance amount of Rs. 1,64,40,000 debited to the profit and loss account, ought to have been considered while computing the disallowance under section 14A of the Act read with Rule 8D of the Rules. Disallowance under Section 14A read with Rule 8D of Rs. 1.63.63.538 under MAT provisions 32. erred in making an addition of Rs. 1,63,63,538 to Book Profits for the purpose of section 115JB on account of disallowance u/s 14A of the Act. Double disallowance of interes....
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....und Nos. 3 to 13 raised by the assessee are challenging the transfer pricing adjustment made by the ld. TPO with regard to Interest paid on Compulsorily Convertible Debentures (CCDs) to Associated Enterprises (AE). 6.1. We have heard the rival submissions and perused the materials available on record. As stated supra assessee is a Joint venture (50:50) between MLDL and SCM Real Estate. We find that on 25/07/2013 the assessee raised funds from its shareholders for the land acquisition through issuance of debentures as under: Type of instrument Compulsory Convertible Debentures ('CCDs') (Series A Debentures) Optionally Convertible Debentures ('OCDs') (Series B Debentures) Subscriber SCM Real Estate MLDL Amount INR 320 crores INR 320 crores Date of Investment July 2013 -Approx. 75% November 201 3 - Approx. 10% February 2014 -Approx. 15% July 2013 -Approx. 75% November 201 3 -Approx. 10% February 2014 -Approx. 15% Coupon rate 17.65% gross of tax (15% net of tax) per annum 15% net of tax (17.65% gross of tax) per annum Terms of conversion Fully, compulsorily converted into equity shares on expiry of twelve year....
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.... using Bloomberg database to benchmark the international transaction without appreciating the fact that the circumstances necessitating the determination of price by the ld. TPO as per section 92C(3) of the Act did not exist in the instant case. The ld. TPO selected SVOGL Oil & Gas Energy Ltd and Soma Enterprises Ltd as comparables and determined the ALP of the international transaction of the assessee. We find that the ld. DRP also followed its earlier order passed for the A.Y. 2014-15 vide para 6.2.2. of its directions and upheld the action of the ld. TPO. We find that this Tribunal in assessee's own case for the A.Y. 2014-15 in ITA No.7159/Mum/2018 dated 03/08/2022 had rejected the above two comparables chosen in A.Y. 2014-15 and deleted the entire transfer pricing adjustment made by the ld. TPO by observing as under:- 7. We have heard the rival submissions of both the parties, perused the paper book filed by the assessee, orders of the authorities below and the material available on record. In the instant case, we find that similar issue on hand has been came before the Mumbai Bench of the Tribunal in the case of India Debt Management in ITA.No.7518/Mum/2014 order date....
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....difference for arriving at a comparable uncontrolled price. Now before us, the assessee had filed two comparable transactions for the year 2009, that is, for the same financial year in the case of Shriram Transport Financial Company Ltd. and Tata Capital Ltd., wherein, for credit rating of AA Enterprises the coupon rate of interest per annum was between 11% to 12% for a tenor of 60 months. The yield on redemption is also around 11.25% to 12%. If for a credit rating company AA or AA(+) the interest rate is ranging between 11% to 12%, then in the case of the assessee which is admittedly BBBQ credit rating company, 11.30% interest paid by the assessee to its AE is much within the ami's length rate. This data/document from public domain now made available before us is worth reiving to benchmark and analyse the current transaction of coupon rate of interest paid/payable on CCDs issued by the assessee. Accordingly, we hold that 11.30% interest rate is at arm's length price. Thus, in our conclusion, the transfer pricing adjustment made by the TPO and as confirmed by the DRP at Rs.48,53,19,310/stands deleted, and consequently ground no. 1 is allowed." 7.1. In the TP study ....
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....udgment of Hon'ble Bombay jurisdictional High Court and in absence of any contrary decision brought to the notice of the Bench by the Ld. D.R, we delete the T.P. adjustment addition of Rs.16,45,67,968/- proposed by the TPO and made by the A.O. in the draft assessment order." 6.5. Respectfully following the same, we direct the ld. TPO to delete the TP adjustment made towards interest paid on CCDs to its AE. Accordingly, the Ground Nos. 3 to 13 raised by the assessee are allowed. 7. The Ground Nos. 14 to 25 raised by the assessee are challenging the allowability of legal & professional charges, advertisement & sales promotion expenses and Commission & brokerage charges in full as revenue expenditure. 7.1. During the course of assessment proceedings, details were called for by the ld. AO with respect to expenses debited to profit and loss account and income credited thereon. It was noticed by the ld. AO that assessee had earned interest income of Rs 65,91,521/- which was reduced from the business income for taxing it under income from other sources. From the perusal of computation of income and breakup of expenses filed with the office, it was noticed that the assessee co....
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....standard required recognition of revenue on transfer of significant risks and reward of ownership, the real estate industry was not able to identify the transfer triggering point and thus determine recognize event. Accordingly, ICAI came out with Guidance Note on Real Estate Developers in 2006 and clarified the method of recognizing revenue under Project Completion Method proportionately over the period of the project. Since parameters under real estate developers have similar economic substance akin to construction contracts, the revised Guidance Note in 2012 prescribes application of Percentage of Completion Method. Accordingly, it was submitted that the assessee herein had adopted the Guidance Note on Accounting for Real Estate transactions issued by ICAI in 2012 for recognizing revenue and expenditure for books and tax purposes and ha been consistently following the same over the years. The assessee submitted that as per the Guidance Note on Real Estate Transactions 2012 issued by ICAI, the revenue and expenditure is to be recognized as under:- 39. As per para 2.2 of the Real Estate Guidance Note - "Project costs in relation to a project ordinarily compr....
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....nventorised / added to the project cost. b) Indirect expenses not related to the construction activity should not be inventorised/ added to the project cost and should be charged to the profit and loss account. These expenses represent general and administrative / business overheads which are not attributable but are incurred for smooth business purposes / operations. 7.5. Accordingly, the assessee pleaded that the following indirect expenses were debited to the profit and loss account by the assessee :- Sr. No.Particulars Amount (in Rs.) Amount (in Rs.) Advertisement & Sales Promotion Expenses 9,17,64,249 2. Commission & Brokerage 8,61,46,619 3. Legal & Professional Fees 7,15,26,276 4. Repairs & Maintenance 83,13,256 5. Payment to auditors 11,30,806 6. Rent expenses 7,52,400 7. Communication expenses 12,75,971 8. Interest others 1,198 9 Rates & taxes 1,41,17,729 10 Travelling & Conveyance 11,11,857 11 Printing & Stationery 3,02,101 12. Miscellaneous expenses 8,42,135 13. Power & Fuel 18,23,040 14 Bank Charges 1,15,910 Total 27,92,....
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....ts and circumstances of the case, we deem it fit and appropriate, in the interest of justice and fair play, to remand this entire issue to the file of ld. AO for adjudication in the light of the following directions:- a) Restricting the allowability of expenses to the extent of 42.08% is wrong. b) Expenses directly attributable to Pre-construction and construction period should be identified and added to the Inventory/ cost of work in progress. c) Other expenses should be allowed as revenue expenses as General Administration and Selling Expenses. The ld. AO is directed to carry out the verification in the light of aforesaid directions and then decide the issue accordingly. Hence the Ground Nos. 14 to 25 raised by the assessee before us are allowed for statistical purposes. 8. The Ground Nos. 26 to 31 raised by the assessee are challenging the disallowance u/s 14A of the Act under normal provisions of the Act. 8.1. We have heard the rival submissions and perused the materials available on record. Before us, the ld. AR stated that if Ground No. 30 raised by the assessee alone is adjudicated, the other grounds i.e Ground 26 to 29 and 31....
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....Amount Invested during the year Dividend earned Total redemption amount Closing balance as at 31 March 2016 Taurus Taurus Liquid Fund Dividend - 19,29,00,000 19,84,395 19,48,84,395 - IDFC IDFC Cash Fund Dividend 22,63,00,000 22,63,344 22,85,63,344 IDFC ultra short fund |Dividend 1,40,00,000 99,842 1,40,98,842 - IDFC cash fund Dividend - 6,30,63,344 - - 6,30,63,344 Kotak Kotak floater short-term Dividend I- 22,62,00,000 25,50,631 22,87,50,631 Kotak liquid scheme plan A Growth 90,00,000 - 90,00,000 Kotak floater short-term Growth 5,37,50,631 5,37,50,631 HDFC HDFC Liquid fund Dividend 11,17,50,000 6,99,175 11,24,49,175 - SBI SBI Premier Liquid Fund Dividend 6,50,00,000 1,43,437 6,51,43,437 SBI Premier Liquid Fund Growth 11,5....
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....nation 1 to section 115JB(2) of the Act by applying the computation mechanism provided in Rule 8D(2) of the Rules as has been held by the Special Bench of Delhi Tribunal in the case of Vireet Investments reported in 165 ITD 27 (Del) (SB). However, as directed in Ground Nos. 26 to 31 supra, the disallowance in terms of clause 'f' of Explanation 1 to section 115JB(2) of the Act should be Rs 77,778/-. Hence the Ground No. 32 raised by the assessee is partly allowed. 10. In view of aforesaid decisions in Ground Nos. 26 to 32, the Ground No. 33 raised by the assessee is allowed. 11. The Ground No. 34 raised by the assessee is with regard to short granting of credit of TDS amounting to Rs 49,10,597/-. This aspect requires factual verification. Hence we direct the ld. AO to verify the same factually and decide the issue in accordance with law. Accordingly, the Ground No. 34 raised by the assessee is allowed for statistical purposes. 12. The Ground No. 35 raised by the assessee is with regard to non-granting of set-off of unabsorbed depreciation as per the computation sheet. It was submitted that in the draft assessment order passed by the ld. AO which was upheld by the ld. DRP, t....