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TMI Blog2021 (8) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... icer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the transactions. Currently, we are concerned with the international transaction of payment of interest on CCDs paid to IIRF Cyprus V. Holding Limited and the Specified Domestic transaction of payment of interest on debentures to M/s. City Corporation Limited amounting. The assessee applied the Comparable Uncontrolled Price (CUP) method to demonstrate that the international transaction and the SDT were at ALP. The TPO observed that the assessee, in fact, availed funds from its related concerns as share capital but wrongly classified them as debentures/CCDs for claiming interest deduction. Relying on his decision for the A.Y. 2013-14, the TPO finally held that such financing by the related concerns was a shareholders' activity. He, thus recharacterized the transactions of issue of debentures/CCDs to those of issue of equity shares and held that no interest payment was called for. That is how, he determined Nil ALP of the transactions and accordingly proposed transfer pricing adjustment of Rs. 18,12,37,000/-. The AO made such an addition, which came to be deleted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and recomputed the ALP at a higher level, which resulted in recommending a transfer pricing adjustment of Rs. 10,51,97.830/-. The ld. CIT(A) directed to include Marg Limited in the list of comparables, against which the Revenue has come up in appeal before the Tribunal. 8. Having heard both the sides and gone through the relevant material on record, we find that there is no dispute on any other issue of the ALP determination of these transactions except the direction of the ld. CIT(A) for including Marg Ltd. in the list of comparables. He held that "this company is in the business of real estate that includes both residential and commercial sector". We find from the Annual report of this company, a copy of which has been placed at page 229 onwards of the paper book, that it is engaged in Port business, Real estate residential, Real estate commercial apart from Others. Standalone financial statements from the Real estate business are available. 'Income from operations' has been shown at Rs. 168.18 crore, whose bifurcation has been given in Note. 20, which includes 'Income from projects/operations' at Rs. 154.83 crore and 'Income from leasing' at Rs. 13.35 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,36,07,600/-. This is how, the differential amount of Rs. 9,18,700/- was added to the assessee's total income as per the prescription of section 43CA(1) of the Act. 13. At this stage, it is relevant to mention that the first proviso to section 43CA was inserted by the Finance Act, 2018 w.e.f. 01-04-2019 providing that: 'where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration'. It is palpable that the rigor of section 43CA has been slackened by the first proviso inserted by the Finance Act, 2018 providing that where the stamp value does not exceed by 5% of the agreed sale consideration, only the transacted value should be considered as full value of consideration. The Memorandum explaining the provisions of Finance Bill, 2018, at the time of insertion of the first proviso, reads as under: "Rationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective.' 16. When we examine the prescription of the proviso in the backdrop of the memorandum explaining the provisions read in conjunction with Vatika Township Pvt. Ltd. (supra), it becomes graphically clear that the insertion of the proviso, which has been provided to mitigate the hardship in the case of genuine real estate transactions, should be held as retrospective. Here is a provision which has been inserted to confer a benefit on some persons (where the difference in two values is less than 5%) but without inflicting a corresponding detriment on some other person or on the public generally and the legislator's object is clearly to confer such benefit. It would be a clear case of travesty of the provision, if in two parallel cases before the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and subsequent assessment years." 18. A perfunctory look at the Memorandum unmistakably transpires that complications were being faced with five per cent safe harbour limit in cases of genuine sale of land, building or both held as stock in trade, for which representations were made to the Government. Realizing the difficulty, the Parliament stepped in and enhanced the safe harbour limit from 5% to 10% in the first proviso to section 43CA. Even though this amendment has been made effective from 01-04-2021 and has been stated to apply in relation to assessment year 2021-2022 onwards, but the same being a beneficial provision aimed at mitigating hardship to the assessees making genuine sale transactions at a rate in variance with the stamp value, the same has also to be held as retrospective in the light of the Constitution Bench judgment of the Hon'ble Supreme Court in Vatika Township (supra). 19. In the light of the above discussion, it gets vivid that where the difference between the stamp value and sale consideration is up to ten per cent, such a difference is liable to be ignored and cannot be brought within the ken of section 43CA(1). Adverting to the facts of the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. To exemplify, if the WIP stood at Rs. 1000 as on 31.3.2013 which included interest of Rs. 100 paid on debentures/CCDS and pursuant to the directions given by the Tribunal, the ALP of interest payment is re-determined at Rs. 75/-. In that case, the differential amount of Rs. 25/- (Rs. 100 minus Rs. 75) is required to be added back proportionately to the total income as and when the corresponding amount of the work-in-progress is reversed on the sale of flats/plots etc. We, therefore, overturn the impugned order on this score and hold that the amount of capitalized interest on debentures/CCDs to the work in progress for the assessment year 2013-14, as is in excess of its ALP freshly determined by the AO/TPO, should be disallowed proportionately in the years in which the work-in-progress containing the amount of such interest standing as on 31-03-2013, is reversed on the sale of flats/plots. 22. The assessee raised an additional ground seeking deduction of Education Cess and Secondary and Higher Secondary Cess amounting to Rs. 26,66,359/- while computing the total income of the assessee company. 23. This ground is similar to the additional ground raised for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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