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2023 (12) TMI 273 - ITAT MUMBAITP Adjustment in respect of extension of performance/ corporate guarantee - Assessee is in the business of construction of infrastructure projects and in order to secure the contract for construction of a bridge in Dubai with Road Transport Authority in Dubai, it had found limited liability Company in Dubai called as Afcons Mideast LLC - HELD THAT:- As seen that the entire functions to carry out the work either in the form of sub-contract or executing the contract work by providing entire support services through its own infrastructure, man power, management, technological support, organizational support, etc. all has been done by the assessee. The function of the AE in the execution of work was only on paper and as a legal entity to comply with the domestic laws. In substance there is negligible function performed by the AE. Apart from that, even the assets deployed belonged to the assessee. The entire risk lied upon the assessee that is the risk assumed for executing the contract and carrying out the entire work solely belonged to the assessee. Ergo the rewards of the risks were also entirely reaped by the assessee in the form of 99% profit. Thus, even if one does FAR analysis of the performance guarantee given by the assessee to FGB for execution of the contract where entire risk and rewards and the benefit was of the assessee only, then where is the question of making any adjustment of ALP in the hands of the assessee that any benefit has been passed on to the AE. Even if it is reckoned as international transaction, then also on FAR analysis and looking to fact that the reward or profit to the AE is almost negligible, i.e. the ultimate profit is not even 1%, the adjustment if at all would also be negligible on the facts of the present case. Thus, on the facts of the present case we hold that no transfer pricing adjustment can be made on account of corporate guarantee. Accordingly, the addition made by the ld.TPO / ld. AO is deleted. Disallowance of interest u/s. 36(1)(iii) - Adjustment in respect of receipt of interest on loan given to Afcons Mideast and Afcons Infrastructure International Ltd. - HELD THAT:- It has been informed that the issue stands covered by the decision of the ITAT from A.Y.2001-02 to 2008-09 [2018 (5) TMI 508 - ITAT MUMBAI] Since, the ld. DRP has followed the initial order of the Tribunal in A.Y.1997-98 [2016 (2) TMI 1372 - ITAT MUMBAI] which has been followed in subsequent years wherein it was held that interest disallowed should be in respect of incremental loans given from 31/03/1996. Once the position from the earlier years has been settled that the opening balance of the loan is to be excluded for making the loans, then we do not find any infirmity in the directions of the ld. DRP which is in accordance with the direction of the Tribunal in earlier year. Therefore, the ground raised by the Revenue is dismissed. Disallowance of depreciation and written down value of speed boat - HELD THAT:- As decided in own case [2016 (7) TMI 1439 - ITAT MUMBAI] for the A.Y. 2001-02, A.Yrs. 2002-03 to 2005-06 and A.Yrs 2006-07 to 2008-09 machinery was purchased by the principal but the assessee had been vested with the possession of them and utilized them for its business.It is not disputed that the principal has debited the cost of machinery to the assessee's account and the assessee has capitalized it in its books of account. The Tribunal applying the ratio laid down in the decisions of Mysore Minerals Ltd [2000 (8) TMI 83 - SUPREME COURT] , Dilip Singh Sardarsingh Bagga [1992 (9) TMI 74 - BOMBAY HIGH COURT] and Varanasi Auto Sales [2010 (1) TMI 19 - ALLAHABAD HIGH COURT] dismissed the department's ground. Disallowance of professional fees paid for arbitration award - HELD THAT:- The Tribunal in A.Y.2005-06 .[2018 (5) TMI 508 - ITAT MUMBAI] has held that, firstly, the professional fees was incurred in respect of arbitration award and therefore, same was for the business of the assessee. Secondly, assessee was justified in claiming the said amount as expenditure in its profit and loss account and lastly, the Tribunal declined the observation of the ld. AO that since the income from arbitration award is excluded from the total income, therefore, professional fees incurred in this should be disallowed. This exact observation of the ld. AO as made in the present assessment year also has been rejected and accordingly, the ground raised by the Revenue is dismissed.
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