DCIT, MUMBAI vs. MAHINDRA HOMES PVT LTD., MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated
26.12.2024 passed by the Ld. Commissioner of Income-tax
(Appeals) – 57, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds:
Ground 1 Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in not appreciating the difference between Debt/Term Loan vs CCDs duly distinguished by the TPO in his order, requiring different benchmarking?

Ground 2 Wh in law, the H benchmarking which are prim
Ground 3 Wh in law, the H
ITAT's decisio reliance is pla
India Debt M
10.03.2016, t the assessee court has obs instrument; w in INR are Assessee in th
Ground 4 Wh in law, the Ho of Legal &
1,80,78,800/
Professional deleting the d the fact that income during effect on the be treated as Ground 5 Wh in law, the H
& Sale expen the disallowa that the said during the ye the business as Capital Exp
Ground 6 Wh in law, the H and brokerag deleting the d the fact that income during effect on the be treated as Ma
ITA hether on the facts and circumstances of t
Hon'ble CIT(A) has erred in directing to g of interest on term loan/debt for intere marily different instruments?
hether on the facts and circumstances of t
Hon'ble CIT(A) has erred in relying on on in assessee's own case for AY 2014
aced on decision of Bombay High Court in Management in ITA.No.7518/Mum/2014
the facts of which are distinguishable in . In this case of India Debt Manageme served that Bloomberg data has no INR d whereas in the case of the assessee Blo available and which were duly intim he show-cause notice by TPO?
hether on the facts and ciroumstances of t on'ble CIT(A) has erred in restricting the d
Professional expenses to the amo
- and also erred in holding the balan expenses as Revenue Expenditure in disallowance made by the AO, without the said expense has not contributed in g the year under consideration and ha business of the assessee and therefore
Capital Expenditure.
hether on the facts and circumstances of t
Hon'ble CIT(A) has erred in holding the Ad nses as Revenue Expenditure in nature ance made by the AO, without apprecia expense has not contributed in earning ear under consideration and have multiy of the assessee and therefore are liable xpenditure.
hether on the facts and circumstances of t
Hon'ble CIT(A) has erred in holding the ge expenses as Revenue Expenditure in disallowance made by the AO, without the said expense has not contributed in g the year under consideration and ha business of the assessee and therefore
Capital Expenditure.
ahindra Homes Pvt. Ltd.
2
A No. 1212/MUM/2025
the case and o accept the est on CCDs, the case and the Hon'ble
4-15 wherein n the case of order dated n the case of ent, the high denominated omberg data mated to the the case and disallowance ount of Rs.
nce Legal &
nature and appreciating earning any ave multiyear are liable to the case and dvertisement and deleting ating the fact g any income year effect on to be treated the case and Commission n nature and appreciating earning any ave multiyear are liable to 2. Briefly stated, t domestic company ,
Lifespace Developers engaged in the busin
Estate, Singapore P
Chartered Bank. The development of reside
2.1 For the year un income electronicall
Rs.13,39,91,969/-. T selected for scrutiny
Income-tax Act, 1961
upon the assessee on the Act were issue
(ITBA) portal on vario of making interes
Debentures (CCDs)
Singapore and other
Form No. 3CEB filed referred the matter fo international transac
Ld. TPO in his orde adjustment amountin interest on CCDs. T
Ma
ITA the facts of the case are that , which is a joint venture bet s Ltd. (MLDL), a part of the “M ness of real estate development
Pvt. Ltd., an investment arm e assessee company is primarily ential projects in India.
nder consideration, the assesse ly on 30.11.2015 declaring
The return of income filed by th y assessment and notice u/s 1 (in short ‘the Act’) was issued n 04.04.2016. Thereafter notice ed through Income-tax Busin ous dates. In view of internation st payment on Compulsori issued to ‘SCM Real Estate r specified domestic transactio d by the assessee, the Ld. Asses for determination of arm’s lengt ctions to Ld. Transfer Pricing Of er dated 29.12.2018 proposed ng to Rs.28,94,33,680/- to the The value of the remaining spe ahindra Homes Pvt. Ltd.
3
A No. 1212/MUM/2025
the assessee a tween Mahindra ahindra Group”
t, and SCM Real m of Standard y engaged in the e filed return of total loss of he assessee was s 143(2) of the and duly served es u/s 142(1) of ess Application nal transactions ily
Convertible
Singapore Ltd.’
on disclosed in ssing Officer(AO) th price of those fficer (TPO). The transfer pricing e transaction of ecified domestic transaction however
Assessing Officer al respect of ‘legal a ‘advertisement and ‘commission and bro
Rs.1,26,33,412/-. Th in-progress at value work-in-progress val assessee.
2.2 On appeal, th adjustment, following
Tribunal in the asse and 2017-18, where
CIT(A) relied upon th in the case of Pr. CIT taxmann.com 55 (Bom benchmarking based the absence of INR regarded as appropr reproduced as under “Further, it is the appellant also. The app decision of H
ITAT order in 2017-18 ITA N order dated
Ma
ITA r was considered as at arm so made disallowance u/s 57
and professional expenses’ (R sales expenses’ (Rs.5,50,69
okerage expenses’ (Rs.4,47,50,45
he Ld. Assessing Officer also adj of Rs.3,49,59,30,826/- as again lue of Rs.368,40,06,222/- as r he Ld. CIT(A) deleted the t g the decision of the Co-ordina essee’s own case for A.Ys. 201
ein similar additions had bee he judgment of the Hon’ble Bom
T v. India Debt Management (P.) m), which had affirmed the Trib d on Bloomberg/Thomson Reute denominated debt instruments riate. The relevant finding of th
:
s noted that similar methodology were ad as well as TPO in later A.Y.2016-17 and pellant has submitted that relying on Hon'ble ITAT for A.Y.2014-15, the Hon'bl the Appellant's own case for AY 2016-1
No. 2179 of 2021 and ITA No. 1008 of 2
30.09.2022 decided the issue in favo ahindra Homes Pvt. Ltd.
4
A No. 1212/MUM/2025
m’s length. The 7 of the Act in Rs.1,90,57,834);
9,726/-) ; and 55/-) totaling to usted the work- nst inventory or reported by the transfer pricing ate Bench of the 14-15, 2016-17, en deleted. The mbay High Court
Ltd. [2019] 106
bunal’s view that rs databases, in s, could not be he Ld. CIT(A) is dopted by d 2017-18
the above e Mumbai
17 and AY
2021) vide our of the appellant. Th referred to th
7518/Mum/2
also. The re reproduced as "Respectfully f the TP adjust its AE. Accor assessee are 6.1.5 From th is correct that of appeal - 1
Hon'ble juri Hence, respec
No.7159/Mum grounds of a Consequently u/s.92CA of income and from invento directed to b
3. Aggrieved with t appeal before us by w
4. Before us, the L containing pages 1 t before the lower au
Tribunal in the case o
5. The ground No pricing adjustment f
Enterprise. The issu interest paid by the a rate of 17.65% (gros
Ma
ITA he Hon'ble Mumbai ITAT in this regard he case of India Debt Management in 2014 (affirmed by the Hon'ble Bombay H levant extract of the said case law s below.
following the same, we direct the Id. TPO tment made towards the interest paid on rdingly, the Ground Nos. 3 to 13 raise allowed"
he above, it is clear that the claim of the t the issue involved is similar and the TP to 9 - are squarely covered by the decis dictional ITAT in its own case for A.Y. 201
ctfully, relying on this decision of Hon'ble m/2018 for A.Y.2014-15 dated 03.08,202
appeal nos. 1 to 9 are considered as y, the TP adjustment of Rs.28,94
the Act (Rs.24,80,269/- added to the the amount of Rs.28,69,53,411/- being ory on account of this TP adjust be deleted.”
the finding of the Ld. CIT(A), th way of grounds as reproduced ab
Ld. counsel for the assessee file o 237, comprises of mostly sub uthorities and copy of the d of the assessee.
s. 1 to 3 of appeal are in rela for interest payments on CCD ue in dispute pertains to bench assessee to its AE on CCDs issu ss of tax). The facts in brief qu ahindra Homes Pvt. Ltd.
5
A No. 1212/MUM/2025
had also n ITA. No.
High Court) has been O to delete n CCDs to ed by the appellant
TP grounds sion of the 4-15. e ITAT ITA
22, the TP s allowed.
4,33,680/- e returned g reduced tment) is he Revenue is in bove.
ed a Paper Book bmissions made ecisions of the ation to transfer s to Associated hmarking of the ued at a coupon ua the issue-in- dispute are that the interest on CCDs am
Enterprise namely SC the assessee explaine
Estate Singapore Pvt rate of 17.65% (gros those CCDs shall be equity shares upon e
However, those CCD an agreed conversion was submitted that issued to SCM Real premium. It was fur coupon rate of 17.65
CCDs issued was pay
5.1 For the purpos international transa indentifying compara
(BSE), National Sto
Deposit Ltd. (N L).
the websites for ‘debt
Central Governmen
Treasury Bill Securi list, privately debt in Ma
ITA assessee reported internationa mounting to Rs.56.51 crores to CM Real Estate, Singapore. Befo ed that the assessee issued CC t. Ltd. on 25.07.2013, which ca ss of the tax). It was further automatically and mandatorily expiry of 12 years from the da s could also be voluntarily conv n price before the expiry of 12
CCDs had faced value of Rs
Estate Pvt. Ltd. at par withou rther submitted that CCD issu
5% (gross of tax per annum) and yable quarterly.
se of benchmarking the arm’s ction, the assessee carried o ables on website of Bombay S ock Exchange (NSE) and Na
. The assessee carried out thro t instruments’ including securit t Securities, State Governm ities, Memorandum of privately nstruments. Out of the above de ahindra Homes Pvt. Ltd.
6
A No. 1212/MUM/2025
al transaction of o its Associated ore the Ld. TPO,
Ds to SCM Real arried a coupon submitted that y converted into ate of allotment.
verted based on years period. It s.100 and were ut charting any ued carried out d the interest of length price of ut analysis for Stock Exchange ational Security ough search on ies consisting of ment Securities, y placed bonds ebt instruments, the list of privately de detailed analysis. O eliminated the list ba

Debt in 
Debt in rates;

Debt in industr

Debt in 5.2 In this manner, total 65 listing. Th entries and the instru in residential sub-sec elimination of listing indentified debt in considered two debt documentation but n companies, were ad manner, the asses companies with mean
The relevant list of interest is reproduced
S No.
Company
Ma
ITA ebt instruments was selected fo
Out of list generated, the as ased on following criteria :
nstruments not issued during FY 2013-14
nstruments issued at floating rate or a nstruments, issued by companies not en ry; and nstruments issued at floating redemption
, search result of the three web he assessee further eliminated uments issued by the companie ctor of real estate. The above cri g of 60 debt instruments leavin nstruments issued. Further, instruments which were accept not appearing in current year dditionally indentified and inc ssee finally indentified seve n coupon rate of which was wor comparables along with their d for ready reference:
ISIN Number
Issue date ahindra Homes Pvt. Ltd.
7
A No. 1212/MUM/2025
or undertaking a ssessee further
4; at zero debt coupon ngaged in real estate n.
bsite resulted in d the duplicate es not operating iteria resulted in ng a list of five the assessee ted in last year’s list of probable cluded. In this en comparable rked out at 18%.
coupon rate of e
Coupon rate

LUE
LIMITED
INE366P07012
23 July 2013
ENT
MS PVT
INE547Q07015
27 March 2014
ENT
RIVATE
INE904L07027
27 March 2014
TIES
INE626P07019
29 October 201
'
OPERS
INE430P07024
24 September 2
S
INE723009013
15 June 2013
A INE882N07013
28 March 2014
above analysis the assessee w nterest to an average of 18%. It t as per the terms of subscripti by the assessee to its AE was 1
est paid on CCDs by the assess arm’s length price under the also supported its transaction ry analysis relied upon RBI pu ous commercial banks in India ahindra Homes Pvt. Ltd.
8
A No. 1212/MUM/2025
16.50%
17.50%
17.50%
3
18.00%
2013
18.40%
19.00%
20.00%
17.50%
18.00%
18.40%
worked out the t was submitted ion, the interest
17.65% (gross of see to its AE was Indian Transfer at arm’s length ublished lending as published by the RBI at quarterly credits. The term loan are considered as in money to its credit median of 35th perce term loan rates offe
September, 2013 whi by the assessee that its AE was 17.65% (g length price under th
5.5 The Ld. TPO wa the assessee. Accordi by the assessee. Th benchmarking holdi available on RBI da international transac indicative rates witho two independent ent financial strength of that Comparable Un comparability of the interest rate from t indicated a broad r banks in India to var
Ma
ITA basis in respect of advances ot n lending rates published by RB ndicative rates at which bank worthy customers. The assess entile and ending on the 65th p red by banks in India for the ich was worked out to 17.25%. I interest rate on CCD issued to gross of tax) and therefore, it w he Indian Transfer Pricing perspe as not satisfied with the benchm ingly, he rejected the benchmar he Ld. TPO rejected the assess ng that lending rates of Com atabase were not strictly com ction carried out by the assesse out any evidence of actual trans tities. Further, the rates were s f the borrowing company. The ncontrolled Price method (CUP) benchmarking data whereas the RBI website considered b range of lending rates offered ried customers with differing pro ahindra Homes Pvt. Ltd.
9
A No. 1212/MUM/2025
ther than export
BI on its website s in India lend see worked out percentile of the e quarter ended
It was explained the assessee to was within arm’s ective.
marking result of rking carried out see’s alternative mmercial Banks mparable to the ee as same were saction between subjected to the Ld. TPO noted
) requires strict the benchmark by the assessee by commercial ofile then that of the assessee and a account without co subscription of CCD debentures issued b could be converted debentures are differ the event of bankru income holders wh financial products i.e accordingly applied effective annual yield
TPO carried out sea juri iction of India a the Ld. TPO arrived a two comparables nam complete search crite shared by the TPO wi
5.4 The assessee h high risk instrument
‘Bloomberg’ compara gas’ and ‘infrastructu terms of issue made also argued that r comparable was stric
Ma
ITA also the lending rates had b onsidering the distinctive term
Ds. The Ld. TPO further held t by the company were as a type d into stock and therefore, rent from the non-convertible d uptcy, debenture are paid af hereas convertible debentures e. benefit of both debt and equi filters viz. issuance date, 12
d, considering quarterly payme arch on “Bloomberg” loan dat and Singapore for benchmarkin at ALP on interest rate of 8.6%
mely ‘SVOGL’ and ‘Soma Enterp eria and screenshot of Bloomber ith the assessee.
owever contended that CCDs w t, specific to the real estate se ables, which pertain to the indus ure’. It was contended that ind the transaction non-comparabl reliance on only two and th ctly insufficient for benchmarkin ahindra Homes Pvt. Ltd.
10
A No. 1212/MUM/2025
een taken into ms attached to that convertible e of loan which the convertible debentures as in fter other fixed are a hybrid ity. The Ld. TPO years maturity, ent etc. The Ld.
tabase involving ng. Accordingly,
% on the basis of prises Ltd’. The rg database was were unsecured, ctor, unlike the stry like ‘oil and dustry risk and le. The assessee hree Bloomberg ng.

“7. We have parties, peru orders of t available on similar issu
Mumbai Ben
Managemen taxmann.com been affirme the case of P
[2019] 106 t
103 wherin the benchma on external and Bloomb observations reproduced a "15. The las benchmarkin or not and 11.30% paid
So far as th done in TP S
Thomson
R
Database, w correct, first issuance ava in absence o out huge a currency risk adjustments appropriate our opinion benchmarkin be correct. H for compara that the as namely; Sta
Microfin Lim
13.75%. Sin assessee ha the time peri
Ma
ITA e heard the rival submissions of bot used the paper book filed by the asse the authorities below and the ma n record. In the instant case, we find ue on hand has been came before nch of the Tribunal in the case of India t
(P.)
Ltd.
v.
Dy.
CIT
[2016]
m 125 and the order of the Tribuna ed by the Hon'ble Bombay High Cou
Pr. CIT v. India Debt Management (P.
taxmann.com 55/264 Taxman 42/41
the Hon'ble Court observed that as f arking done by the lower authorities b data using Thomson Reuters, Dea berg Database is not correct. The rel s of Hon'ble Juri ictional High Cou as under :
st leg of the controversy is, whethe ng analysis done by the assesses is c whether the average rate of intere d by the assessee to its AE is at ALP o he assesses's benchmarking analys
Study report based on external data
Reuters'
Deal
Scan, and Bloom we find that such an approach is tly, there are no INR denominated ailable on such databases and; seco of such a data the assessee has to adjustments on account of country k and tenor risk. With all these facto s, it would be difficult to arrive a arm's length range of price; therefo such an approach of the assesse ng the arm's length interest rate ma
However, as regards the search under able debt issuances in BSE data, we sessee has shortlisted two compar arlight Systems Private Limited and S mited which have a coupon rate of 15%
nce these data belong to year 2013
ad made minor tenor adjustment to f iod to arrive at interest rate of 15.97%
ahindra Homes Pvt. Ltd.
13
A No. 1212/MUM/2025
th the essee, aterial d that e the a Debt
]
69
al has urt in .) Ltd.
7 ITR far as based alScan levant urt is er the orrect est of or not.
sis as using mberg s not debt ondly, carry risk, ors of at an re, in ee for ay not taken e find rables
Share
% and 3, the factor
% and 14.05% givi assessee wa by taking th if such a dat that such a t cannot be m accurately t relating to ti
We though a is required comparable eliminate th arriving at before us, t transactions financial ye
Financial C wherein, for rate of inter for a tenor o also around company AA between 11%
which is a 11.30% inter within the a public doma reiving to transaction o
CCDs issued that 11.30%
in our conclu by the TPO
48,53,19,31
ground no. 1
7.1 In the comparables
NSE, BSE an is 17.65% gr rate or merg in secondary
17.89% on b
Ma
ITA ng a mean rate of 15.01%. Though as required to benchmark its transa e financial year data for year 2009-10
ta were not available then it cannot be tenor adjustment for taking into time p made under CUP, if has been made taking into account the material fa ime of the transaction affecting the p agree that, a high degree of compara under CUP, but in absence of su data, a minor adjustment can be ma he material effect of time differenc a comparable uncontrolled price.
the assessee had filed two compa s for the year 2009, that is, for the ear in the case of Shriram Tran
Company Ltd. and Tata Capital r credit rating ofAA Enterprises the co rest per annum was between 11% to of 60 months. The yield on redempti d 11.25% to 12%. If for a credit r
A orAA(+) the interest rate is ra
% to 12%, then in the case of the ass dmittedly BBBQ credit rating comp rest paid by the assessee to its AE is ami's length rate. This data/document ain now made available before us is w benchmark and analyse the cu of coupon rate of interest paid/payab d by the assessee. Accordingly, we interest rate is at arm's length price.
usion, the transfer pricing adjustment
O and as confirmed by the DRP a 0/stands deleted, and consequ
1 is allowed."
TP study the assessee had taken s in CUP method related to database nd N L database margin of the app ross or 15% net of tax system wherea ing as per database 18.13%. The ass y analysis calculated the rate at the r basis of the term loan lending rates of ahindra Homes Pvt. Ltd.
14
A No. 1212/MUM/2025
h the action
0,but, e held period quite actors price.
ability uch a ade to ce for Now arable same nsport
Ltd., oupon o 12%
ion is rating anging essee pany, much t from worth urrent ble on e hold
Thus, made at Rs.
uently n the used ellant as the essee ate of ffered by various b
Bank of Ind search using international circumstance the TPO as m of the Act di length rate of per Bloombe same rate of AE. No othe during the application o the risk adju
Rules, which transaction maintain th rendering ac done by the NSE,
BSE&
comparable
TPO. The re interest paid industries a cup method comparable ground numb
TPO should products b contractual t benchmarkin method usin data. We ac
18.13%then impugned in arm's length database b impugned in paid at 17.6
Respectfully
Judgment of and in absen
Ma
ITA banks in India as published in the Re dia. the learned TPO undertook a g Bloomberg database to benchmar l transaction without appreciating tha es necessitating determination of pri mentioned in sub-section (3) of section id not exist in the instant case. The of interest in CCDs was arrived @ 8.58
erg database. The assessee applied f interest both in foreign AE and dom er uncontrolled comparable is determ
TP study under CUP method.
of CUP method as MAM without taking ustment in terms of rule 10B(1)(e)(iii) o h are generally involved in a third- vis-à-vis between AEs to facilita he level and was not transactio ctual service to AE. So, the benchma appellant by way of search conducte
&
N L comprising of followin should be accepted in TP study by evenue in TP study had considered d on loans in the oil, gas and infrastru as comparable to interest on CCDs u d. So, the two comparables from li selected by the TPO be rejected as pe ber 9 of the assessee. During the stud take care specific characteristics o being compared, functions perfor terms and conditions. It is directed tha ng undertaken by the assessee under ng correct filter on NSE, BSE and N ccepted, arithmetic mean of which c the interest rate on CCD in respect o nternational transaction of 17.65%
h. The benchmark performed on Bloom by the appellant be considered, nternational transaction of interest on 5% is at arm's length.
following the decision in the afor f Hon'ble Bombay juri ictional High nce of any contrary decision brought t ahindra Homes Pvt. Ltd.
15
A No. 1212/MUM/2025
eserve fresh rk the at the ice by n 92C arm's
8% as d the mestic mined
The g care of the -party ate &
on of arking ed on ng
7
y the d the ucture under ist of er the dy the of the rmed, at the r CUP
N L comes of the is at mberg the n CCD resaid
Court to the notice of the adjustment by the TPO assessment
Nos.2 to 13
to TPO consi to say the as for the case.
7. Before us, the L
Ld. TPO rejected th conducted on BSE, N valid reason for the also rejected the seco to conduct a fresh s
ALP on interest rat namely ‘SVOGL’ an operating in the oil entirely un-related to estate sector.
7.1 The Ld. counse not adopting proper while undertaking a selection of non-com that the dataset adop reasons:
i. Comparable
Infrastructure
Respondent's
Ma
ITA e Bench by the Ld. D.R, we delete the addition of Rs. 16,45,67,968/- prop
O and made by the A.O. in the order and accordingly, grounds of ap of the assessee company are setting idering the findings of the Bench. Nee ssessee should get reasonable opport
”
Ld. counsel for the assessee sub e primary economic analysis
NSE and N L database withou same. He further submitted th ondary analysis of the assessee search using ‘Bloomberg’ Datab e of 8.6% on the basis of tw nd ‘Soma Enterprises Ltd’ a and gas and infrastructure s o the assessee’s business in the el further submitted that the Ld filters such as debt instrumen a search of Bloomberg Databas mparable dataset. The Ld. cou pted by the Ld. TPO was erroneo es selected by the TPO operate in the Oi e sectors, which are entirely unrela business in the residential real estate se ahindra Homes Pvt. Ltd.
16
A No. 1212/MUM/2025
e T.P.
posed draft appeal aside edless tunity bmitted that the of the assessee ut providing any hat the Ld. TPO e and proceeded base to arrive at wo comparables and both were sector, which is e residential real d. TPO erred in nts industry etc.
se and erred in unsel submitted ous for following il & Gas and ated to the ector.

ii. The real es during AY 20
costs, rising i high rise in re industry, for e hence there i inventory risk iii. Out of th transactions p
However, in t on an unsecu be comparabl iv. The loan interest rate v by the Appe
7.2 The Ld. couns ordinate Bench of th was further followed and 2017-18. 8. On the contrar submitted that decis for assessment year firstly, he submitted and circumstances o year are different and extended to any sub the ITAT in AY 2014
relied on the decision wherein the Hon’ble was not available an Ma
ITA state industry, is an inherently highly risk
015- 16, real estate developers faced hig nput prices and shrinking profit margins eal estate inventory. On the contrary, in th example, there are ready buyers for the p is rarely any unsold inventory thereby k for companies operating in the Oil & Gas he 6 loan transactions selected by lear pertained to secured loans taken SOMA the case of the Appellant, the CCDs have ured basis, and hence, same cannot be c le to the CCD's issued by Respondent.
transactions selected by learned TPO h vis-à- vis fixed coupon rate in case of the llant.
el further relied on the decis he Tribunal in assessment year by the Tribunal in assessment ry, the Ld. Departmental Repr ion of the Tribunal in the case r 2014-15 is not applicable fo d that in case of transfer prici of the assessee as well as comp d therefore, same economic ana bsequent assessment years. He
4-15 in the case of the assessee n in the case of India Data Mana
High Court held that INR den nd therefore, said data set was ahindra Homes Pvt. Ltd.
17
A No. 1212/MUM/2025
ky sector and gh borrowing owing to the he Oil & Gas products and lowering the s sector.
rned TPO, 5
Enterprises.
been issued considered to have floating
CCDs issued sion of the Co-
2014-15 which t years 2016-17
resentative (DR) of the assessee or two reasons, ing study, facts parables in each alysis cannot be submitted that e has ultimately agement (supra) nominated data not found to be comparable with tha instant year the Ld.
therefore the ratio of India Data Manage assessment year 20
applied as a valid pr the Hon’ble High C
(supra) has taken in debt instruments w method. He submitte emphasized that a h the CUP unless min material effect of uncontrolled price.
9. We have heard the relevant materia mandates that the appropriate method"
Rules, 1962. In the Comparable Uncontr explicitly lays down t be had to:
(i) the specific characteri
(ii) the functions perfo
Ma
ITA at assessee. The Ld. DR submi
TPO has used data set havin f the Hon’ble Bombay High Cou ement (supra) relied upon by 14-15 is distinguishable and s recedent. Secondly, the Ld. DR ourt in the case of India Dat nto consideration the rating an while comparing the transactio ed that the Hon’ble High Court high degree of comparability is nor adjustment can be made t difference for arriving at rival submissions of the parti als on record. The Section 9
ALP be determined by apply prescribed under Rule 10B of instant case, both parties ha rolled Price (CUP) Method. Th that for determining comparabil istics of the property transferred or ormed, assets employed and risk ahindra Homes Pvt. Ltd.
18
A No. 1212/MUM/2025
tted that in the g INR data and rt in the case of y the ITAT in same cannot be submitted that ta Management nd tenor of the ons under CUP has specifically required under to eliminate the a comparable ies and perused
92C of the Act ying the "most f the Income-tax ave applied the he Rule 10B(2) lity, regard shall services provided; ks assumed (FAR analysis);
(iii) the contract
(iv) the economic circum operate.
9.1 The Rule 10B transaction shall be differences between t reasonably accurate differences.
9.2 Further, the Ho
Debt Management (P.
held that CUP deman databases (Bloomber transactions, bench suitable adjustments
9.3 The CCDs, by Unlike plain NCDs, they mandatorily con option to convert con thereby reducing the debt instrument. T debentures as they e
The comparability u instruments of funda
Ma
ITA tual terms of the tra mstances of the parties and the mark
B(3) further provides that a e considered comparable only the transactions materially affec adjustments can be made to on’ble Bombay High Court in ) Ltd. [2019] 106 taxmann.com nds a high degree of comparab rg/Thomson Reuters) lacked IN hmarking could not be sus s for country risk, currency risk, their very nature, are hybri they carry an embedded equi nvert into equity shares at a fu nfers a significant equity upside e required coupon rate compar
The CCDs are not comparable embody the dual character of d under CUP cannot be presume amentally distinct risk and retur ahindra Homes Pvt. Ltd.
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A No. 1212/MUM/2025
ansaction; and kets in which they an uncontrolled if none of the ct the price, or if eliminate such Pr. CIT v. India
55 categorically bility, and where
NR-denominated tained without
, and tenor risk.
id instruments.
ity option since future date. The to the investor, ed to a straight e with ordinary debt and equity.
ed between two rn profile.

(ii) The seconda rates was rightly reje rates and not the out are therefore outsid
10B(1)(a).
(iii) On the oth comparables is also pertain to unrelated violating Rule 10B(2) secured loans, while the coupon structure adjustments were contrary to Rule 10B
(iv) In effect, ne comparables satisfy t
CUP. In such a posit comparables, the ben reconsidered with ap
9.8 In light of the f view that the issue c sets of comparables fundamental compa conversion option,
Ma
ITA ary analysis based on RBI’s pu ected by the TPO, as those are i tcome of actual independent tra de the purview of CUP as env her hand, the TPO’s reliance o flawed. Firstly, the selecte industries with different risk-
(b). Secondly, the majority of tra e the assessee’s CCDs are unse es (floating vs fixed) are materia attempted to neutralize the (3).
ither the assessee’s comparable the statutory test of strict comp tion where neither party demon nchmarking must fail and the propriate adjustments.
foregoing discussion, we are of cannot be resolved on the prese are deficient in terms of Rule arability differences in resp subordination, security, indu ahindra Homes Pvt. Ltd.
23
A No. 1212/MUM/2025
ublished lending indicative policy ansactions. They visaged in Rule on Bloomberg ed comparables
-return profiles, ansactions were ecured. Thirdly, ally different. No ese differences, es nor the TPO’s parability under nstrates reliable matter must be f the considered ent record. Both
10B(2)/(3). The pect of equity ustry risk, and coupon structure re assessee as well as standards required u with us except to se restore the matter ba out appropriate adju factor) to minimize transaction either of interest transaction o loan transaction. Acc the order of the CIT
AO/TPO with a direc it clear that our ob analysis and shall no shall pass a reasoned mention that the ad afforded to the asses international transac the Revenue are acco
10. The Ground No of additions made by professional expenses and commission and the assessee submitt
Ma
ITA emain unaddressed. As approa s of TPO is not meeting the under the method of CUP , no et aside the order of the lower ack to the file of the Ld. AO/T ustment to cover the convertibili e the difference between th the NCD or Bloomberg INR de or SBI base/CLR credit tenor sp cordingly, in the interest of justi
T(A) and restore the matter to ction to re-examine the issue de bservations are confined to th ot prejudice the merits of the cas d order in accordance with law.
dequate opportunity of being h ssee while proposing adjustment ction. The ground Nos. 1 to 3 o ordingly allowed for statistical pu os. 4 and 5 of the appeal pertain y the Assessing Officer in resp s, advertisement and sales prom d brokerage expenses. The Learn ted that the said expenditure ha ahindra Homes Pvt. Ltd.
24
A No. 1212/MUM/2025
ach of both the e comparability o alternative left authorities and TPO for carrying ity (option value he comparable enominated loan pread interest on ice, we set aside o the file of the novo. We make e comparability se. The AO/TPO
It is needless to heard should be t to the value of of the appeal of urposes.
n to the deletion ect of legal and motion expenses, ned Counsel for ad been claimed strictly in accordance
Chartered Accounta developers. As per su land, labour, and m progress, whereas administrative expen progress, but are allo are incurred. Relianc
Delhi High Court in taxmann.com 472 (D deductible. It was fu in the assessment y
Tribunal, and no fu before the Hon’ble Hi
10.1. Per contra, t submitted that in the Tribunal, after cons matter to the file of t was argued that the such expenses an attributable to the which case they oug only the residual g should be allowed
Ma
ITA e with the guidelines issued by nts of India (ICAI) applicable uch guidelines, only direct costs materials are to be capitalise indirect expenses, includin nditure, are not to be treated as owable as deduction in the yea ce was placed upon the judgmen
CIT v. Somnath Buildtech Pvt. L
Delhi)], wherein similar expenses urther submitted that identical year 2014-15 had already been urther appeal was preferred b igh Court, thereby attaining fina the Learned
Departmental e assessment years 2016-17 an idering the ICAI guidelines, ha the Assessing Officer with speci
Assessing Officer had to examin nd determine whether they pre-construction or construc ght to be capitalised as work-in general administrative and se as revenue expenditure. The ahindra Homes Pvt. Ltd.
25
A No. 1212/MUM/2025
y the Institute of to real estate s such as cost of ed as work-in- g selling and part of work-in- ar in which they nt of the Hon’ble
Ltd. [(2023) 146
s were held to be additions made n deleted by the by the Revenue ality.
Representative nd 2017-18, the ad restored the ific directions. It ne the nature of were directly ction period, in n-progress, and elling expenses
Ld. DR placed reliance upon the re under:
7.10. It is not in assessee were in of business only.
whether they are as general adm allowing revenue relevant expendit basis for the Id.
relevant expend assessee. Restric business income of the Act. Consid case, we deem it and fair play, to for adjudication I a) Restricting the allow b) Expenses directly should be identified a c) Other expenses
Administration and Se
The Id. AO is directe directions and then d
25 raised by the asse
Ma
ITA levant findings of the Tribunal dispute that the expenditures in ncurred wholly and exclusively fo
What is required to be analysed e connected with the project or ministrative and selling costs. I e expenditure to the extent o ture is grossly incorrect. There is . AO for doing this. All said a diture has already been incu cting the business expenditure to is certainly not provided in the dering the totality of facts circum t fit and appropriate, in the inte remand this entire issue to the In the light of the following direc wability of expenses to the extent of 42.08
attributable to Pre-construction and co and added to the Inventory/ cost of work i should be allowed as revenue expen elling Expenses.
ed to carry out the verification in the decide the issue accordingly. Hence the G ssee before us are allowed for statistical ahindra Homes Pvt. Ltd.
26
A No. 1212/MUM/2025
, which read as ncurred by the for the purpose d here is as to to be allowed
In any event, of 42.08% of s absolutely no and done, the urred by the o the extent of entire scheme mstances of the erest of justice file of Ld. AO ctions:-
8% is wrong.
onstruction period in progress.
nses as General light of aforesaid
Ground Nos. 14 to purposes.

Ma
ITA ered the rival submissions an n record, we note that the con y the directions issued by th for assessment years 2016-17
ng the said precedent, we dee s issue to the file of the Assessin erification. The Assessing Office ned expenses, namely legal a and sales promotion expenses, nses, are directly connected with ent such expenditure is attrib struction activity, the same sha ogress; and to the extent they a ative or selling expenses, they s ture in the year of incurrence, the findings of the Learned CIT he matter is restored to the file o udication in the light of the ab d Nos. 4 and 5 raised by th l purposes.
ahindra Homes Pvt. Ltd.
27
A No. 1212/MUM/2025
nd perused the ntroversy stands he Tribunal in 7 and 2017-18. em it just and ng Officer for the er shall examine and professional and commission h the real estate butable to pre- all be capitalised are in the nature shall be allowed
, in accordance
(A) on this issue of the Assessing bove directions.
he Revenue are 12. In the result, statistical purposes.

Order pronoun (RAJ KUMAR C
JUDICIAL M
Mumbai;
Dated: 15/09/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Ma
ITA the appeal of the Revenue ced in the open Court on 15/0
d/-
S
CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu ahindra Homes Pvt. Ltd.
28
A No. 1212/MUM/2025
is allowed for 09/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai