Section 8D(2)(iii) of the Income Tax Act
The decision most relied on for Section 8D(2)(iii) is Commonwealth Trust Ltd., Calicut, Kerala v. Commissioner of Income-tax Kerala II, Ernakulam (228 ITR 1), cited in 13 of the 50 judgments on BharatTax that turn on this section.
Leading authorities on Section 8D(2)(iii)
A transfer pricing adjustment re-characterizing equity investment as a loan is not permissible if it questions the commercial expediency of the assessee's transaction. Such adjustments are also not applicable for assessment years commencing on or before April 1, 2016, as per Section 92CE(1) proviso (ii).
No disallowance of interest is warranted on interest-free advances to associated concerns when the assessee possesses substantial interest-free funds, such as shareholders' funds.
Departmental authorities cannot discard a taxpayer's consistently adopted method of accounting or valuation simply because they believe a different method should have been used. The consistent method should not be disturbed as the closing stock of one year is the opening stock of the next.
