Advancing monies to AE's - ALP benchmarking

Expenditure under Section 35D allowability

Facts:

Assessee had advanced interest free monies from its GDR funds and other monies to its offshore AE's at Singapore Adani Power and Adani shipping. TPO made additions at prevailing interest rates for entire year. On appeal CIT(A) restricted it to cross border interest rate for USD, i.e., respective currency of lending for the tenure of borrowing.

Certain amounts were claimed under Section 35D which were disallowed by AO. CIT(A) allowed part of it.

In a cross appeal on both above points to ITAT -

Assessee's stand was -

Monies were given for strategic reasons hence no addition of interest was warranted.

Scope of 35D permits extra non-listed spends as long as it was "preliminary expenditure".

Held against the assessee -

Once lending was done to AE's then there is an opportunity cost of funds which need's benchmarking. Additions were sustained.

Scope of 35D does not permit remote or not listed spends in the ambit of the said Section No further spends were allowed accordingly.

Ed. Note: The layering or fund motility amongst Adani group especially offshore entities has been in recent news.

Finance Bill, 2023 has a provision on Section 35D to list spends in a designated form for AO to examine allowability - to be noted.

Case: Adani Power Ltd. v. Dy. CIT 2023 TaxPub(DT) 1117 (Ahd-Trib)