IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.4395/MUM/2025 (Assessment Year : 2015-16)

Assistant Commissioner of Income Tax-

6(1)(1), Room No.504, 5th Floor, Aaykar Bhavan, Churchgate, ............... Appellant Mumbai - 400020 v/s M/s. Essar Power Limited, 11^th Floor Essar House, 11 K.K. Marg, ……………… Respondent Mahalaxmi, Mumbai - 400034 PAN : AAACE0895J Assessee by : Shri Vijay Mehta Revenue by : Ms. Neena Jeph, CIT-DR Date of Hearing – 28/08/2025 Date of Order - 11/09/2025

O R D E R

PER SANDEEP SINGH KARHAIL, J.M.

The Revenue has filed the present appeal against the impugned order dated 14/04/2025, passed under section 250 of the Income-tax Act, 1961 (“the Act”), by the learned Commissioner of Income Tax (Appeals)-56, Mumbai [“learned CIT(A)”], for the assessment year 2015-16.

2. In the interest of justice, the slight delay of 4 days in filing the present appeal by the Revenue is condoned.

3. In this appeal, the Revenue has raised the following grounds: -

“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the adjustment @LIBOR for calculating interest on the outstanding receivables without assigning OR giving adequate reasons for the same and ignoring the rate of interest arrived at, by the TPO after careful consideration of the facts of the case.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the established precedence of rate of interest being upheld in iGate Computer System Ltd vs. The Addl. Commissioner of Income Tax, Range-4, Pune (ITA No.2504/PN/2012) at LIBOR plus 300 basis points for outstanding receivables.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the adjustment to interest on outstanding share application money paid by assessee to its AE without appreciating the fact that assessee could not derive any benefits till the time the shares were allotted to it.

4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the adjustment to interest on outstanding share application money paid by assessee to its AE without appreciating the fact that amount advanced by the assessee was parked with its AE for a considerable period of time without any allotment of shares and that the assessee allowed to forgo substantial interest income which would not be the case with independent third parties when transacting at arm's length.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 1,33,79,35,727/- made by the Assessing Officer u/s 14A r.w.r. 8D of the Income Tax Rules, without appreciating that disallowance under section 14A can be made even in a year in which no exempt income was earned OR received by the assessee

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 1,33,79,35,727/- made by the A.O. under section 14A r.w.s 8D without appreciating that the CBDT vide circular No. 5/2014 has clarified that Rule 8D r.w.s 14A of the Act provides for disallowance of the expenditure even WHARE taxpayer in a particular year has not earned any exempt income.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing depreciation @, 25%, as claimed by the assessee on the major overhauling expenditure capitalized in A.Y. 2003-04, without appreciating that only depreciation @ 15% was allowable to the assessee, under the relevant provisions of the Act.”

4. The issue arising in Grounds No.1 and 2, raised in Revenue’s appeal, pertains to the transfer pricing adjustment on account of interest on outstanding receivables from the associated enterprises.

5. The brief facts of the case pertaining to this issue are that the assessee is a part of the Essar Group and one of the largest players in the Indian P