The Delhi bench of the Income Tax Appellate Tribunal (ITAT) rejected an additional INR 328 crore tax demand against DLF Urban Pvt Ltd. DLF Urban had acquired land development rights from its parent company. The transaction was valued at INR 925 crore by real estate firm Cushman & Wakefield. However, the tax authorities felt the valuation was too high compared to the circle rates and imposed the additional tax. The ITAT overruled this and accepted Cushman & Wakefield's independent market valuation as a fair assessment of the transaction between related parties.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) granted relief to DLF Urban Pvt Ltd by rejecting an additional INR 328 crore that was proposed to be added to the company's income for the assessment year 2016-17.
DLF Urban Pvt Ltd, a subsidiary of DLF Home Developers Ltd, had plans to develop a property in Delhi's Moti Nagar area. To do so, it needed to acquire the land development rights for the project from its parent company. An independent valuation of these rights was conducted by real estate services firm Cushman and Wakefield which valued the transaction at INR 925 crore.
However, the transfer pricing officer (TPO) who reviewed related party transactions felt this valuation was too high. The circle rate valuation for the same land was much lower at INR 192.7 crore. The TPO proposed adding INR 328 crore to DLF Urban's income as an adjustment to reflect what it deemed was the fair market value based on circle rates.
DLF Urban challenged this decision, but the Commissioner of Income Tax Appeals upheld the TPO's adjustment. Not satisfied with the outcome, DLF Urban appealed to the Income Tax Appellate Tribunal (ITAT) in Delhi. In its recent order, the ITAT rejected the additional INR 328 crore that was proposed to be added to DLF Urban's income for the assessment year 2016-17.
The ITAT noted that Cushman and Wakefield's independent valuation using actual market conditions was a more accurate reflection of the fair market price than the circle rates. By overturning the tax authorities' decision, the ITAT provided relief to DLF Urban and accepted that the transaction between the related parties was correctly valued at INR 925 crore based on Cushman and Wakefield's assessment.
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