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2024 (1) TMI 106 - ITAT CHENNAIDisallowance of interest expenditure u/s. 36(1)(iii) - Investment made in subsidiary company - HELD THAT:- The assessee had owned rigs required for carrying out its business activity in the name of subsidiary company in Singapore, for the sole purpose of getting financial advantage by arranging funds required for acquiring rigs. The assessee has filed necessary evidences to prove that the investment made in subsidiary company is facilitated the subsidiary company to raise further capital from the Banks and Financial Institutions, to have a better debt equity ratio. We further noted that the assessee and the subsidiary company are in common business, having some business advantage in growing business in international market. Therefore, assessee, as a businessman, has taken a prudent decision to make investments in subsidiary company to derive commercial advantage and thus, we are of the considered view that the AO as well as the DRP are erred in disallowing interest expenses u/s. 36(1)(iii) of the Act, on loans and advances given to subsidiary company and also investment in equity share capital of subsidiary company. Thus we set aside the issue to the file of the AO and direct the AO to verify the issue in accordance with the directions given by the Tribunal for the AY 2012-13 and decide the issue for the impugned assessment year. TDS u/s 195 - disallowance of professional and consultancy fee paid to non-residents u/s. 40(a)(i) for non deduction of TDS - payment made to non-residents are in the nature of fee for technical services as per the provisions of Sec.9(1)(vii) of the Act. HELD THAT:- As in assessee’s own case for the AY 2015-16 [2021 (4) TMI 768 - ITAT CHENNAI] wherein, the Tribunal by following its earlier order for the AY 2012-13, held that in order to bring the impugned payments under the definition of fee for technical services in light of the explanation inserted by the Finance Act with retrospective effect from 01.06.1976, the twin conditions of rendering services in India and utilization of such services in India, are necessary for deducting TDS on such payments. Since, the impugned payments are made outside India for rendering services is also outside India, the question of taxability of said payments in India in the hands of the service provider does not arise and consequently, the assessee is not required to deduct TDS on said payments. We find that an identical issue had been considered by the Tribunal, in the assessee’s own case for the AY 2015-16, wherein, the Tribunal by following its earlier decision for the AYs 2007-08 & 2012-13, held that the payment made by Branch Office of the assessee at Dubai to non-resident service provider does not come under the definition of fee for technical services and thus, remitted the matter back to the file of the AO to examine the issue afresh in light of our discussions and Article-7 of DTAA between India and UAE. we set aside the issue to the file of the AO and direct the AO to follow the directions of the Tribunal given in the assessee’s own case for the earlier assessment years and decide the issue for the impugned assessment year in accordance with law. Disallowance u/s. 14A r.w.r. 8D - assessee has common expenses for taxable and exempt income - HELD THAT:- As decided in assessee own case 2016- 17 it is logical to conclude that when the assessee has common expenses for taxable and exempt income, then the possibility of certain expenses attributable towards exempt income, cannot be ruled out. Therefore, we are of the considered view that there is no error in the reasons given by the AO to determine the disallowanceu/s.14A r.w.r.8D of Income Tax Rules. Further, the AO has considered only those investments, which yielded exempt income for the impugned assessment years. Therefore, we are of the considered view that there is no error in the findings given by the AO to make addition towards disallowance u/s. 14A of the Act. Hence, we are inclined to uphold the findings of the lower authorities and reject the ground taken by the assessee Denial of tax credit u/s. 90 - assessee, submitted that although the assessee has disclosed income earned from M/s. Aban Holdings Pvt Ltd., and paid tax, AO has not allowed credit for foreign tax paid u/s. 90 of the Act, even though Article 25 of DTAA between India and Singapore allows claim for credit for tax paid in Singapore - HELD THAT:- We find that a similar issue has been considered by the Tribunal in assessee’s own case for assessment year 2016-17 [2022 (4) TMI 1582 - ITAT CHENNAI] where the issue has been set aside to the file of the Assessing Officer to verify and allow credit for tax paid in Singapore in terms of Article 25 of the DTAA between India and Singapore and also provisions of section 90 of the Act. In the impugned year also, the assessee claims that it had offered income to tax in India in respect of foreign tax paid in Singapore. Therefore, we direct the Assessing Officer to verify the claim of the assessee in light of necessary evidences, if any that may be filed by the assessee including certificate for tax paid in Singapore and allow credit in accordance with law. Incorrect credit for TDS - assessee, submitted that although, the assessee has claimed for TDS credit of Rs. 16,39,92,186/-, but the Assessing Officer has allowed TDS credit for Rs. 16,37,64,684/- only - HELD THAT:- We find that if assessee claims for TDS and same is supported by necessary certificates, and appeared in Form no. 26AS, then same needs to be allowed as deduction. Therefore, AO is directed to verify the claim of the assessee with reference to Form no. 26AS and other details if any that may be filed by the assessee and allow credit for TDS in accordance with law. TP Adjustment - towards corporate guarantee fee @ 1% on total corporate guarantee outstanding at the end of the year, on the ground that corporate guarantee given by the assessee to their AEs, is an international transaction, which needs to be bench marked to determine the ALP of the transaction - HELD THAT:- An identical issue has been considered by the tribunal in assessee’s own case for earlier assessment year and by, considering relevant facts and also by following the decision of Hon’ble Bombay High Court in the case of CIT vs Everest Kento Cylinders Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT] directed the TPO to compute corporate guarantee commission @ 0.5% to total corporate guarantee given by the assessee to their AE. Not allowing credit for Dividend Distribution Tax (DDT) - It was the argument of the assessee that the Assessing Officer has wrongly adjusted DDT paid for assessment year 2014-15 to DDT payable for assessment year 2013-14 - HELD THAT:- The assessee has filed necessary Form no. 26AS and challans for payment of DDT for assessment year 2013-14 and argued that facts may be verified by the Assessing Officer and allow credit as per the law. Since, the assessee has filed relevant evidences to prove payment of DDT, in our considered view, the Assessing Officer needs to verify the claim of the assessee and allow as per law. Thus, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to verify the claim of the assessee and allow credit for DDT for relevant assessment years as per law.
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