TMI Blog2017 (1) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... w much s reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look the matter from their own viewpoint but that of a prudent businessman. - Additions deleted - Decided in favour of assessee. Grant of TDS credit & Refund - Held that:- AR has stated that the assessee is entitled for full TDS credit on the strength of physical TDS certificates. Therefore, reiterating the stand of DRP and following Hon’ble Bombay High Court judgment in Yashpal Sahni Vs. Rekha Hajarnavis (2007 (7) TMI 7 - HIGH COURT , BOMBAY) DCIT is directed to grant full TDS credit of ₹ 1,64,11,584/- after verifying the physical TDS certificates and grant refund, to which assessee is entitled. Both grounds of assessee’s appeal stand allowed for statistical purposes. - I.T.A. No. 500/Mum/2015 - - - Dated:- 4-1-2017 - SHRI AMIT SHUKLA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM Appellant by : Shri Rajan Vora Shri Pranay Gandhi, ARs Respondent by : Shri M.Murali, DR O R D E R Per M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate guarantee was reduced to 51 million vide amendment to deed of guarantee dated 04/01/2010 and thus, total corporate guarantee remaining outstanding stood at INR 62.475 crores. The transaction was referred to TPO to suggest suitable adjustment. Before TPO, the assessee contended that Corporate guarantee [CG] was not an international transaction and hence no benchmarking thereof has been done by the assessee but the same got rejected by TPO by noticing amendment made by Finance Act, 2012 which has specifically taken Corporate guarantee in the ambit of definition of international transaction w.e.f. 01/04/2002. On merits, it was contended that credit rating of both guarantor and guarantee was the same i.e. CARE BB+ (Is). However, TPO after analyzing the financials and risk profiles of the both companies was not convinced with the explanation of assessee and rejected the same. Thereafter, TPO proceeded to compute the ALP by adopting External CUP method on the basis of yield approach on unsecured bonds corresponding to credit rating of two entities after considering following judgments of foreign courts:- i. General Electric Capital Canada Inc. V. The Queen (Tax court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give the said CG. 4.3 We have heard rival contentions and perused material available on record. It is observed that the assessee company proposed to charge 0.5% guarantee fees from its AE but waived it subsequently on account of poor financial health of the AE. Further, the assessee s contention is that both entities enjoyed similar ratings and hence no TP adjustment thereof is called for, with which we are not convinced as had that been the position, there would have been no requirement to provide the said guarantee. The assessee considering the same to be a benefit to its AE, had proposed to charge guarantee fees of 0.5%. Hon ble Bombay High Court in CIT Vs. Everest Kento Cylinders Ltd. (supra) has affirmed guarantee adjustment of 0.50% as upheld by the Tribunal. In various other judicial pronouncements, CG has been benchmarked in the range of 0.20% to 0.50%. Therefore, keeping in mind the overall facts and circumstances of the case, we restrict TP adjustment against bank guarantee to 0.50% on CG given by the assessee. Further, we are of the considered opinion that CG stood in force at all time and the assessee was contingently liable for the Gross amount of CG provided to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Lacs. The same has been assailed before us. 5.2 First of all, the Ld. AR drew our attention to rectification application dated 09/12/2014 filed by assessee u/s 154 against the said order to contend that the disallowance has wrongly been computed by DCIT and the same should actually be ₹ 427.57 Lacs as against ₹ 492.15 made by DCIT and the break-up of interest component was as follows:- Nature of Interest Amt. (Rs. in Lacs) On Fixed Term Loans 248.17 On working capital loans 427.58 Other interest 15.20 Total 690.95 Our attention was further drawn to computation of Income for impugned AY where we find that out of Other interest of ₹ 15.20 Lacs, assessee had already made suo-moto disallowance of ₹ 11.23 Lacs comprising of Interest on TDS and Interest provision to MSME . The balance amount mainly represents Interest on Service Tax. This being the factual position, we conclude that amount of ₹ 15.20 Lacs has wrongly been disallowed by DCIT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT Vs Ashok Commercial Enterprises [Bombay High Court] [ITA-L No. 2985 of 2009)] vi. CIT Vs. HDFC Bank Ltd [Bombay High Court][ITA No, 330 of 2012] Per Contra, Ld. DR justified the disallowances made by lower authorities on the ground that deduction thereof could be allowed only if the funds were used wholly and exclusively for the purpose of the business of the assessee but here, the funds have been diverted to subsidiaries and that too without charging any interest. 5.5 We have heard various contentions and perused relevant material including cited case laws. After analyzing the various judicial pronouncements, we find strength in the various arguments of Ld. AR. The perusal of Net worth statements reveals that as on 31/03/2010, the assessee s capital structure stood as follows:- Liabilities Amount (Rs. in Crores) Assets Amount (Rs. in Crores) Shareholders Fund 249.00 Fixed Assets 27.45 Loan Funds 64.22 Investments 12.60 Loans Advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chair of the businessman or in the position of the Board of Directors and assume the role to decide how much s reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look the matter from their own viewpoint but that of a prudent businessman. 5.6 Keeping all these factors in mind and on the facts and circumstances of the case, we are inclined to delete impugned additions. The ground of assessee s appeal succeeds. 6. Grant of TDS and Refund Ground Nos. 17 18 is related with Grant of TDS credit Refund. The assessee had claimed TDS credit of ₹ 1,57,53,775/- in the return of income whereas before DRP, it claimed the same for ₹ 1,64,11,584/- on the strength of physical TDS certificates. DRP directed DCIT to grant the full TDS credit on the strength of physical TDS certificates even if the entries were not being reflected in Form 26AS. Misapplying the same, DCIT granted TDS credit for ₹ 1,57,53,775/- only which was being reflected in Form 26AS. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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