2016 (3) TMI 1215 - AT - Income Tax

ALP adjustment in respect of the issuance of corporate guarantees - Held that - Vide our order of even date, which is deemed to be attached and forming part of this order as well, we have deleted similar disallowance for the assessment year 2009-10. We see no reasons to take any other view of the matter for this year. Respectfully following the said order, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment Disallowance under section 14A - Held that - When there is no income in the hands of the assessee, which is exempt from tax, there cannot be any occasion to make disallowance under section 14A. This was so held by Hon ble Delhi High Court in the case of CIT vs. Winsome Textile Industries Ltd (2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT ) - Thus addition deleted. - Decided in favour of assessee Deduction u/s. 80IB(8A) allowed. Disallowance of expenses on MS Office licence - Held that - The amount paid is only an annual licence fees for use of software, the expenses so incurred is required to be treated as revenue expenditure. No material has been brought on record to demolish, or even dispute, this finding of fact. In view of these discussions, and bearing in mind entirety of the case, we approve the order of the CIT(A) on this point as well.

Summary

Issues:
1. Transfer pricing adjustment on corporate guarantees
2. Disallowance under section 14A for making long-term investments
3. Credit of advance taxes paid

Transfer Pricing Adjustment on Corporate Guarantees:
The appeal concerns a transfer pricing adjustment of ?1,13,40,000 related to corporate guarantees provided by the assessee to overseas subsidiaries. The assessee argued that providing corporate guarantees is not an international transaction under transfer pricing regulations. They also contended that the ALP determination was incorrect and that the guarantee commission charged was reimbursed by subsidiaries. The Tribunal, following a previous order, ruled in favor of the assessee and directed the deletion of the ALP adjustment.

Disallowance under Section 14A for Making Long-term Investments:
The second ground of appeal involved disallowance under section 14A despite the absence of exempt income. The Tribunal held that when there is no exempt income, disallowance under section 14A is not warranted, citing precedents from various High Courts. Consequently, the disallowance was deleted in favor of the assessee.

Credit of Advance Taxes Paid:
Regarding the credit of ?60 lakhs paid as advance tax, the Tribunal noted that a petition under section 154 was pending before the Assessing Officer. As the matter was still under consideration, the Tribunal declined to interfere at that stage, dismissing the issue as infructuous.

Assessing Officer's Grievances:
The Assessing Officer raised concerns regarding deduction claims under section 80IB(8A) and software expenditure treatment. The Tribunal found that these issues were already decided in favor of the assessee by coordinate benches for previous assessment years. Consequently, the Tribunal upheld the CIT(A)'s order and dismissed the Assessing Officer's appeal on these aspects.

Conclusion:
The Tribunal allowed the assessee's appeal, directing the deletion of the transfer pricing adjustment and disallowance under section 14A. The Assessing Officer's appeal was dismissed, upholding the CIT(A)'s order on the issues raised. The Tribunal pronounced the judgment on March 31, 2016.