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2019 (6) TMI 1418 - AT - Income TaxRectification of mistake u/s 254 - mistake apparent on the face of record - determination of arm s length price (ALP) in respect of an international transaction of giving up loan b the assessee to its Associated Enterprise (AE) and interest income that the assessee ought to have received on such loan - HELD THAT - Admittedly the factors on which the Tribunal passed an order of remand were not indicated either in the order of TPO or in the order of DRP. That is why the Tribunal has observed in its order that no material was brought on record indicating the terms of loan loan tenure security offered etc. We are therefore of the view that there is no mistake in the order of Tribunal and the contentions of the assessee of the miscellaneous petition making reference to decided cases on the point do not require discussion. We however make it clear that the issue will be considered afresh by the TPO and all aspects of the issue are left open and that is the purport of the order of the Tribunal. Accordingly the MP of the assessee on ground No.5 is dismissed. Transaction of giving of guarantee by the assessee to its AE - assessee has contended that corporate guarantee is not an international transaction and that the Tribunal overlooked certain judicial pronouncements and that details of corporate guarantee and credit rating were also filed bore the Tribunal as well as before the revenue authorities - HELD THAT - We are of the view that all these aspects can be canvassed in the set aside proceedings before the TPO. The ground on which the Tribunal remanded the matter back to the TPO was that sufficient economic and business factors were not considered by the TPO before determining the ALP. We are therefore of the view that there is no mistake apparent on the fact of record in the order of Tribunal calling for interference u/s. 254(2) of the Act. Accordingly the MP on ground No.6 is also dismissed. Disallowance u/s. 14A - HELD THAT - We find that the stand taken by the assessee is correct and therefore the conclusion of the Tribunal that assessee did not raise the issue of excluding investments which did not yield any dividend income while computing the average value of investments is incorrect and contrary to material on record. We therefore recall the order of Tribunal for the limited purpose of adjudicating the issue with regard to computation of average value of investment while making disallowance under Rule 8D r.w.s. 14A Excluding royalty income from the business income for the purpose of allowing deduction u/s. 10A - HELD THAT - As rightly submitted by the ld. counsel for the assessee the Tribunal has proceeded on an erroneous assumption that royalty income was not in respect of IPRs generated by industrial undertaking whereas the revenue authorities did not dispute this position; nor was this the basis of their refusing to treat royalty income forming part of business income. The revenue authorities proceeded on the basis that this was not part of export income and therefore excluded the same from the business income. There is therefore a mistake apparent on the face of record calling for interference u/s. 254(2) of the Act. We therefore recall the order of Tribunal for the limited purpose of adjudicating ground No.14 of the grounds of appeal of the assessee. Excluding expenses incurred in foreign currency from export turnover while computing deduction u/s. 10A - HELD THAT - Assessee as contained in the MP and are of the view that the Tribunal in its order has not considered the real controversy and proceeded on a wrong basis as if appeal was against the directions of the DRP. By doing so the grievance of the assessee in ground No.15 has not been adjudicated. We therefore recall the order of the Tribunal for the limited purpose of adjudicating ground No.15. Non-adjudication of ground No.18 19 of the grounds of appeal raised by the assessee - HELD THAT - It is evident from the order of Tribunal that these grounds were not adjudicated and therefore we recall the order of the Tribunal for the limited purpose of adjudicating ground Nos. 18 19.
Issues Involved:
1. Determination of arm's length price for an international transaction. 2. Consideration of commission rate in an international transaction of providing guarantee. 3. Disallowance under section 14A of the Income Tax Act. 4. Exclusion of royalty income from business income for deduction under section 10A. 5. Treatment of expenses in foreign currency for export turnover deduction under section 10A. 6. Non-adjudication of specific grounds of appeal. Issue 1: Determination of Arm's Length Price for an International Transaction: The Tribunal remanded the issue to the AO for fresh consideration regarding the determination of arm's length price for an international transaction involving a loan in US Dollars. The Tribunal observed the lack of material indicating the terms of the loan, security offered, and other relevant details. The assessee contended that all factual details were already on record, but the Tribunal dismissed the Miscellaneous Petition (MP) on this ground. Issue 2: Consideration of Commission Rate in Providing Guarantee: The Tribunal remanded the issue of determining the appropriate commission rate for providing a guarantee in an international transaction to the Transfer Pricing Officer (TPO). The assessee argued that corporate guarantee is not an international transaction and highlighted certain judicial pronouncements. The Tribunal found no apparent mistake in its order and dismissed the MP related to this ground. Issue 3: Disallowance under Section 14A: The Tribunal dismissed certain grounds related to disallowance under section 14A, citing the assessee's failure to raise specific contentions before the lower authorities. However, upon review, it was found that the assessee did raise relevant points before the Dispute Resolution Panel (DRP). The Tribunal recalled its order to adjudicate the issue of computing the average value of investments for the disallowance under Rule 8D. Issue 4: Exclusion of Royalty Income from Business Income: The Tribunal excluded royalty income from business income for deduction under section 10A, stating a lack of direct nexus with the industrial undertaking eligible for deduction. However, the assessee argued that the revenue authorities treated royalty income as business income. The Tribunal was found to have proceeded on an erroneous assumption, and the order was recalled for further adjudication on this ground. Issue 5: Treatment of Expenses in Foreign Currency: The Tribunal dismissed a ground related to excluding expenses incurred in foreign currency from export turnover for deduction under section 10A, deeming it infructuous based on the DRP's directions to the AO. However, the assessee contended that the appeal was against the AO's order, not the DRP's direction. The Tribunal's order was recalled for reconsideration of this issue. Issue 6: Non-Adjudication of Specific Grounds: Certain grounds of appeal raised by the assessee were not adjudicated by the Tribunal. As a result, the Tribunal's order was recalled for the limited purpose of adjudicating these specific grounds, ensuring a comprehensive review of all relevant issues raised in the appeal. This comprehensive analysis of the judgment addresses each issue involved, highlighting the key arguments, decisions, and the Tribunal's actions.
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