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2017 (7) TMI 1347 - AT - Income TaxTP Adjustment - adjustment in respect of Guarantee Commission - HELD THAT - As decided in own case 2017 (4) TMI 1092 - ITAT MUMBAI similar issue had been dealt by the tribunal and Guarantee Commission has been restricted to 0.50%. Accordingly respectfully following the order of the tribunal we direct the A.O. to restrict the TP adjustment to 0.5% p.a. We direct accordingly. It is pertinent to mention that no new guarantee were given to new AE during the year and the guarantee during the year was in continuation of the old guarantee only. Disallowance u/s.14A r.w.r. 8D - sufficiency of own funds - HELD THAT - In the current year i.e. as on 31.3.2012 own funds amounted to 9595.60 cores as compared to Investments of 3146.76 crores in terms of the balance sheet of assessee placed at pg. 11 of the paper book. We therefore direct the AO to delete disallowance of interest. As during the year under consideration there is a decrease in investment as per the audited balance sheet placed on record. Investment as on 31.3.2011 was 39.66 crores whereas as on 31.3.2011 it was 31.46 crores. However there is increase in capital and free reserve as on 31.3.2012 as compared to capital reserves on 31.3.2011. Under these facts and circumstances relying on the decision of the Hon ble Jurisdictional High Court in the case of Reliance Utilities 2009 (1) TMI 4 - BOMBAY HIGH COURT we can reasonably presume that investment was out of own funds and no disallowance of interest is warranted. Disallowance of administrative expenses u/s. 14A r.w.r. 8D(2)(iii) - Hon ble ITAT 2017 (4) TMI 1092 - ITAT MUMBAI has set-aside the matter to ld. AO with the directions to exclude investments giving taxable income and strategic investments and also to verify the working of disallowance under Rule 8D(2)(iii) in light of various judicial propositions - issue restored back to the file of the AO for deciding afresh in terms of the direction given by the tribunal in order dated 24.02.2017. We direct accordingly. Disallowance u/s. 14A to the book profit u/s.115JB - Restrict the addition u/s.15JB to the extent of disallowance of administrative expenses worked out in terms of direction given by the tribunal 2017 (4) TMI 1092 - ITAT MUMBAI Bogus purchases - HELD THAT - Shri Suresh A. Parekh has confirmed that he had procured materials for Videocon Industries Ltd. and delivered the same at 14 KM Aurangabad. This confirmation was for the financial years 2008-09 to 2011-12. The facts and figures given for FY 2011-12 amounting to 59, 09, 78, 823/- are pertaining to the issue i.e. AY 2012-13. We further found that an affidavit was also given by Shri Suresh A. Parekh for FYs 2008-09 to 2011-12. All these were examined by the tribunal and thereafter reached to the conclusion as reproduced above. Under these facts and circumstances we can reasonably follow the decision of the tribunal for deleting the addition made on account of bogus purchases.
Issues Involved:
1. Upward Transfer Pricing (TP) Adjustment for Guarantee Commission and Fee for Letter of Comfort. 2. Disallowance under Section 14A read with Rule 8D. 3. Addition on Account of Bogus Purchases. Issue-wise Detailed Analysis: 1. Upward Transfer Pricing (TP) Adjustment for Guarantee Commission and Fee for Letter of Comfort: The assessee contested the upward TP adjustment made by the Transfer Pricing Officer (TPO) amounting to ?14,62,62,878 for guarantee commission and ?26,36,02,329 for the fee for the letter of comfort. The TPO applied rates of 3% p.a. and 1.5% p.a. respectively. The Dispute Resolution Panel (DRP) upheld the TPO's adjustments, considering factors such as terms and conditions of loans, risks undertaken, and economic interests. The assessee argued that the issue was covered by a previous Tribunal decision for A.Y. 2011-12, where it was held that the guarantee commission should be restricted to 0.5% p.a. based on internal Comparable Uncontrolled Price (CUP) and various judicial precedents. The Tribunal agreed and directed the Assessing Officer (AO) to restrict the TP adjustment to 0.5% p.a., noting that no new guarantees were given during the year, and the guarantees were a continuation of the old ones. 2. Disallowance under Section 14A read with Rule 8D: The AO made a disallowance of ?1,65,49,73,234 under Section 14A read with Rule 8D, which included interest and administrative expenses. The DRP upheld this disallowance based on earlier directions. The Tribunal, referring to its order for A.Y. 2011-12, held that disallowance under Section 14A is triggered only if there is exempt income, which was not the case here. Additionally, it was noted that the assessee had sufficient interest-free funds to cover the investments, thus negating the need for interest disallowance. The Tribunal directed the AO to delete the interest disallowance and re-examine the disallowance of administrative expenses, excluding investments yielding taxable income and strategic investments. 3. Addition on Account of Bogus Purchases: The AO made additions on account of purchases from suspicious parties, treating them as bogus. This included disallowance of depreciation, reduction in the Written Down Value (WDV) of assets, reduction in the book value of Capital Work in Progress (CWIP), reduction in inventory value, and addition for raw material purchases. The DRP confirmed the AO's action, but the Tribunal referred to its earlier decision for A.Y. 2011-12, where it was established that the supplier, Shri Suresh A. Parekh, confirmed the actual supply of goods through grey market channels. The Tribunal emphasized that the purchases were backed by gate passes, book entries, and consumption details, thus validating the genuineness of the transactions. The Tribunal directed the deletion of the addition made on account of bogus purchases, following its previous order. Conclusion: The appeal was allowed in part, with the Tribunal directing specific adjustments and deletions based on its previous rulings and the facts presented. The AO was instructed to follow the Tribunal's directions and make the necessary adjustments accordingly.
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