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2021 (12) TMI 1428 - AT - Income TaxTP Adjustment - Corporate Guarantee Fee - assessee had charged guarantee fee of 0.25% - HELD THAT - We find that identical issue arose in assessee s own case in A.Y. 2010-11 2018 (2) TMI 2030 - ITAT DELHI and the Co-ordinate Bench of Tribunal decided the issue in favour of the assessee. Transaction of corporate guarantee fee charged at 0.25% by the assessee from its AEs to be at Arm s Length rate and accordingly deleted the addition made by TPO. Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2010-11 2012-13 has been stayed/ set aside/ overruled by higher judicial forum. On relying on the decision of the Co-ordinate Bench of Tribunal for A.Y. 2010-11 in assessee s own case, we hold that the AO was not justified in making adjustment. Adjustment on account of interest on foreign currency loan u/s 92CA(3) - assessee had advanced loan to its AEs and had charged interest @LIBOR 224 bps on the advance provided to the AEs - HELD THAT - We find that identical issue arose in assessee s own case in A.Y. 2010-11 2018 (2) TMI 2030 - ITAT DELHI and the Co-ordinate Bench of Tribunal in assessee s own case decided the issue LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AE. Well the assessee has charged 250 basis points over an above such benchmark viz. LIBOR. No addition is justified and the entire addition. Adjustment on account of reimbursement received by the assessee from its AEs - HELD THAT - It is an assessee s submissions that the expenses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee s submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return. The aforesaid contentions of the AR have not found to be false. We find that in the case of Vedanta Ltd. 2020 (9) TMI 1010 - ITAT DELHI has held that no mark up is warranted on pass through costs which are inter alia incurred by the assessee and are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. Before us no material has been placed by Revenue to demonstrate that value addition has been done by the assessee and is not in the nature of reimbursement of primary third party expenses which were initially incurred by the assessee. As in the case of Vedanta Ltd. 2020 (9) TMI 1010 - ITAT DELHI we are of the view that no addition is called for in the present case. Thus the grounds of assessee is allowed. Disallowance on brought forward Business Losses - HELD THAT - The issue in the present ground is with respect to disallowance of brought forward business losses A.Y. 2013-14. Before us, AR has submitted that the appeal for A.Y. 2013-14 is listed before the Tribunal and the decision of the Tribunal is thus awaited. Considering the aforesaid facts, we direct the AO to allow the claim of the losses when the same is finally determined and in accordance with law. Thus the Ground of the assessee is allowed. Disallowance of depreciation on Goodwill - HELD THAT - We find that issue of depreciation on goodwill also arose in assessee s own case in A.Y. 2012-13 2020 (2) TMI 1485 - ITAT DELHI and the Co-ordinate Bench of Tribunal by relying on the decision of Hon ble Apex Court in the case of Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT held that assessee is eligible to claim depreciation on goodwill. However in that order since the claim of depreciation was made as an additional claim before the Tribunal, the matter was remitted to the AO for examination. In the year under consideration, we are of the view that since the claim was already made in the return of income and was denied by AO and DRP, we are of the view that ratio of the decision rendered by Hon ble Apex Court in the case of Smifs Securities is squarely applicable to the facts of the case. We are therefore direct the AO to grant the depreciation of such goodwill. Thus the ground of assessee is allowed. Incorrect computation of Book Profit under MAT - disallowance of depreciation on goodwill amounting to Rs.25,53,577/- to work out the adjusted Book Profit - HELD THAT - We have herein while deciding the Ground have held the depreciation on goodwill as an allowable expenditure. Therefore in such a situation, we are of the view that once the depreciation is held to be an allowable expenditure, same cannot be added to the book profit more so as u/s 115JB the depreciation which is required to be added back to compute book profits is the depreciation as per the books of account and not as per the Income Tax Act. We are of the view that AO was not justified in making addition of depreciation on goodwill to compute the book profits. We accordingly direct the AO to delete the addition made to book profit u/s 115JB - Thus the ground of assessee is allowed. Claim of deduction u/s 80-IA in respect to Wind Power Plant (WPP) and Captive Power Plant (CPP) - HELD THAT - We are also find in the case of Mitesh Impex 2014 (4) TMI 484 - GUJARAT HIGH COURT has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the Assessing Officer. It has further held that any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. We are of the view that the claim of the assessee of the deduction u/s 80IA merits consideration and adjudication by the AO. We therefore set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such documents, explanations and submissions as deemed fit in respect of its claim. Thus the ground of assessee is allowed for statistical purposes. Additional depreciation u/s 32(1)(iia) - HELD THAT - It is the case of the assessee that it did not claim the additional depreciation in the return of income but was claimed before the AO but however AO did not discuss the issue and when the matter was carried before the DRP, DRP also did not allow the claim of additional depreciation. We find that identical issue arose in assessee s own case in A.Y. 2010-11, the claim was allowed in A.Y. 2012-13 - following the reasoning of the Co-ordinate Bench for A.Y. 2010-11 and for similar reasons set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. TDS and self assessment tax which was not claimed in the return of income - HELD THAT - Before us, assessee is seeking the credit for TDS amounting to Rs.2,70,000/- deducted on sale of immovable property and the claim of self assessment amounting to Rs.47,61,334/- which was inadvertently claimed as TDS. Assessee has furnished the copy of the self assessment tax challan in the paper book and the copy of Form 26QB evidencing the deduction of TDS - We find merit in the prayer of Ld AR. We therefore considering the submissions of the Learned AR restore the matter to AO to examine the same as per record and if the claim of the assessee is found to be in order, to allow the claim. Thus the ground of assessee is allowed for statistical purposes. Deduction of education cess - HELD THAT - Since the issue being identical to the issue in the case of ExLServices.com (India) Pvt. Ltd 2021 (9) TMI 361 - ITAT DELHI we therefore for similar reasons hold the expenses on education cess to be allowable and accordingly direct the AO to allow its deduction. Thus the ground of assessee is allowed.
Issues Involved:
1. Corporate Guarantee Fee Adjustment 2. Interest on Foreign Currency Loans Adjustment 3. Adjustments on Account of Reimbursement Received from AEs 4. Disallowance of Brought Forward Business Losses 5. Disallowance of Depreciation on Goodwill 6. Incorrect Computation of Book Profit under MAT 7. Additional Claims Made During Assessment Proceedings 8. Claim of Deduction of Education Cess Issue-wise Detailed Analysis: 1. Corporate Guarantee Fee Adjustment: The assessee challenged the upward adjustment of Rs.2,28,67,811/- made by the TPO by imputing the arm’s length corporate guarantee fee rate at 0.5% instead of 0.25%. The assessee argued that the corporate guarantee fee charged was based on specific quotations from HDFC Bank and ICICI Bank. The ITAT noted that in earlier years, the Tribunal had upheld the corporate guarantee fee rate at 0.25% in the assessee's own case. Consequently, the ITAT set aside the adjustment made by the TPO, holding that the AO was not justified in making the adjustment. 2. Interest on Foreign Currency Loans Adjustment: The TPO proposed an upward adjustment of Rs.12,98,917/- by using LIBOR + 250 basis points as ALP. The ITAT observed that in the assessee's own case for earlier years, the Tribunal had held that LIBOR + 250 basis points was appropriate for benchmarking foreign currency loans. The ITAT thus held that no adjustment was called for and allowed the assessee's ground. 3. Adjustments on Account of Reimbursement Received from AEs: The TPO re-characterized the reimbursement of expenses as intra-group services and proposed a mark-up. The ITAT noted that the reimbursements were on a cost-to-cost basis without any value addition by the assessee. Citing the decision in Vedanta Ltd., the ITAT held that no mark-up was warranted on the reimbursement of primary third-party expenses. Consequently, the ITAT allowed the assessee's ground. 4. Disallowance of Brought Forward Business Losses: The AO disallowed the set-off of brought forward business losses of Rs.24,84,48,618/- from A.Y. 2013-14. The ITAT directed the AO to allow the claim of losses when the same is finally determined in accordance with law. 5. Disallowance of Depreciation on Goodwill: The AO disallowed the claim of depreciation on goodwill amounting to Rs.25,53,577/-. The ITAT, relying on the decision of the Hon’ble Apex Court in Smifs Securities Ltd. and the Tribunal's decision in the assessee's own case for earlier years, directed the AO to grant depreciation on goodwill. 6. Incorrect Computation of Book Profit under MAT: The AO added the disallowance of depreciation on goodwill to compute the book profit under MAT. The ITAT held that once depreciation on goodwill is allowed, it cannot be added to the book profit. Thus, the ITAT directed the AO to delete the addition made to book profit. 7. Additional Claims Made During Assessment Proceedings: - Claim of Deduction u/s 80-IA: The ITAT set aside the issue back to the AO to consider the claim on merits. - Claim of Additional Depreciation u/s 32(1)(iia): The ITAT, following its decision in earlier years, remitted the issue back to the AO for verification and consideration on merits. - Claim of TDS and Self-Assessment Tax: The ITAT restored the matter to the AO to examine and allow the claim if found in order. 8. Claim of Deduction of Education Cess: The ITAT, following the decision in ExLServices.com (India) Pvt. Ltd., held that education cess is an allowable deduction and directed the AO to allow the claim. Conclusion: The ITAT allowed the appeal of the assessee partly, providing relief on various grounds while directing the AO to reconsider certain claims on merits. The judgment emphasized adherence to established precedents and the necessity of examining genuine claims.
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