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2022 (1) TMI 1369 - HC - Income TaxTP adjustment - adjustment of Corporate Guarantee - HELD THAT - As pointed out to us that the issue is squarely covered by a detailed judgment of this Court 2017 (12) TMI 583 - RAJASTHAN HIGH COURT concerning this very assessee. Under the circumstances these questions are not considered. Write off of loss on account of investment made in equity shares of one of its subsidiary - HELD THAT -This issue is covered by a recent order 2021 (12) TMI 1407 - RAJASTHAN HIGH COURT which also concerned this very assessee held that assessee had made investment in its subsidiary company in order to expand its business with a view to earn higher profit. The investment was thus driven by business expediency. The tribunal therefore committed no error as opined that such investment being in the nature of revenue expenditure was to be allowed under Section 37. MAT computation - Write off of investment n the subsidiary company for the purpose of computing book profit u/s. 115JB - HELD THAT - Full Bench of the Gujarat High Court in the case of CIT Vs. Vodafone Essar Gujarat Ltd. 2017 (8) TMI 451 - GUJARAT HIGH COURT held that with insertion of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit under section 115JB - if this was not a mere provision made by the assessee by merely debiting the Profit and Loss Account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the asset side of the balance sheet and consequently, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the explanation to section 115JB. ITAT justification to remit back the issue of disallowance out of provision for doubtful loans and disallowance out of bad debts provision claimed in MAT to the file of the AO for verification - HELD THAT - The questions as arise out of the order of the Income Tax Appellate Tribunal remanding certain issues to the assessing officer for fresh consideration. Being a pure remand and we are informed that decisions have also been rendered in such remand, no question of law arises.
Issues:
1. Adjustment on account of interest-free loans 2. Adjustment of Corporate Guarantee 3. Write-off of loss on equity shares investment 4. Write-off of investment for computing book profit 5. Disallowance out of provision for doubtful loans 6. Disallowance out of bad debts provision in MAT Analysis: 1. The Revenue appealed the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the adjustment on account of interest-free loans advanced to Aes. The High Court considered if the ITAT acted lawfully in restricting the adjustment to prevailing LIBOR +2% without addressing the evidence brought by the Transfer Pricing Officer (TPO). The Court noted that this issue was previously addressed in a detailed judgment concerning the same assessee and therefore was not entertained. 2. The Court examined the ITAT's decision to delete the adjustment made by the Assessing Officer on account of Corporate Guarantee. The Revenue challenged this deletion, arguing that the insertion of explanation (i) (c) to section 92B by the Finance Act 2012 clarified that corporate guarantees fall under international transactions. However, the Court did not entertain this issue as it was previously addressed in a related judgment. 3. The High Court considered the write-off of a loss on equity shares investment made in a subsidiary company. The Court referred to a recent order concerning the same assessee, where a similar issue was discussed. The Court upheld the ITAT's decision to allow the write-off under Section 37 of the Income Tax Act, as the investment was made for business expansion purposes, qualifying it as revenue expenditure. 4. The Court analyzed the addition made by the Assessing Officer for the write-off of investment in the subsidiary company for computing book profits under Section 115JB. The ITAT accepted the assessee's position that it was an actual write-off, not just a provision for diminution in value. Citing a decision of the Full Bench of the Gujarat High Court, the Court upheld the ITAT's decision, stating that the write-off was valid and not subject to inclusion for MAT purposes. 5. The issue of disallowance out of provision for doubtful loans to subsidiary was remitted back to the Assessing Officer by the ITAT for verification. The Court noted that decisions had been rendered on this remand, and as it was a pure remand issue, no question of law arose, leading to the dismissal of this aspect of the appeal. 6. Similarly, the Court addressed the remand issue of disallowance out of bad debts provision claimed in MAT. As decisions had been made on this remand and it was not a question of law, the Court dismissed this issue as well, resulting in the overall dismissal of the appeal. In conclusion, the High Court dismissed the appeal after considering various issues related to adjustments, write-offs, and remanded matters, based on previous judgments and legal interpretations, thereby providing a comprehensive analysis and resolution for each issue raised.
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