2023 (6) TMI 1388 - AT - Income Tax

TP Adjustment - Addition on account of notional interest - HELD THAT - Tribunal in assessee s own case for A.Y. 2010-11 2023 (5) TMI 1101 - ITAT MUMBAI wherein the identical issue as to making investment by the assessee in its overseas AEs but share had not been allotted during the year under consideration, which has been decided in favour of the assessee wherein as held no income has accrued from the share application money to the assessee and therefore such transactions could not be subjected to transfer pricing provisions. The Hon ble Jurisdictional Bombay High Court in the case of Shell India Markets Pvt Ltd. 2014 (11) TMI 897 - BOMBAY HIGH COURT has also held that the provisions of chapter 10 of the Act would apply only when income arises from the international transactions. Disallowance of FCCB Issue Expenses u/s 35D - Assessee s claim of 1/5th issue expenses of foreign currency convertible bonds (FCCB) disallowed by the AO on the ground that there is no provision under section 35D for amortization of the said issue expenses on FCCB over a period and since expenses are not incurred during the year under consideration no deduction in respect of the issue expenses can be allowed - HELD THAT - We have perused in 2022 (9) TMI 1594 - ITAT MUMBAI which is on the identical facts and grounds deleted the said disallowances. Disallowance u/s 14A r.w.r.8D and adjustment to book profit u/s 115JB - suo-moto addition made by assessee - HELD THAT - As in case of CIT vs. Prithvi Brokers and Shareholders Pvt. Ltd 2012 (7) TMI 158 - BOMBAY HIGH COURT and decision of Gujarat Gas Company Ltd. 2000 (4) TMI 19 - GUJARAT HIGH COURT AO is directed to delete the addition made by him as well as suo-moto disallowance made by the assessee and reduce the same while determining the taxable income as no exempt income has been derived by the assessee during the year under consideration. Similarly when there could be no disallowance under section 14A no adjustment could be made to the book profit computed in terms of section 115JB of the Act with respect to disallowance under section 14A. Consequently ground Nos.6 7 and additional ground No. 1 are allowed. Set off brought forward Long Term Capital Loss (LTCL) of earlier years against the income from LTCG of the captioned years - HELD THAT - AO is directed to examine the same and to allow the same as per law. So additional ground is allowed for statistical purposes.

Issues Involved:
1. Transfer Pricing Adjustment u/s 92CA
2. Imputing Additional Interest on Share Application Money
3. Disallowance of Premium Payable on Redemption of FCCBs
4. Allowability of Premium on FCCBs in the Year of Redemption
5. Disallowance of FCCB Issue Expenses
6. Disallowance u/s 14A
7. Disallowance u/s 14A while Computing 'Book Profits' u/s 115JB
8. Credit for Foreign Taxes Paid
9. Credit for Tax Deducted at Source (TDS)
10. Levy of Interest u/s 234B
11. Levy of Interest u/s 234C
12. Initiation of Penalty Proceedings u/s 271(1)(c)
13. Rectification of Mistakes Apparent on Record
14. General Grounds

Summary:

Ground No. 1:
General in nature, no specific discussion required.

Ground No. 2: Transfer Pricing Adjustment u/s 92CA
The Tribunal held that the issue of imputing interest on share application money pending allotment has already been decided in favor of the assessee in previous years (A.Y. 2008-09, 2010-11, 2014-15, 2015-16). The Tribunal directed the AO to delete the addition made on account of notional interest, as the transaction was not deemed to be a loan.

Ground Nos. 3 & 4: Disallowance of Premium Payable on Redemption of FCCBs
These grounds were dismissed as they were not pressed by the assessee.

Ground No. 5: Disallowance of FCCB Issue Expenses
The Tribunal followed its previous orders for A.Y. 2008-09 and directed the AO to delete the disallowance of FCCB issue expenses, allowing the assessee's claim.

Ground Nos. 6 & 7 and Additional Ground No. 1 (19.06.2023): Disallowance u/s 14A
The Tribunal found that no disallowance u/s 14A is required when there is no exempt income. The suo-moto disallowance made by the assessee was also directed to be deleted. The Tribunal also held that no adjustment could be made to the book profit u/s 115JB with respect to disallowance u/s 14A.

Ground Nos. 8 & 9: Credit for Foreign Taxes Paid and TDS
The Tribunal noted that the relief sought by the assessee had already been granted by the AO in subsequent orders, rendering these grounds infructuous.

Ground No. 10: Levy of Interest u/s 234B
This ground was deemed consequential and required no specific finding.

Ground No. 11: Levy of Interest u/s 234C
The Tribunal directed the AO to verify the assessee's claim that there was no shortfall in tax payment and to delete the interest levied u/s 234C if verified.

Ground No. 12: Initiation of Penalty Proceedings u/s 271(1)(c)
This ground was dismissed as premature.

Ground No. 13: Rectification of Mistakes Apparent on Record
This ground was dismissed as infructuous since the assessee had already received relief through subsequent orders.

Additional Ground No. 1 (14.12.2022): Set-off of Brought Forward Long Term Capital Loss
The Tribunal directed the AO to examine and allow the set-off of brought forward long-term capital loss against the income from long-term capital gains as per law.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes. The Tribunal directed the AO to make necessary adjustments and deletions as per the findings on each issue.

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