9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (11) TMI 864 - AT - Income TaxTP adjustment - certain Bank Guarantee being provided by the assessee to its Associated Enterprises AE . - Held that - As relying on assessee s own case 2017 (1) TMI 1519 - ITAT MUMBAI we restrict the rate of impugned additions to 0.50% as against 2.25% taken by the lower authorities. This ground stand partly allowed. The Ld. AO is directed to modify the final assessment order to that extent. TP adjustment - assessee under contractual terms, had granted certain loan to one of its Associated Enterprise AE namely Laqshya Media International, Mauritius LMI for the purpose of further lending to step down subsidiaries and for acquiring the shares of overseas entities by the aforesaid AE - Held that - The fact remains the same that the assessee has advanced loan pursuant to loan agreements / arrangements to its AE and was entitled to certain rate of interest. These loan transactions as entered into by the assessee with the AE squarely falls within the ambit of Section 92(1) / 92B as an international transactions as accepted by the assessee in its TP study and the statutory provisions mandates that the income from such transactions is to be computed on the principle of arm s length price irrespective of the fact that no such income has actually accrued to the assessee. This being so, the argument of principles of commercial expediency or notional income or revenue neutrality as raised before us fails since as long as the transaction is an international transaction within the framework of law, the computation of income there-from has to be on the basis of arm s length principle. Applicable interest rate - AR has supported the argument that the same should be benchmarked at LIBOR - admission of additional evidence - Held that - Since additional evidences have been placed before us for the first time which are germane to the adjudication of the issue and the fact as to the currency in which the loan was granted and the currency in which it was repayable is not quite certain, the issue requires re-appreciation by lower authorities. For the aforesaid limited purpose, the matter stand remitted back to the file of AO / TPO with a direction to the assessee to provide requisite details & information to substantiate the claim. This ground stand partly allowed for statistical purposes. Interest disallowance u/s 36(1)(iii) - interest paid towards working capital loans obtained by the assessee was disallowed and added back to the income of the assessee. Held that - Similar facts exist in the impugned AY and there is no material change in the factual matrix. Further, there is only a marginal increase of ₹ 0.53 Crores in loans granted by the assessee to its subsidiary during the impugned AY. Therefore, respectfully following the consistent stand of the Tribunal in assessee s own case for AYs 2010-11 & 2011-12, the impugned additions of ₹ 214.05 Lacs stand deleted. The suo-moto disallowance of ₹ 194.10 Lacs as made by assessee while computing its income remain intact since the same has been added back in terms of the provisions of Section 43B. Disallowance u/s 14A - Held that - After perusal of decision of Special Bench of Delhi Tribunal in ACIT Vs. Vireet Investment (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI , we observe that the special bench, after considering catena of judicial pronouncements, has arrived at conclusion that only those investments are to be considered for computing average value of investments which yielded exempt income during the year. Respectfully following the same, we direct Ld. AO to recompute the disallowance after considering only those investments which have yielded exempt income during the year. The assessee is directed to provide requisite details in this regard. MAT - adjustment of disallowance u/s 14A in computation of book profit u/s 115JB - Held that - Decision in PCIT Vs. Bhushan Steel Ltd. 2015 (9) TMI 1424 - DELHI HIGH COURT held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115J. We hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Respectfully following the catena of judgment in assessee s favour, we hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Certain incomes as reflected in Form 26AS not found to be credited in the Profit & Loss Account and the income to the extent of ₹ 1.02 Lacs could not be reconciled by the assessee - Held that - Upon due consideration of factual matrix, we find that onus to reconcile the entries was on assessee. Since impugned order was passed on 31/01/2017, Ld. AO is directed to re-appreciate the entries in Form 26AS and re-adjudicate the same in the light of the confirmations / any other evidences received after the date of the impugned order. This ground stand allowed for statistical purposes. Short Grant of TDS Credit - Held that - As per Ld. AR s submissions, complete TDS reconciliation has already been filed before lower authorities. AO is directed to verify the same and grant TDS credit as per law which has accrued to the assessee during impugned AY. This ground stand allowed for statistical purposes.
Issues Involved:
1. Transfer Pricing Adjustment on account of Corporate Guarantee 2. Transfer Pricing Adjustment on account of interest on loan given to AE 3. Disallowance of interest u/s 36(1)(iii) 4. Disallowance u/s 14A 5. Mismatch in Form 26AS data 6. Short Grant of TDS Issue-wise Detailed Analysis: 1. Transfer Pricing Adjustment on account of Corporate Guarantee: The assessee provided a corporate guarantee of AED 53 million to its Mauritius-based AE, which was reduced to AED 40 million. The TPO proposed an adjustment of 2.25%, amounting to ?141.30 Lacs. The assessee argued that the transaction was not an international transaction but conceded that the issue was partly covered in its favor by previous Tribunal orders, which sustained the adjustment at 0.50%. The Tribunal restricted the rate of additions to 0.50% and directed the AO to modify the final assessment order accordingly. 2. Transfer Pricing Adjustment on account of interest on loan given to AE: The assessee granted loans to its AE, Laqshya Media International, Mauritius, for further lending and acquiring shares. The TPO benchmarked the interest rate at 13%-14%, leading to an adjustment of ?12.72 crores. The assessee argued that the loans were non-performing assets and should be benchmarked at Nil or LIBOR rates. The Tribunal rejected the argument of commercial expediency and notional income, stating that the transaction was an international transaction under Section 92(1)/92B. However, the Tribunal remitted the issue back to the AO/TPO for reappreciation, considering additional evidence regarding the currency in which the loan was granted and repayable. 3. Disallowance of interest u/s 36(1)(iii): The AO disallowed ?214.05 Lacs of interest paid on working capital loans, as the assessee had advanced interest-free loans to its subsidiaries. The Tribunal noted that similar disallowances were deleted in the assessee's favor in previous years (AY 2010-11 and AY 2011-12). The Tribunal found that the assessee's own funds were sufficient to cover the interest-free loans and that the loans were advanced out of commercial expediency. Therefore, the Tribunal deleted the disallowance of ?214.05 Lacs, while the suo-moto disallowance of ?194.10 Lacs under Section 43B remained intact. 4. Disallowance u/s 14A: The AO computed a disallowance of ?2.58 Lacs under Rule 8D(2)(iii) for expenses related to exempt dividend income. The Tribunal directed the AO to recompute the disallowance, considering only those investments that yielded exempt income during the year, following the Special Bench decision in ACIT Vs. Vireet Investment (P.) Ltd. The Tribunal also held that the disallowance u/s 14A should not be adjusted in the computation of book profits under Section 115JB, based on various judicial pronouncements. 5. Mismatch in Form 26AS data: The AO made an addition of ?1.02 Lacs due to unreconciled income reflected in Form 26AS. The Tribunal directed the AO to reappreciate the entries in Form 26AS and re-adjudicate the issue, considering any confirmations or evidence received after the date of the impugned order. 6. Short Grant of TDS: The assessee claimed a short grant of TDS credit amounting to ?7.15 Lacs due to revised TDS statements filed by its customers post-return filing. The Tribunal directed the AO to verify the TDS reconciliation and grant the credit as per law. Conclusion: The appeal was partly allowed, with specific directions issued for each issue. The Tribunal provided relief on several grounds while remanding others for further verification and reappreciation by the lower authorities.
|
