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2020 (2) TMI 72 - AT - Income TaxDisallowance u/s 36(1)(iii) - HELD THAT - Assessee s own fund consisting of share capital and reserve and surplus was ₹ 175.11 Crore. The assessee has given loans and advance to is subsidiaries i.e. Dee Greaves of ₹ 2,13,55,159/- only. The Hon ble Bombay High Court in Reliance Utility Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT held that if the assessee have funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. Therefore, in view of the decision of jurisdiction High Court as referred above, we are of the view that the assessee has sufficient interest free fund available with the assessee and therefore, no interest disallowance under section 36(1)(iii) was justified. Disallowance under section 14A - HELD THAT - Assessee has made investment from its own interest free funds for the earning exempt income or the investment made are from the income generated from the business of assessee, therefore, no interest disallowance under Rule 8D(2)(ii) is warranted against the assessee. So far as disallowance under section Rule 8D(2)(iii) is concerned, the Assessing Officer have made disallowance @ .5% of average value of investment. In our view, the Assessing Officer has correctly made the disallowance of indirect expenses by applying the formula of Rule 8D. Therefore, we upheld the disallowance of .5% of average value of investment. The assessing officer is directed to allow the setoff of suo moto disallowance offered by the assessee. Thus, the assessee gets part relief on this ground of appeal Addition of Pooja Expenses - HELD THAT - In assessee s own case for preceding year when no variance is brought to our notice. Thus, respectfully following the same, we direct the Assessing Officer to delete the disallowance of Pooja Expenses. Addition of Club Expenses - HELD THAT - Considering the decision of Tribunal on similar ground of appeal in assessee s own case for preceding year when no variance is brought to our notice. Thus, respectfully following the same, we direct the Assessing Officer to delete the disallowance of Club Expenses. Transfer Pricing Adjustment for corporate guarantee - HELD THAT - Provision of guarantee is not international transaction is not acceptable to us. In our view after introduction of Explanation 1(c) to section 92B with retrospective effect from 01.04.2002, the provision of guarantee has to be considered as international transaction. However, following the decision of Hon ble Bombay High Court in Everest Canto Cylinder Ltd. 2015 (5) TMI 395 - BOMBAY HIGH COURT , we direct the Assessing Officer to charge/add guarantee commission @ 0.5% p.a. for the period of guarantee. In the result, this ground of appeal is partly allowed. Treatment of receipt received on transfer of TDR - capital receipt or revenue receipt - Admission of additional claim - HELD THAT - Assessing Officer is not entitled to accept revised claim without filing of revised return of income, however, we are in agreement with the contention of ld. AR of the assessee that the appellate authority have jurisdiction to consider revised claim as held by jurisdictional High Court in Pruthvi Brokers Shareholder Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT - We are also in agreement with the submission of ld. AR of the assessee that acquiescence cannot take away the right of the parties for the relief that he is entitled, where tax is levied or collected without authority of law. Therefore, considering the facts of the case, we admit the additional ground/claim raised by assessee about the receipt of income received on transfer of capital asset/TDR. We have admits the additional ground/claim of assessee, therefore, we deem it appropriate to restore the issue to the file of Assessing Officer to decide this issue afresh in accordance with law. Interest u/s 244A and 234D - HELD THAT - Appeal are restored the file of Assessing Officer to recompute the interest under section 244A and 234D in accordance with law. Disallowance under section 14A to book profit under section 115JB - HELD THAT - Issue decided in favour of assessee by the decision of Special Bench in Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein Special Bench of Delhi Tribunal that the computation under clause (f) of Explanation 1 to section 115JB (2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D.
Issues Involved:
1. Disallowance under Section 36(1)(iii) 2. Disallowance under Section 14A 3. Disallowance of Pooja Expenses 4. Disallowance of Club Expenses 5. Transfer Pricing Adjustment for Corporate Guarantee 6. Treatment of Receipt on Transfer of TDR 7. Unutilized Cenvat Credit 8. Interest under Section 244A 9. Interest under Section 234D 10. Addition to Book Profit under Section 115JB on Disallowance of Section 14A Detailed Analysis: 1. Disallowance under Section 36(1)(iii): The Tribunal noted that similar disallowances were made in previous years (A.Y. 2006-07 & 2007-08) and were deleted by the Tribunal. The assessee had sufficient interest-free funds, and the advances were given to subsidiaries out of these funds. Therefore, following the precedent, the disallowance under Section 36(1)(iii) was deleted. 2. Disallowance under Section 14A: The assessee argued that investments were made from its own funds and not borrowed funds. The Tribunal agreed that no interest disallowance under Rule 8D(2)(ii) was warranted as the investments were from interest-free funds. However, the Tribunal upheld the disallowance of indirect expenses under Rule 8D(2)(iii) at 0.5% of the average value of investments, granting partial relief to the assessee. 3. Disallowance of Pooja Expenses: The Tribunal found that similar disallowances in previous years were allowed. Following the same reasoning, the Tribunal directed the Assessing Officer to delete the disallowance of Pooja Expenses. 4. Disallowance of Club Expenses: The Tribunal noted that similar disallowances in previous years were allowed based on the decision of the Hon’ble Bombay High Court in Otis Elevator Co. Ltd. Therefore, the Tribunal directed the deletion of the disallowance of Club Expenses. 5. Transfer Pricing Adjustment for Corporate Guarantee: The Tribunal held that the provision of a corporate guarantee is considered an international transaction as per Explanation 1(c) to Section 92B. Following the Hon’ble Bombay High Court's decision in Everest Canto Cylinders Ltd., the Tribunal directed the Assessing Officer to charge a guarantee commission at 0.5% per annum for the period of the guarantee. 6. Treatment of Receipt on Transfer of TDR: The Tribunal admitted the additional ground raised by the assessee regarding the non-taxability of capital gains from the transfer of TDR. The Tribunal restored the issue to the Assessing Officer to decide afresh, considering the assessee's claim and providing sufficient opportunity for the assessee to substantiate its claim. 7. Unutilized Cenvat Credit: Following the Tribunal's decision in the assessee's own case for A.Y. 2007-08, the issue was restored to the Assessing Officer for examination afresh. 8. Interest under Section 244A: The Tribunal restored the issue to the Assessing Officer to recompute the interest under Section 244A in accordance with the law, directing the assessee to provide necessary details. 9. Interest under Section 234D: Similar to the interest under Section 244A, the Tribunal restored the issue to the Assessing Officer to recompute the interest under Section 234D, directing the assessee to provide necessary details. 10. Addition to Book Profit under Section 115JB on Disallowance of Section 14A: The Tribunal followed its decision in the assessee’s own case for A.Y. 2007-08, wherein it was held that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to computation/disallowance under Section 14A. The Tribunal directed the Assessing Officer to follow this precedent and recompute the adjustment under Section 115JB accordingly. Separate Judgments: - The appeal of the assessee for A.Y. 2008-09 was partly allowed. - The appeal of the assessee for A.Y. 2009-10 was partly allowed with similar directions as given for A.Y. 2008-09. - The appeal of the revenue was dismissed as it became infructuous following the Tribunal's decision on the assessee's appeal. Order Pronouncement: The order was pronounced in the open court on 17/01/2020.
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