2021 (5) TMI 208 - AT - Income Tax

TP adjustment - adjustment of interest @12% as arm's length price on receivables from Gulf Batter Co. Ltd. after allowing 60 days credit period and from HBL America Income. HBL Germany GmBH after allowing 180 days credit period - whether AO/TPO have erred by treating receivables from AEs as a separate international transaction? - HELD THAT - It is sufficiently clear from a perusal of the assessment findings that the impugned ALP adjustment is based on the assessee's details produced in its letter dt. 23-11-2016 containing as well request to adopt the impugned interest rate @12% than 14.75% taken by the Transfer Pricing Officer (TPO). We observe in this backdrop of the facts as to how the assessee could not be taken as an aggrieved party once the impugned adjustment is based on its own computation submitted during the course of assessment. Coupled with this, this tribunals decision in Bechtel India Pvt. Ltd. 2017 (5) TMI 965 - ITAT DELHI holds that such interest on delayed realisation on receivables is an international transaction in itself. We therefore find no reason to interfere with the impugned ALP adjustment in issue. The assessee's former six substantive grounds to this effect are declined. Addition on account of mismatching of tax credit as per form 26AS viz-a-viz its books of accounts - assessee's case is that the very income stands assessed in preceding assessment years and therefore, it amounts to double addition - HELD THAT - We are of the opinion that in this backdrop of the facts about the instant issue requires factual verification at the Assessing Officer's end so that the impugned sum does not suffer double addition in different assessment years. This 7th substantive ground is taken as accepted for statistical purposes in foregoing terms. Disallowance u/s Section 14A r.w.s. 8D amount included in Section 115JB MAT computation -HELD THAT - This tribunal in ACIT Vs. Vireet Investments P. Ltd., 2017 (6) TMI 1124 - ITAT DELHI holds that such Section 14A disallowance does not deserve to be included in Section 115JB MAT computation. We therefore direct the Assessing Officer to delete the impugned MAT addition in foregoing terms.

Summary

Issues involved:
1. Arm's Length Price (ALP) adjustment on receivables from Associated Enterprises (AEs)
2. Addition on account of mismatching of tax credit as per Form 26AS
3. Section 14A disallowance included in Section 115JB MAT computation

Arm's Length Price (ALP) adjustment on receivables from Associated Enterprises (AEs):
The appeal concerned the ALP adjustment of ?1,69,22,957 @12% on receivables from AEs, M/s. Gulf Batter Company Ltd., M/s. HBL America Inc., and M/s. HBL Germany, GmBH. The authorized representative argued against the adjustment, stating it lacked benchmarking and did not constitute international transactions under Section 92B. The Revenue supported the adjustment, citing Section 92B Explanation(c). The Assessing Officer computed the ALP under Section 92CA, resulting in an addition of ?2,08,01,135. The DRP directed to consider the weighted average rate provided by the assessee, leading to a reduced adjustment of ?1,69,22,957. The Tribunal upheld the adjustment based on the assessee's own submissions and cited a previous decision to support the treatment of interest on delayed receivables as an international transaction. The appeal on this issue was dismissed.

Addition on account of mismatching of tax credit as per Form 26AS:
The assessee challenged the addition of ?68,81,044 due to a mismatch in tax credit as per Form 26AS and its books. The contention was that the income was already assessed in previous years, resulting in double addition. The Tribunal accepted this ground for statistical purposes, emphasizing the need for factual verification by the Assessing Officer to prevent double taxation in different assessment years.

Section 14A disallowance included in Section 115JB MAT computation:
Regarding the disallowance of ?6,72,77,273 under Section 14A included in Section 115JB MAT computation, the Tribunal referred to a precedent where it was held that such disallowance should not be part of the MAT computation. As a result, the Tribunal directed the Assessing Officer to remove the disallowance from the MAT computation, ensuring compliance with the law. The appeal was partly allowed on these grounds.

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