2021 (5) TMI 575 - AT - Income Tax

TP Adjustment - adjustments pertaining to corporate guarantees - international transaction u/s 92B - HELD THAT - We find no merit in assessee's instant legal argument in principle since hon'ble Madras high court's latest decision in Redington India Pvt. Ltd. 2020 (12) TMI 516 - MADRAS HIGH COURT has settled the law that a corporate guarantee indeed forms an international transaction and covered by the Explanation to section 92B with retrospective effect as well. The assessee's first and foremost legal argument fails therefore. Quantification of the impugned corporate guarantee commission - Lumpsum corporate guarantee commission of 0.9% would be just and proper in both the impugned assessment years i.e., A.Ys. 2012-13 and 2013-14. Denying carry forward set-off losses under the head 'capital gains' - HELD THAT - It transpires during the course of hearing that this tribunal's order in assessee's appeal 2016 (9) TMI 1597 - ITAT HYDERABAD has restored the issue of carried forward of short term losses pertaining to earlier assessment years back to the Assessing Officer. The said order has indeed not been considered in any of the lower appellate authorities' adjudication(s). We therefore proceed on the very line of action in the impugned assessment year as well by adopting judicial consistency and direct the Assessing Officer to verify all the necessary facts in the light of the consequential adjudication in the earlier assessment year(s). Ordered accordingly. This second substantive ground is taken as allowed for statistical purposes. Admission of additional claim - Capital gains addition - Assessing Officer's consequential assessment dt. 30-01-2017 holds that such an additional claim could not be entertained in absence of a revised return as per hon'ble apex court's decision in Goetze (India) 2006 (3) TMI 75 - SUPREME COURT - HELD THAT - We find no merit in the Revenue's foregoing argument. Their lordships have made it clear in para 4 that the same only applies on the Assessing Officer's jurisdiction to entertain a new claim than impinging upon the appellate authorities' similar jurisdiction to allow the concerned parties to plead new grounds. We therefore direct the Assessing Officer to adjudicate the assessee's impugned capital gains addition grievance on merits as per law within three effective opportunities of hearing.

Summary

Issues:
1. Arm's Length Price (ALP) adjustments for corporate guarantees in A.Ys. 2012-13 & 2013-14.
2. Denial of carry forward set-off losses under 'capital gains' for A.Y. 2010-11.
3. Upholding capital gains addition of ?21,02,947/- for A.Y. 2012-13.
4. Non-credit of tax paid on distributed profits under section 115-O of the Act for A.Y. 2013-14.

Arm's Length Price (ALP) Adjustments for Corporate Guarantees:
The appeals involved challenges against ALP adjustments for corporate guarantees in A.Ys. 2012-13 and 2013-14. The argument presented was that corporate guarantees should not be treated as international transactions under section 92B of the Income Tax Act, 1961. However, the Tribunal held that a corporate guarantee constitutes an international transaction based on legal precedents. The Tribunal determined a lump sum corporate guarantee commission of 0.9% for both assessment years, overruling the TPO's higher rate.

Denial of Carry Forward Set-Off Losses:
Regarding the denial of carry forward set-off losses under 'capital gains' for A.Y. 2010-11, the Tribunal noted that a previous order had restored the issue to the Assessing Officer for verification. As this restoration was not considered by lower authorities, the Tribunal directed the Assessing Officer to reexamine the matter in line with judicial consistency. Consequently, the second substantive ground was allowed for statistical purposes.

Upholding Capital Gains Addition:
In the case of the capital gains addition of ?21,02,947/- for A.Y. 2012-13, the Tribunal disagreed with the Revenue's argument that the claim could not be entertained without a revised return. Citing legal precedent, the Tribunal emphasized the appellate authorities' jurisdiction to consider new grounds. The Assessing Officer was directed to review the capital gains addition grievance on merits within three hearing opportunities.

Non-Credit of Tax Paid on Distributed Profits:
For the issue of not granting tax credit on distributed profits under section 115-O of the Act for A.Y. 2013-14, the Tribunal noted the assessee's decision to no longer pursue the claim as the credit had already been provided in subsequent years. Consequently, the Tribunal accepted the appeal in part on this ground.

In conclusion, the Tribunal partly allowed both appeals, providing detailed reasoning and directions for each issue raised. The order was pronounced on 11th May 2021, with specific instructions for further computations and case files.