9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (9) TMI 464 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D -submission of no exempt income earned - HELD THAT - As relying on assessee s own case 2021 (2) TMI 848 - ITAT MUMBAI there is no exempt income there cannot be any disallowance - we direct the Assessing Officer to delete the disallowance made u/s. 14A - Decided in favour of assessee. TP Adjustment - assessee had remitted funds to its A.E by way of share application money and loan - TPO treated the aforesaid amount as interest free loan on the ground that in a third party scenario the assessee would not have invested in the shares of an unrelated party at such a huge premium and also no shares were allotted - HELD THAT - As decided in own case 2019 (10) TMI 987 - ITAT MUMBAI wherein for the reasons stated therein the issue has been decided in favour of the assessee and against the Revenue.
Issues Involved:
1. Disallowance under section 14A of the Income Tax Act. 2. Transfer pricing adjustment concerning interest on the assessee's investment in its Associated Enterprise (AE). Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The first issue pertains to the disallowance of ?95,19,605 under section 14A of the Income Tax Act. The Assessing Officer (AO) observed that the assessee, a Private Limited Company engaged in Scientific R&D in Biotechnology, had made investments in equity shares that might yield exempted dividend income in the future. The AO noted that the assessee did not voluntarily disallow expenses related to such investments. Consequently, the AO computed the disallowance under section 14A in accordance with Rule 8D, adding ?95,91,605 to the total income of the assessee. The learned Commissioner of Income Tax (Appeals) [CIT(A)] deleted the disallowance, observing that the assessee had not earned any exempt income during the year. The CIT(A) relied on several judicial precedents, including: - Pr. Commissioner of Income Tax -3 vs. M/s Ballarpur Industries Limited (Bombay High Court) - Cheminvest Ltd. v. Commissioner of Income–tax–IV (Delhi HC) - Commisioner of Income-tax, Central 1, Chennai vs Chettinad Logistics (P.) Ltd (Madras HC) - Principal Commissioner of Income tax-04 v/s IL & FS Energy Development Company Ltd (Delhi HC) - ITAT Delhi "H" Special Bench in ACIT, Circle 17(1) v/s Vireet Investment Pvt Ltd The CIT(A) concluded that no disallowance under section 14A was warranted as no exempt income was earned during the year. The Tribunal upheld the CIT(A)'s order, citing the consistent view taken in the assessee's own case for preceding assessment years and other judicial precedents. 2. Transfer Pricing Adjustment: The second issue relates to the transfer pricing adjustment of ?4,18,52,115 concerning interest on the assessee's investment in its AE, RLS Inc., USA. The assessee had remitted funds to its AE by way of share application money and loan during earlier years, which were later converted into capital surplus. The Transfer Pricing Officer (TPO) treated the amount as an interest-free loan, determining the arm's length price (ALP) of interest based on Libor rates and added ?4,18,52,115 to the assessee's income. The CIT(A) followed the orders passed in the assessee's own case for the assessment years 2012-13 and 2013-14, deciding the issue in favor of the assessee. The Tribunal upheld the CIT(A)'s order, referencing the Co-ordinate Bench's decision in the assessee's own case for previous years. The Tribunal cited precedents from the Bombay High Court in CIT v. Indo American Jewellery Ltd. and CIT v. M/s. Lingingstones, where it was held that no interest could be charged on amounts due from AEs if the assessee had not charged interest on similar transactions with non-AEs. The Tribunal concluded that the assessee's consistent policy of not charging interest on receivables from both AEs and non-AEs justified the deletion of the transfer pricing adjustment. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The disallowance under section 14A was deleted as no exempt income was earned during the year, and the transfer pricing adjustment was nullified based on the consistent policy of the assessee and judicial precedents.
|
