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2022 (4) TMI 543 - AT - Income TaxComputation of interest on share application money paid to the Associated Enterprises ( A.Es ) - HELD THAT - As in assessee s own case we direct the Assessing Officer / TPO to delete the adjustment towards notional interest on share application money for delayed allotment of shares. Computation of interest on advance recoverable - HELD THAT - We direct the Assessing Officer / TPO to consider LIBOR plus 300 basis point to compute the interest on advances recoverable from the A.Es. We further direct that while computing the interest, the credit period allowed by the A.Es to be considered and only on net credit period interest needs to be charged. Accordingly, ground no.3, raised in assessee s appeal is allowed for statistical purpose. Disallowance u/s 14A of the Act r/w rule 8D - HELD THAT - We find that while making a further disallowance under section 14A of the Act, over and above suo motu disallowance offered by the assessee, the Assessing Officer has not considered any of the submissions made by the assessee which have bearing on the issue. We also noticed that the Co ordinate Bench in assessee s own case 2016 (4) TMI 1316 - ITAT MUMBAI restored the issue to the file of the Assessing Officer observing only those investments which yield exempt income needs to be considered for computation of average value of investments. In this case, we notice that the Assessee has himself disallowed an amount owhich has not been found to be accepted by the AO or the DRP - total investments and investments which yield exempt income is not readily available before us. We, therefore, are of the considered view that ends of justice would be met if the disallowance is made after re-computing average value of investment by considering only those investments which yield exempt income - thus we deem it appropriate to restore this issue to the file of the Assessing Officer for denovo adjudication in accordance with the directions of the Co ordinate Bench of the Tribunal in the order cited supra. Re computation of book profit under section 115JB by making addition towards expenditure incurred for earning exempt income under section 14A - HELD THAT - We direct the Assessing Officer to delete the addition of disallowance under section 14A while computing book profit under section 115JB Non grant of foreign tax credit with respect to the dividend income earned - HELD THAT - As respectfully following the order passed by the Co ordinate Bench of the Tribunal in assessee s own case we direct the Assessing Officer to allow the foreign tax credit with respect to dividend income earned in terms of Article 25(4) of the Indo Cyprus DTAA. Accordingly, ground no.7, raised in assessee s appeal is allowed. Levy of interest under section 234A - HELD THAT - As per the assessee, the return of income was filed on 27.11.2015, i.e., before the statutory due date for filing the return of income and thus interest under section 234A of the Act has been erroneously levied by the Revenue. In view of the above, we deem ITAppropriate to direct the Assessing Officer to verify the date of filing of return of income and in case it is found that the return of income has been filed belatedly, the interest may be charged as per law. Levy of interest under section 234C - A.R. submitted that the interest under section 234C only be charged on the basis of tax due on the returned income - AO has charged interest u/s 234C on the basis of tax computed on the assessed income - HELD THAT - As per the provisions of section 234C of the Act, interest is levied either on failure to pay advance tax by the assessee or on short fall in payment of advance tax as compared to tax due on returned income. In the present case, the dispute is whether the interest under section 234C of the Act would be calculated on returned income or on assessed income . It is pertinent to note that provisions of section 234C of the Act refers to the term returned income in comparison to the provisions of section 234B of the Act which refers to the term assessed income for imposing interest. The Assessing Officer is directed to re compute the interest under section 234C of the Act on the basis of returned income in case there is default / short fall in payment of advance tax as compared to tax due on returned income. Accordingly, ground no.11, is allowed for statistical purpose.
Issues Involved:
1. Imputation of interest on share application money paid to Associated Enterprises (A.Es). 2. Imputation of interest on advances recoverable. 3. Disallowance under section 14A of the Income Tax Act r/w rule 8D of the I.T. Rules, 1962. 4. Disallowance under section 40(a)(ia) of the Income Tax Act. 5. Re-computation of book profit under section 115JB of the Income Tax Act. 6. Non-grant of foreign tax credit on dividend income. 7. Non-grant of foreign tax credit on royalty and interest income. 8. Levy of interest under section 234A of the Income Tax Act. 9. Levy of interest under section 234B of the Income Tax Act. 10. Levy of interest under section 234C of the Income Tax Act. 11. Initiation of penalty under section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Imputation of Interest on Share Application Money Paid to A.Es: The assessee challenged the imputation of interest on share application money paid to A.Es. The TPO justified the imputation due to delays exceeding six months between remittance and share issuance. The Tribunal, referencing the assessee's own case from previous years, ruled in favor of the assessee, stating that the Revenue cannot re-characterize share application money as a loan. The Tribunal directed the deletion of the notional interest adjustment. 2. Imputation of Interest on Advances Recoverable: The TPO imputed interest on advances recoverable from A.Es, treating them as loans due to delayed realization. The Tribunal, following its previous rulings, directed the TPO to compute interest using LIBOR plus 300 basis points, considering the credit period allowed by A.Es. The matter was allowed for statistical purposes. 3. Disallowance under Section 14A r/w Rule 8D: The assessee made a suo-motu disallowance under section 14A. The Assessing Officer made a further disallowance, which the DRP upheld. The Tribunal restored the issue to the Assessing Officer for re-computation, considering only those investments yielding exempt income. 4. Disallowance under Section 40(a)(ia): The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed. 5. Re-computation of Book Profit under Section 115JB: The Assessing Officer added the disallowance under section 14A while computing book profit under section 115JB. The Tribunal, following its previous orders, directed the deletion of this addition, stating that no addition to book profits could be made based on disallowance under section 14A. 6. Non-grant of Foreign Tax Credit on Dividend Income: The assessee claimed additional foreign tax credit under Article 25(4) of the Indo-Cyprus DTAA. The Assessing Officer and DRP rejected this claim. The Tribunal, referencing its previous ruling, directed the Assessing Officer to allow the foreign tax credit for dividend income received from Cyprus subsidiaries. 7. Non-grant of Foreign Tax Credit on Royalty and Interest Income: The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed. 8. Levy of Interest under Section 234A: The assessee contended that the return was filed before the due date, and interest under section 234A was erroneously levied. The Tribunal directed the Assessing Officer to verify the filing date and charge interest only if the return was filed belatedly. 9. Levy of Interest under Section 234B: The assessee stated that this ground was consequential. The Tribunal directed the Assessing Officer to compute interest under section 234B if leviable, as per law. 10. Levy of Interest under Section 234C: The assessee argued that interest under section 234C should be charged based on "returned income" rather than "assessed income." The Tribunal directed the Assessing Officer to re-compute the interest based on "returned income." 11. Initiation of Penalty under Section 271(1)(c): The Tribunal dismissed this ground as premature. Conclusion: The appeal by the assessee was partly allowed for statistical purposes, with specific directions for re-computation and verification on various grounds. The Tribunal's decisions were largely based on precedents from the assessee's own case in previous years.
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