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2022 (5) TMI 1406 - AT - Income TaxDisallowance made on account of interest expenses u/s. 14A r.w.s. Rule 8D(2)(ii) and (iii) of the Rules - HELD THAT - As only exempt income yielding investments have to be taken into consideration whilst computing administrative expenses disallowance u/s 14A r.w.r. 8D(2)(iii). Suffice to say, hon'ble jurisdictional high court's decision in REI Agro Ltd. case 2014 (4) TMI 713 - CALCUTTA HIGH COURT has already decided the very substantial question of law in assessee's favour. ALP determination for fee for corporate guarantee - HELD THAT - It is sufficiently clear by now that the assessee s very arguments have been partly accepted through for benchmarking corporate guarantee transaction is issued @ 0.5% commission. We therefore adopt judicial consistency qua the instant issue as well to decline to Revenue s corresponding substantive ground in both of its appeals. Adjustment made by TPO for SDTs in respect of transfer of power from eligible unit to other manufacturing units - As gone through the orders of the Co-ordinate bench 2019 (3) TMI 687 - ITAT KOLKATA in the case of assessee itself which squarely covers the issues involved in the present two appeals before us. Nothing is brought on record to controvert to discussions made and findings given by the Co-ordinate Bench in the case of assessee itself 2017 (2) TMI 685 - ITAT KOLKATA and that there being no change in the fact pattern and the applicable law, we adopt the judicial consistency from the decisions cited supra, qua the instant issues in the present appeals to uphold the findings given by Ld. CIT(A). Accordingly, we dismiss both the appeals of the revenue.
Issues Involved:
1. Subsidy received by the assessee not deducted from the written down value (WDV) of block of assets. 2. Disallowance made under Section 14A read with Rule 8D(2)(ii) & (iii) of the Income-tax Rules, 1962. 3. Arms' Length Price (ALP) of fee for corporate guarantee. 4. Adjustment made by Transfer Pricing Officer (TPO) for Specified Domestic Transactions (SDTs) in respect of transfer of power from eligible unit to other manufacturing units. 5. Claim of Education Cess on Income-tax and Surcharge as a deduction under Section 37(1) of the Act. Detailed Analysis: 1. Subsidy Received by the Assessee: The issue pertains to whether the subsidy received should be deducted from the WDV of the block of assets. The Tribunal referred to its previous decisions in the assessee's own case for AYs 2003-04 to 2013-14, where it was held that the subsidy received from the government is not to be reduced from the actual cost of the assets under Section 43(1) read with Explanation 10 of the Income-tax Act, 1961. The Tribunal emphasized that the subsidy was intended to encourage industrial development in backward areas and was not specifically for the acquisition of fixed assets. Therefore, the subsidy does not partake the character of a payment intended to meet the "actual cost" of the assets. 2. Disallowance under Section 14A: The Tribunal addressed the disallowance of interest expenses under Section 14A read with Rule 8D(2)(ii) & (iii). It was noted that the issue was covered in favor of the assessee by previous decisions, which held that only those investments which yielded dividend income during the previous year should be considered for disallowance. Additionally, the Tribunal acknowledged that if the assessee had sufficient own funds to cover the investments, a presumption should be drawn that the investments were made out of own funds and not borrowed funds. The Tribunal directed the AO to recompute the disallowance accordingly. 3. ALP of Fee for Corporate Guarantee: The issue of determining the ALP for the fee for corporate guarantee was discussed. The Tribunal referred to its earlier decisions where it was held that the arm's length guarantee commission should be 0.5%, not the 2% adopted by the DRP. The Tribunal cited various decisions where 0.5% was considered appropriate and directed the AO/TPO to adopt the 0.5% as the guarantee commission charges. 4. Adjustment for SDTs in Transfer of Power: The Tribunal examined the adjustment made by the TPO for SDTs related to the transfer of power from the eligible unit to other manufacturing units. It was noted that the issue was covered by previous decisions where it was held that the market value for the purpose of Section 80IA should be based on the rate at which the non-eligible units procured power from the State Electricity Board. The Tribunal directed the AO to determine the profits and gains of the undertaking generating power on a reasonable basis after affording the assessee an opportunity of being heard. 5. Claim of Education Cess as Deduction: The assessee's cross objections related to the claim of deduction of education cess under Section 37(1) were not pressed in light of the recent amendment brought by the Finance Act, 2022, and the decision of the Coordinate Bench of ITAT Kolkata against the assessee. Consequently, the cross objections were dismissed as not pressed. Conclusion: The Tribunal dismissed both the appeals of the revenue and the cross objections of the assessee, maintaining judicial consistency with previous decisions in the assessee's own case. The order was pronounced in the open court on 17.05.2022.
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