2018 (2) TMI 109 - AT - Income Tax

TPA - Adjustment on shareholder corporate guarantee - Held that - We find that the coordinate bench in assessee s own cases and its group cases held that amendment to section 92B are applicable prospectively from AY 2013-14. Therefore, the amended provision is not applicable to the present AY under consideration. Therefore, the ground raised by the assessee is allowed. Disallowance u/s 14A - Held that - With regard to investment in APGPCL, the coordinate bench has remitted this issue back to the file of the AO to verify the contention of the assessee and, if, found correct, the investment should be excluded from the calculation under rule 8D(2)(iii). Therefore, we are also inclined to remit this issue back to the file of the AO to verify the contention of the assessee. With regard to investment in Moonglow company, which is overseas investment, we direct the AO to include those investments which have generated exempt income and exclude those which have generated taxable income or not generated any income as per the provisions of section 14A, as per which, we have to exclude those expenses which are connected with the generation of exempt income. Therefore, ground raised by the assessee in this regard is allowed for statistical purposes. Set off of previous years losses and unabsorbed depreciation - Held that - When the assessee raised objection before the DRP, the DRP remitted the matter to the file of the AO to verify the claim of the assessee with reference to records and take appropriate action as per law.

Summary

Issues involved:
1. Adjustment on shareholder corporate guarantee
2. Disallowance under section 14A of the Income Tax Act
3. Set off of previous years' losses and unabsorbed depreciation
4. Imposition of interest under sections 234B and 234D
5. Short credit of prepaid taxes
6. Providing partial credit of MAT under section 115JAA

Analysis:

Adjustment on shareholder corporate guarantee:
The issue revolved around the adjustment made by the Transfer Pricing Officer (TPO) on the shareholder corporate guarantee provided by the assessee to its associated enterprise (AE). The TPO imputed a notional fee on the guarantee, considering it as an international transaction. The TPO calculated the arm's length price at 2% per annum and suggested an adjustment under section 92CA of the Income Tax Act. However, the Dispute Resolution Panel (DRP) directed the Assessing Officer (AO) to recompute the arm's length price at 1.80%. The tribunal held that the amendment to section 92B of the Act was applicable prospectively from AY 2013-14, thus allowing the assessee's appeal on this ground.

Disallowance under section 14A:
The AO disallowed expenses under section 14A as the assessee had investments generating exempt income. The DRP upheld the disallowance. The tribunal directed the AO to verify the nature of investments and exclude those generating taxable income from the disallowance calculation. The ground was allowed for statistical purposes.

Set off of previous years' losses and unabsorbed depreciation:
The AO rejected the claim for set off of carry forward losses. The DRP remitted the matter to the AO for verification. The tribunal upheld the DRP's decision to allow the AO to verify the claim with reference to records.

Imposition of interest and short credit of prepaid taxes:
The issues related to the imposition of interest under sections 234B and 234D, short credit of prepaid taxes, and partial credit of Minimum Alternate Tax (MAT) were remitted back to the AO by the DRP for verification. The tribunal dismissed the grounds raised by the assessee, directing them to provide relevant information to the AO for further consideration.

Conclusion:
The tribunal allowed the appeals for statistical purposes based on the decisions made on each issue. The judgments were pronounced on 31st January 2018 by the Appellate Tribunal ITAT Hyderabad, comprising Vice President Shri D. Manmohan and Accountant Member Shri S. Rifaur Rahman.