2021 (9) TMI 844 - AT - Income Tax

Rectification of mistake u/s 254 - Disallowance u/s 14A - argument was advanced by the assessee that since audited financial statement showing availability of surplus fund was available on record, there is no need for restoring the issue to the assessing officer for verifying the availability of surplus funds - HELD THAT - Availability of surplus funds in the context of disallowance of interest expenditure u/r 8D(2)(ii), the Tribunal clearly observed that in case surplus fund was available, no disallowance of interest expenditure can be made - Tribunal had directed the assessing officer to verify the availability of surplus interest free funds and delete the disallowance made u/r 8D(2)(ii). While doing so, the Tribunal has specifically observed that neither the assessing officer nor the learned Dispute Resolution Panel has properly appreciated assessee s contention regarding availability of surplus interest free funds - No rectifiable mistake as the assessee tries to make out. The assessee, in our view, wants the Tribunal to pass an order according to its own liking. Thus, in our view, there is no mistake in the order of the Tribunal as contemplated under section 254(2) of the Act on this issue. Accordingly, we decline to entertain assessee s plea in this regard. Disallowance under section 14A r.w.r. 8D while computing book profit under section 115JB of the Act - Tribunal, though, has agreed with the legal principle enunciated in the case of ACIT vs Vireet Investments P Ltd . 2017 (6) TMI 1124 - ITAT DELHI that, while computing book profit under section 115JB of the Act, no adjustment/disallowance can be made with reference to section 14A r.w.r.8D of the I.T. Rules, 1962, however, considering the fact that the assessing officer retains his power to make adjustment under Explanation 1(f) of section 115JB of the Act, the Tribunal has directed the assessing officer to compute book profit under section 115JB of the Act. Pertinently, in case of ACIT vs Vireet Investments P Ltd (supra), the Special Bench of the Tribunal has also expressed similar view by holding that the assessing officer can make adjustment under Explanation I(f) under section 115JB. That being the case, we do not find any mistake apparent on record as per section 254(2) of the Act. This plea of the assessee is rejected. Adjustment made on account of provision of corporate guarantee - While deciding the issue relating to adjustment on account of provision of corporate guarantee, the Tribunal has followed the orders passed by it in assessee s own case in assessment years 2008-09, 2009-10 and 2010-11 and restricted the disallowance to 0.5%. While deciding the issue in the preceding assessment years, the Tribunal had rejected assessee s pleading that provision of corporate guarantee does not come within the purview of international transaction. In the appellate order of the impugned assessment year, the Tribunal has simply followed its earlier decision. Thus, it has to be presumed that assessee s contention that provision of corporate guarantee is not an international transaction was deemed to have been rejected and the Tribunal proceeded on the footing that it is an international transaction. Thus, in view of our observation above, there is no need for any rectification / recall of the earlier order of the Tribunal. Rectification application dismissed.

Summary

Issues:
1. Rectification of mistakes in the order dated 27-05-2020 passed in ITA No.850/Mum/2015 under section 254(2) of the Income Tax Act, 1961.
2. Disallowance under section 14A of the Act regarding availability of surplus funds and interest expenditure.
3. Disallowance under section 14A r.w.r. 8D while computing book profit under section 115JB of the Act.
4. Transfer pricing adjustment on account of provision of corporate guarantee.

Analysis:

1. The assessee sought rectification of mistakes in the order dated 27-05-2020. The first mistake highlighted was regarding disallowance made under section 14A of the Act. The Tribunal had directed the assessing officer to verify the availability of surplus interest-free funds and delete the disallowance made under section 8D(2)(ii). The Tribunal observed that no rectifiable mistake existed as the assessee's argument was based on its preference, and there was no error in the Tribunal's order as per section 254(2) of the Act. The plea was declined.

2. The next issue raised was the Tribunal's decision on disallowance under section 14A r.w.r. 8D while computing book profit under section 115JB of the Act. The Tribunal agreed with the legal principle that no adjustment/disallowance can be made with reference to section 14A r.w.r. 8D while computing book profit under section 115JB. However, the assessing officer retained the power to make adjustments under Explanation 1(f) of section 115JB. As there was no apparent mistake on record, the plea was rejected.

3. The final issue concerned transfer pricing adjustment on the provision of corporate guarantee. The assessee contended that the provision of corporate guarantee to the AE did not fall under international transaction and the arm's length price of guarantee commission should be limited to 0.5%. The Tribunal, based on its earlier decisions, restricted the disallowance to 0.5% and presumed that the provision of corporate guarantee was an international transaction. As the Tribunal followed its previous decisions, there was no need for rectification or recall of the order.

In conclusion, the miscellaneous application seeking rectification of mistakes was dismissed by the Appellate Tribunal ITAT Mumbai on 20-08-2021.