2021 (11) TMI 878 - AT - Income Tax

TP Adjustment - adjustment on account of interest on loan to Associated Enterprises (AE) while determining Arm s Length Price of international transaction - HELD THAT - Unsecured loan to Associated Enterprise is outstanding on which Arm s Length Price for interest was computed by TPO in earlier years. Therefore, respectfully following the order of Co-ordinate Bench, we direct the AO/TPO to follow the order of the Tribunal in A.Y. 2008-09, 2010-11 and 2011-12 2020 (4) TMI 522 - ITAT AHMEDABAD and re-compute the interest adjustment.

Issues Involved:
1. General nature of the assessment order
2. Additions made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) (CIT(A))
3. Purchase of shares from promoters at a discounted price vs. receipt as a gift
4. Transfer of shares without consideration and its classification as a gift
5. Non-acceptance of long-term capital loss
6. Treatment of gain on sale of shares received as a gift as book profit under Section 115JB
7. Upward adjustment on account of interest on loan to Associated Enterprises (AE) while determining Arm's Length Price of international transactions

Detailed Analysis:

General Nature of the Assessment Order:
Grounds 1 and 2 were deemed general in nature and dismissed as they required no adjudication. The appellant's representative acknowledged that these grounds were covered by previous Tribunal decisions.

Additions Made by AO and Confirmed by CIT(A):
The appellant contended that the additions made by the AO and confirmed by the CIT(A) were contrary to law and based on an erroneous understanding of the facts. However, the Tribunal dismissed these grounds (Grounds 2 to 6) by following the decisions in earlier years.

Purchase of Shares from Promoters at Discounted Price vs. Receipt as a Gift:
The appellant argued that the shares were received as a gift and not purchased at a discounted price. The CIT(A) confirmed the AO's action, holding that the shares were not received as a gift. The Tribunal dismissed this ground, adhering to previous decisions.

Transfer of Shares Without Consideration and Its Classification as a Gift:
The appellant claimed that the transfer of shares without consideration should be classified as a gift. The CIT(A) upheld the AO's decision that the transfer did not constitute a gift. The Tribunal dismissed this ground, following earlier rulings.

Non-Acceptance of Long-Term Capital Loss:
The appellant's claim of long-term capital loss was not accepted by the AO and confirmed by the CIT(A). The Tribunal dismissed this ground based on prior decisions.

Treatment of Gain on Sale of Shares Received as a Gift as Book Profit Under Section 115JB:
The appellant argued that the gain on the sale of shares received as a gift should not be treated as book profit under Section 115JB. The CIT(A) confirmed the AO's action. The Tribunal dismissed this ground, adhering to previous decisions.

Upward Adjustment on Account of Interest on Loan to AE While Determining Arm's Length Price of International Transactions:
Grounds 7 and 8 related to the upward adjustment of 2.29% on account of interest on loans to AE. The appellant's representative argued that these grounds were covered in favor of the appellant by Tribunal decisions for the assessment years 2010-11 and 2011-12. The Tribunal agreed, citing its own decisions in the appellant's case for the assessment years 2008-09, 2010-11, and 2011-12. The Tribunal directed the AO/TPO to follow these decisions and recompute the interest adjustment, allowing Grounds 7 and 8.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the AO/TPO to recompute the interest adjustment on loans to AE, while dismissing other grounds based on previous decisions.

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