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2023 (2) TMI 523 - AT - Income TaxTP Adjustment - International transaction - corporate guarantee furnished by the assessee to a bank on behalf of the assessee s step-down subsidiary - HELD THAT - The said transaction comes under the purview of international transaction and which thus calls for the calculation of upward adjustment towards corporate guarantee fee. Computation of corporate guarantee fee - TPO applied 2% rate and on the other hand, the assessee has given an alternate submission applying 0.25% rate. We, however, find that under similar set of facts and circumstances of the case, we have sustained the addition for corporate guarantee fee applying 0.5% rate. We draw support from the decision of coordinate Bench, Guwahati in the case of Greenply Industries Limited 2022 (7) TMI 1045 - ITAT GUWAHATI wherein the issue has been examined at length and Arm's Length fee has been restricted @ 0.5%. Thus we direct ld. AO to compute the corporate guarantee fee @ 0.5% of the outstanding loan at the year end as against 2% charged in the assessment proceedings. Thus, ground no. 2 raised by the assessee is partly allowed. Disallowance u/s 14A r.w.r. 8D - suo moto disallowance offered by the assessee - HELD THAT - As relying on H.T. Media Ltd case 2017 (8) TMI 962 - DELHI HIGH COURT considering the fact that most of the investments held by the assessee are brought forward from preceding year and also the major portion of the investment is in the sister/group concerns of the assessee and thus, reverse the finding of ld. CIT(A) and delete the disallowance made by ld. AO and accept the suo moto disallowance offered by the assessee. Addition of disallowance u/s 14A for the purpose of computing book profit u/s 115JB - HELD THAT - Issue is well-settled by the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Jayshree Tea Industries Ltd 2014 (11) TMI 1169 - CALCUTTA HIGH COURT wherein held that provisions of Section 115JB of the Act in the matter of computation is a complete code in itself and resort need not and cannot be made to Section 14A of the Act. Similar view was also taken by ACIT vs. Vireet Investments Pvt. Ltd 2017 (6) TMI 1124 - ITAT DELHI as well as Hon'ble Bombay High Court in the case of CIT vs. Bengal Finance Investments Pvt. Ltd 2015 (2) TMI 1263 - BOMBAY HIGH COURT Respectfully following the same, common ground no. 4 raised by the assessee are allowed. Disallowance of deduction u/s 80G - HELD THAT - As assessee gave donation to Assam Investment Advisory Society considering it to be a donation eligible for deduction u/s 80G of the Act but till the time of completion of assessment proceedings, the donee was not in the process of getting the required eligibility certificate which the assessee is in the process to receive from the donee. Thus, considering the prayer made by the assessee, we set aside this issue to ld. AO to examine the veracity of the claim of deduction on account of donation u/s 80G of the Act and if found in order, may be allowed to the assessee in accordance with law. Computing the tax liability and MAT credit - also claimed that the MAT has been erroneously computed @ 18.3% instead of @ 18.50% of book profit - HELD THAT - Considering the prayer of the assessee, we direct ld. AO to recompute the tax liability and also recompute the available MAT credit and grant it in accordance with law. Thus, ground no. 9 is allowed for statistical purposes.
Issues Involved:
1. Transfer pricing adjustment on account of corporate guarantee. 2. Disallowance under section 14A of the Income Tax Act. 3. Addition of disallowance under section 14A for computing book profit under section 115JB. 4. Short grant of withholding tax credit. 5. Denial of foreign tax credit. 6. Computation of interest under section 234C. 7. Consideration of capital gains twice. 8. Denial of deduction under section 80G. 9. Error in computation of tax liability and MAT credit. 10. Non-grant of credit for dividend distribution tax. 11. Initiation of penalty proceedings under section 271(1)(c). 12. Claim of deduction for education cess. Detailed Analysis: 1. Transfer Pricing Adjustment on Account of Corporate Guarantee: The Tribunal examined the issue of transfer pricing adjustment made by the TPO on account of corporate guarantee provided by the assessee to a bank for its step-down subsidiary in Cyprus. The assessee contended that the transaction did not fall within the definition of "international transaction" under section 92B of the Act, and even if it did, the adjustment should be limited to 0.25%. The Tribunal held that the transaction did fall within the definition of "international transaction" as it had a bearing on the profits, income, losses, or assets of the enterprise. However, the Tribunal directed the AO to compute the corporate guarantee fee at 0.5% of the outstanding loan, as per the consistent view taken in similar cases. 2. Disallowance Under Section 14A of the Income Tax Act: The assessee had made a suo moto disallowance under section 14A, but the AO was not satisfied and invoked Rule 8D to make a higher disallowance. The Tribunal noted that similar issues had been decided in favor of the assessee in previous years, where the AO had failed to record proper satisfaction as required under section 14A(2). The Tribunal accepted the assessee's suo moto disallowance and deleted the additional disallowance made by the AO. 3. Addition of Disallowance Under Section 14A for Computing Book Profit Under Section 115JB: The Tribunal held that the provisions of section 115JB are a complete code in themselves, and resort cannot be made to section 14A for computing book profit. This view was supported by the jurisdictional High Court and other judicial precedents. Therefore, the Tribunal deleted the addition made by the AO under section 14A for computing book profit under section 115JB. 4. Short Grant of Withholding Tax Credit: For AY 2012-13, the assessee claimed that the AO had not granted credit for withholding tax of Rs. 4,03,309/-. The Tribunal directed the AO to grant the said credit in accordance with the law. 5. Denial of Foreign Tax Credit: The issue of denial of foreign tax credit was addressed by the AO in rectification orders for both assessment years, and therefore, the grounds were not pressed by the assessee. 6. Computation of Interest Under Section 234C: For AY 2012-13, the assessee contended that there was a discrepancy in the computation of interest under section 234C. The Tribunal directed the AO to recompute the interest in accordance with the law. 7. Consideration of Capital Gains Twice: For AY 2013-14, the issue of capital gains being considered twice was addressed by the AO in a rectification order, and therefore, the ground was not pressed. 8. Denial of Deduction Under Section 80G: For AY 2013-14, the Tribunal set aside the issue of deduction under section 80G to the AO for verification of the requisite documents and to allow the deduction if found in order. 9. Error in Computation of Tax Liability and MAT Credit: For AY 2013-14, the Tribunal directed the AO to recompute the tax liability and MAT credit as per the correct rate and grant the appropriate credit. 10. Non-Grant of Credit for Dividend Distribution Tax: The issue of non-grant of credit for dividend distribution tax was addressed by the AO in a rectification order, and therefore, the ground was not pressed. 11. Initiation of Penalty Proceedings Under Section 271(1)(c): The issue of initiation of penalty proceedings was not pressed by the assessee as it was premature. 12. Claim of Deduction for Education Cess: The additional ground for claiming deduction of education cess was not pressed by the assessee. Conclusion: The appeals filed by the assessee for AY 2012-13 and AY 2013-14 were partly allowed for statistical purposes, with specific directions issued to the AO on various issues.
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