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TMI Blog2018 (6) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... eal filed by the assessee. The first issue urged therein relates to transfer pricing adjustment made on guarantee fees in respect of Corporate Guarantee given by the assessee to its associated enterprise named Taj TV in respect of following facilities availed by it from IDBI Bank : (a) Overdraft facility of 25 million US$ (b) Bank guarantee of 29 million US$ As on 31.3.2011, the overdraft account was showing nil balance and the outstanding bank guarantee given on behalf of the Taj TV by IDBI Bank stood at 21.40 million US$. As noticed earlier, the assessee has given Corporate guarantee to IDBI Bank for the facilities extended to Taj TV. The TPO treated the same as international transactions and computed the guarantee fees @ 1.50% and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IDBI on behalf of M/s Taj TV, the Ld A.R submitted that it is only a counter guarantee given by the assessee to IDBI. The learned AR submitted the risk involved in the counter guarantee is very much lower, since the liability for the assessee would arise only if IDBI Bank invokes main guarantee in case of failure on the part of Taj TV to honour its commitments. In view of the backing of assets, the possibility of Taj TV failing to honour its commitments and the possibility of invoking guarantee given by the assessee is very less. 6. The Learned AR submitted that the issue relating to corporate guarantee was examined by the Tribunal in assessee's own case in A.Y. 2008-09 in ITA No. 3406/Mum/2014 reported in (2017) 118 TTJ 65. In that year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that TP adjustment of 0.5% will be on higher side. The Learned AR submitted that an identical issue was considered by Hon'ble Bombay High Court in the case of CIT Vs. Asian Paints (India) Ltd. (2016) 75 tamann.com 152, wherein the assessee therein had charged 0.20% as guarantee commission and the same was upheld by the Tribunal. The Hon'ble Bombay High Court has dismissed the appeal filed by the Revenue, since the Revenue had accepted the orders passed by the Tribunal in earlier years deleting the addition. He submitted that the T.P adjustment on the Counter guarantee given by the assessee may be restricted to 0.20% of the Guarantee amount actually given. 8. On the contrary, the learned DR submitted that the assessee has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (India) Ltd (supra), 0.20% has been held to be appropriate by the Tribunal. Accordingly, we direct the Assessing Officer to compute TP adjustment in respect of counter guarantee given at 0.20% of the amount of counter guarantee. 10. The Next issue urged by the assessee relates to disallowance made u/s. 14A of the Act. 11. During the year under consideration, the assessee received dividend income of 12.06 crores and claimed the same as exempt. The assessee disallowed a sum of Rs. 41.33 lakhs u/s. 14A of the Act. The Assessing Officer took the view that the disallowance has to be computed by the assessee as per Rule 8D of the I.T. Rules. Accordingly, he worked out the disallowance to 63.07 lakhs, which resulted in an addition of Rs. 21.70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled for as per Rule 8D(2)(ii) of the I.T Rules. 14. With regard to disallowance to be made under rule 8D(2)(iii) out of administrative expenses, only those investments which have yielded exempt income have to be considered for working out the average value of investments, as per decision rendered by Delhi Special Bench of the Tribunal in the case of Vireet Investment (P) Ltd. (supra). The assessee has given working of the disallowance u/r. 8D(2)(iii) by considering only those investments which have yielded dividend income. As per the working, disallowance works out to Rs. 32.71 lakhs whereas, the assessee itself has disallowed a sum of Rs. 41.33 lakhs. Accordingly, learned AR submitted that the disallowance made by the assessee voluntari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt deduction of tax at source, the AO disallowed the expenditure claim u/s 40(a)(ia) of the Act. The Learned DRP had held in the immediately preceding year i.e. in A.Y. 2010-11 that provisions of section 194J will not be applicable to these payments, as they do not come within the definition of "royalty". Accordingly, by following its decision rendered in A.Y. 2010-11, the learned DRP deleted the disallowance made by the Assessing Officer u/s. 40(a)(ia) of the Act during the year under consideration. The revenue is aggrieved by the decision of Ld DRP. 16. The Learned DR supported the view taken by the Assessing Officer and submitted that the disallowance proposed by the AO u/s 40(a)(ia) of the Act should be sustained. The Learned AR, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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