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TMI Blog2019 (2) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Act and Rs. 1789,41,11,720, under section 115JB of the Act. During the assessment proceedings, the Assessing Officer noticed that in the relevant previous year, the assessee has earned exempt income by way of dividend amounting to Rs. 100,27,21,590. Further, he noticed that the assessee has debited interest expenditure of Rs. 131.50 crore to the Profit & Loss Account. Therefore, he called upon the assessee to explain why disallowance of expenditure for earning exempt income should not be made under section 14A r/w rule 8D. In response, though, the assessee filed a detailed submission stating that no expenditure was incurred for earning the exempt income, hence, no disallowance under section 14A of the Act can be made. However, without prejudice to the aforesaid submission, the assessee furnished a working of notional disallowance under section 14A of the Act which worked out to Rs. 11.63 crore. The Assessing Officer did not find merit in the submissions of the assessee and proceeded to disallow expenditure under section 14A of the Act by applying the methodology provided in rule 8D. In the process, he disallowed an amount of Rs. 52 crore. The assessee challenged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has challenged disallowance of expenditure incurred for issue of Foreign Currency Convertible Notes (FCCN). 9. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction of Rs. 7,60,13,852, towards expenditure incurred for issue of FCCN. Therefore, he called upon the assessee to justify its claim. After considering the submissions of the assessee, the Assessing Officer observed that as per the annual report of the company, the assessee has issued FCCNs aggregating to 11,760 Japanese Yen. He observed, FCCNs were listed in the Singapore Stock Exchange. He observed, as per the terms of issue the holders have an option to convert the FCCNs into ordinary shares or American Depository Shares. Thus, from the aforesaid facts, he concluded that FCCNs are in the nature of convertible debentures. Hence, any expenditure relatable to it has to be considered as share issue expenses, therefore, capital in nature. Accordingly, he disallowed assessee's claim of deduction. Though, the assessee objected to the aforesaid disallowance before the DRP, however, it was unsuccessful. Accordingly, the Assessing Officer carried out the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of warranty, there is net decrease in warranty provision by 20.77 crore. He observed, the warranty provision relates to the vehicles on which the claim may arise in the next three years. Therefore, according to the Assessing Officer, the liability to pay against the claim has not crystallized during the year. Thus, he disallowed the amount of Rs. 20.77 crore. The assessee challenged the aforesaid disallowance before the DRP. 15. The DRP after considering the objections of the assessee directed the Assessing Officer to verify all the relevant facts and estimate the disallowance by following the ratio laid down in Rotork India Pvt. v/s CIT, 314 ITR 062 (SC). While implementing the aforesaid direction of the DRP in the final assessment order, though, the Assessing Officer held that the warranty provision amounting to Rs. 20.77 crore is not allowable, however, no specific disallowance in this regard was made in the computation of income. 16. The learned Authorised Representative submitted, there is no financial effect/implication on account of such disallowance in this year since the assessee has already offered to tax the amount on reversal of provision. However, he sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine assessee's claim afresh after considering the decisions of the Tribunal in case of Tata Motors Ltd., ITA no.4100/Mum./2011, dated 31st July 2017. 23. The learned Departmental Representative submitted, assessee's claim may be verified by the Assessing Officer. 24. We have considered rival submissions and perused material on record. Undisputedly, the Assessing Officer has disallowed assessee's claim simply on the ground that it was not made by way of a revised return of income. However, fact remains, in course of assessment proceedings, the assessee did make the claim by placing relevant facts to indicate that write back of provision offered to tax was inadvertently made at a higher figure instead of actual amount accruing as income to the assessee. As per the settled principle of law, real income of the assessee has to be taxed. If by mistake or inadvertence the assessee has offered more than the actual income, assessee's claim has to be considered on the basis of facts and material brought on record. Therefore, the departmental authorities, in our view, were not justified in rejecting assessee's claim on technical ground. Accordingly, we restore this issue to the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,89,065, was granted, however, in the assessment order passed under section 143(1) of the Act, the interest on refund under section 244A was restricted to Rs. 24,81,284. It is the claim of the assessee that on the basis of intimation issued under section 143(1) of the Act the assessee has offered the amount of Rs. 44,89,065, as income instead of Rs. 24,81,284 actually granted to the assessee. We direct the Assessing Officer to verify the facts relating to the claim of the assessee and decide the issue after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. 31. In ground no.6, the assessee has challenged disallowance of deduction claimed amounting to Rs. 42.70 crore on account of excise duty paid on vehicle held as stock-in-trade as on 31st March 2006. 32. Brief facts are, the aforesaid deduction was not claimed by the assessee in the return of income. In course of assessment proceedings, the assessee vide letter dated 23rd November 2009, claimed the aforesaid amount as deduction by stating that such amount was paid towards excise duty, education cess on shipment of vehicles held as stock-in-trade on 31st March 2006. Relying upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to decide the issue following the ratio laid down in the decisions referred to above. The Assessing Officer must afford reasonable opportunity of hearing to the assessee before deciding the issue. Ground is allowed for statistical purposes. 36. In ground no.7, the assessee has challenged addition made of Rs. 3,79,55,599, on account of transfer pricing adjustment. 37. Brief facts are, in the course of assessment proceedings the Assessing Officer noticing that the assessee course of international transaction with its Associated Enterprises (AE) viz. Tata Technologies USA (TTUS) has received interest on loan amounting to Rs. 9,69,82,205, made a reference to the Transfer Pricing Officer to determine the arm's length price of the interest charged to the AE. The Transfer Pricing Officer after calling for necessary details found that the assessee has bench marked the arm's length price of the interest charged by using Comparable Uncontrolled Price (CUP) method. He observed, the assessee has compared the interest rate received from TTUS at LIBOR Plus 15 basis points with the interest rate of LIBOR plus 30 basis points payable by TTUS to Calyon and Standard Chartered Bank from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marking done by the Transfer Pricing Officer at LIBOR Plus 200 basis points is applicable to external commercial borrowing as per RBI Master Circular dated 1st July 2005. He submitted, the loan given to the AE was out of funds received through FCCN. Therefore, there is no interest coupon payable. If notes are not converted, they are redeemable at a discount of 4.12%. Therefore, the effective interest rate works out to 3.78% p.a. Whereas, the assessee has charged interest @ 4.72% which is more than the rate of interest at which the assessee has raised the fund. Further, he submitted, the internal CUP by way of loan availed by the AE from Bank is a valid comparable, hence, should not have been rejected. He submitted, the applicability of internal CUP also finds support under the OECD guidelines. For such proposition, he relied upon the following decisions:- i) Tecnimont ICB Pvt. Ltd. 138 ITD 23; and ii) VVF Ltd. v/s DCIT, 31 CCH 474 40. The learned Departmental Representative relied upon the observations of the DRP and the Transfer Pricing Officer. 41. We have considered rival submissions and perused material on record. The dispute is primarily with regard to the rate at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue in a speaking order meeting all the submissions to be made by the assessee. This ground is allowed for statistical purposes. 42. In ground no.8, the assessee has challenged the adjustment made to book profit computed under section 115JB of the Act in the final assessment order. 43. Brief facts are, though, in the draft assessment order, the Assessing Officer had not made any adjustment to book profit computed under section 115JB of the Act, however, in the final assessment order, the Assessing Officer enhanced the book profit under section 115JB of the Act by making the following adjustments. i) Fringe benefit tax Rs. 19,00,00,000 ii) Deferred Tax Rs. 142,15,00,000 iii) Provision for Wealth Tax Rs. 43,00,000 iv) Disallowance u/s 14A Rs. 4,15,00,000 44. However, subsequently, vide rectification order passed under section 154 of the Act, the Assessing Officer himself deleted the addition of fringe benefit tax of Rs. 19 crore. 45. The learned Authorised Representative submitted, without making any adjustment in the book profit in the assessment order, the Assessing Officer cannot make such adjustment in the final assessment order, since, he has to pass the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perused material on record. Admittedly, while proposing the draft assessment order, the Assessing Officer has not made any adjustments to the book profit shown by the assessee. Only in the final assessment order, the Assessing Officer has made adjustment to the book profit computed under section 115JB of the Act by making certain additions / disallowances. On a careful perusal of the provisions contained under section 144C of the Act, it is noted that the power of the Assessing Officer under section 144C(13) of the Act is very limited. As per the said provision, after receipt of the directions issued by the DRP under sub-section (5) of section 144C of the Act, the Assessing Officer shall complete the assessment in conformity with the directions of the DRP. The word "shall" used in section 144C(13) of the Act makes it mandatory on the part of the Assessing Officer to pass the assessment order strictly implementing the directions of the DRP. Therefore, any adjustment to the income of the assessee which is not in conformity with the directions of the DRP is invalid and not in strict compliance to the provisions of section 144C(13) of the Act. The very fact that section 144C(13) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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