9911796707
TMI Blog2019 (4) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income, the disallowance u/s.14A of the Act made by the AO deserves to be deleted. Suo-moto offered a sum of 5 lakhs for disallowance u/s.14A on an adhoc basis during the course of assessment proceedings. Even this was not considered by the ld. AO while framing the assessment. Only dividend bearing investments are to be considered for the purpose of computing the disallowance u/s.14A of the Act r.w.rule 8D of the rules. Reliance in this regard is placed on the special bench decision of Delhi High Court in the case of ACIT vs. Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] Consideration of revised claim made by the assessee towards deduction of provision for bad and doubtful debts written back - HELD THAT:- CIT(A) had accepted the claim for reducing the provision for doubtful debts written back in the sum of 23,96,673/- from the total income after considering the fact that the said sum was duly disallowed by the assessee in the computation of income in earlier years in the year in which said provisions were made. Hence, adding the very same sum in the year under consideration would lead to double addition. Accordingly, we hold that the ld. CIT(A) had rightly grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income. The ld. AO asked the assessee to furnish details of expenses incurred for earning exempt income and also show-caused as to why the expenses incurred and claimed in respect of exempt income should not be disallowed u/s.14A of the Act r.w.r 8D of the rules. 2.1. In response, the assessee vide its letter dated 30/01/2013 submitted that it had not incurred any expenditure in relation to exempt income and hence, no disallowance u/s.14A was per se called for. The ld. AO not satisfied with this reply observed that assessee failed to bring on record that it has not incurred any expenditure for earning such exempt income. Accordingly, he proceeded to derive the disallowance figure by adopting the computation mechanism provided in rule 8D of the rules as under:- (i) Under rule 8D(2)(ii) -Rs.14,93,095/- (ii) Under rule 8D(2)(iii) - ₹ 56,76,077/- Total Rs.71,69,172/- 2.2. This sum of ₹ 71,69,172/- was disallowed by the ld. AO u/s.14A of the Act. The ld. CIT(A) observed that in A.Y.2007-08, similar disallowance of interest under second limb of rule 8D was made by the ld. AO wherein the issue was restored back to the file of the ld. AO for considering it afre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjective satisfaction with cogent reasons, the ld. AO cannot proceed to make disallowance u/s.14A of the Act or by adopting computation mechanism provided in rule 8D(2) of the rules. This position has been made very clear by the recent decision of Hon'ble Supreme Court in case of Maxopp Investment Ltd., vs. CIT reported in 402 ITR 640. 4.1 Respectfully following the aforesaid decision and in view of the fact that the ld. AO had not recorded any satisfaction with cogent reasons for rejecting the claim of the assessee that no expenditure was incurred for earning exempt income, the disallowance u/s.14A of the Act made by the ld. AO deserves to be deleted. 4.2. We also find that assessee had suo-moto offered a sum of ₹ 5 lakhs for disallowance u/s.14A on an adhoc basis during the course of assessment proceedings. Even this was not considered by the ld. AO while framing the assessment. 4.3. It is now well settled that only dividend bearing investments are to be considered for the purpose of computing the disallowance u/s.14A of the Act r.w.rule 8D of the rules. Reliance in this regard is placed on the special bench decision of Delhi High Court in the case of ACIT vs. Vireet In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very same sum in the year under consideration would lead to double addition. Accordingly, we hold that the ld. CIT(A) had rightly granted relief to the assessee by placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd., supra wherein the Hon'ble Jurisdictional High Court clarified that the judgment of Hon'ble Supreme Court in the case of Goetze India Ltd., reported in 284 ITR 323 does not impinge upon the hearing of the Income Tax Appellate Tribunal as well as CIT(A) to consider the claim of the assessee and direct the Assessing Officer to allow the claim of the assessee. Thus, the Hon'ble Supreme Court has not negated the jurisdiction of the appellate authorities to entertain such claim. Accordingly, ground No.1 raised by the revenue is dismissed. III. Addition made towards compensation in the form of mark-up of reimbursement: ₹ 8,98,575/-. Ground No.2 of revenue's appeal 8. We have heard rival submissions. Both the parties mutually agreed that this issue is covered in favour of the assessee in its own case for A.Y.2008-09 by the order of this Tribunal in ITA No.5002/Mum/2013 dated 04/10/2018 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% shall not be charged by the assessee on the above amount of services rendered to the AE. 4. The AR of the assessee contended that the amount represented reimbursement of actual expenditure, hence no mark-up should be charged thereon. However the TPO did not find such submission of the appellant as acceptable. He observed that the very narration of the expenditure suggested that the assessee had rendered marketing and promotional services, the cost of which has been recovered without charging any markup thereon. As the transaction was not at arm's length, 10% mark-up was imputed there upon to bring the transaction on par with arm's length price. Accordingly, ₹ 2,44,896/- was adjusted to this transaction, representing 10% on the cost of expenditure recovered. 5. Upon the assessee's appeal, the ld. CIT(A) confirmed the TPO's action and inter alia observed as under: It can be seen from the above table that the appellant has recovered expenses totaling to ₹ 2,44,48,960/- which it has incurred towards Marketing and Communications expenses on behalf of the AEs. Even if these Marketing and Communication expenses were the payments initially made to the third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice in relation to an international transaction or specified domestic transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely :- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed23 by the Board. 11. It is undisputed that the method of computation of arm's-length price adopted by the transfer pricing officer is not as per any of the method prescribed under the act for the extant period. In similar circumstances, the Hon'ble jurisdictional High Court in the case of CIT vs. Kodak India (P) Ltd. [2017] 79 taxmann.com 362 (Bombay) vide order dated 11.07.2016 in ITA No. 15 OF 2014 has held as under: The assessee, an Indian subsidiary of an American company sold its imaging business to Indian subsidiary of another American company. The Assessing Officer held that even if transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36,821 5. Cement Corporation 2,650 6. Material Organization 6,91,909 7. Vedanta Aluminum Ltd 25,88,286 8. OPG Metals Pvt Ltd 45,00,000 9. Saint Gobain 37,00,000 Total 1,64,43,351/- 12. During the course of assessment proceedings, the assessee was asked to furnish the evidences and establish that the assessee was liable to pay liquidated damages to the clients mentioned above. The ld. AO observed that assessee did not furnish any evidence to show that the liability had in fact accrued and / or the payments are made. Hence, he observed that assessee had not established the fact that it had any liquidated damages or not. Accordingly, he concluded that the said liquidated damages are liable to be disallowed by applying the Explanation to Section 37(1) of the Act as the same tantamounts to default committed by the assessee warranting penalty for violating the law in force. Accordingly, he disallowed the sum of ₹ 1,64,43,351/- on account of liquidated damages in the assessment. 13. Before the ld. CIT(A), the assessee stated that similar disallowance had been deleted in assessee's own case in earlier years for A.Yrs. 2001-02 to 2006-07 and the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
