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TMI Blog2019 (4) TMI 1761X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the case of CIT Vs. Black Veatch Consulting Pvt. Ltd. [ 2012 (4) TMI 450 - BOMBAY HIGH COURT] . Lower authorities had erred in disallowing part of the assesses claim of deduction under Sec.10AA by wrongly aggregating the income and loss of various units while quantifying its entitlement towards deduction under Sec.10AA of the I.T Act. In terms of our aforesaid observations, we vacate the disallowance under Sec.10AA Rectification of mistake - short credit of TDS - HELD THAT:- We find that the assessee is stated to have also filed a rectification application dated 14.02.2017 with the A.O, requesting him to rectify the error apparent on record as regards allowing of short credit of TDS. We are of the considered view that the said claim of the assessee as regards the failure on the part of the A.O to allow credit of TDS of 21,13,229/- would require verification on facts. Be that as it may, in all fairness we direct the A.O to look into the said claim of the assessee, and in case if the same is found to be in order, then allow the credit for the deficit amount TDS. We thus in terms of our aforesaid observations restore the issue as regards allowing of short credit of TDS to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance u/s. 14A of the Income-tax Act, 1961. 1: 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no disallowance u/s. 14A of the Income-tax Act, 1961 was called for and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this connection is misconceived, incorrect, erroneous and illegal. 1:3 The Appel lant submi ts that the Assessing Of f icer be di rec ted to delete the disal lowance u/s. 14A made by him and to re-compute i ts total income and tax thereon accordingly. 1:4 Without prejudice to the foregoing and in the alternative, the Appellant submi ts that in case it be held that a disallowance u/s. 14A is warranted then the disallowance should be restricted to ₹ 1,22,050/- suo-moto made by the Appellant. 2:0 Re.: Computation of deduction u/s. 10AA of the Income-tax Act, 1961: 2:1 The Assessing Of f icer/the Dispute Resolut ion Panel has er red in comput ing the deduction u/s. 10AA by setting off the losses of STP/ non-STP units by erroneously relying upon the CBDT Circular dated 16 July 2013. 2:2 The Appellant submits that considering the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 20,51,901/- being the disal lowance u/s. 14A of the Income- tax Act, 1961 r.w.r. 8D of the Income-tax Rules, 1962. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevail ing on the subject no disallowance u/s. 14A of the Income-tax Act, 1961 was cal led for and the stand taken by the Assessing Of f icer/the Dispute Resolution Panel in this connection is misconceived, incorrect, erroneous and illegal. 5:3 The Appel lant submi ts that the Assessing Of f icer be di rec ted to delete the disallowance u/s. 14A made to the 'Book Prof its' and to re-compute its total income and tax thereon accordingly. C. Re.: Transfer Pricing Grounds: 6:0 Re.: General Ground: 6:1 On the facts and circumstances of the case, the learned Transfer Pricing Of f icer ('TPO') and the learned Assessing Officer ('AO') under the directions of the Hon'ble Dispute Resolution Panel ('DRP') erred in levying adjustment of ₹ 5,34,18,750/- on account of Guarantee Commission to the Appel lant's total income based on the provisions of Chapter X of the Income-tax Act, 1961 ('the Act'). 6:2 The learned TPO/AO have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r choosing the above rate and the Hon'ble DRP erred in confirming the same. 7:7 Without prejudice to the above, the TPO had wrongly imputed 1.5% as the rate of guarantee commission to be charged by the Appellant as against the 1.25% show- caused by him in the order sheet noting dated 25 January 2016. 7:8 On facts and circumstances of the case and in law, the learned TPO/AO erred and the Hon'ble DRP further erred in conf irming the adjustment without considering the economic and commercial benefit accruing to the Indian entity for determination of arm's length price. 7:9 On the facts and circumstances of the case and in law, the learned TPO/AO erred and the Hon'ble DRP further erred in disregarding the fact that the provision of guarantee is a shareholders activity by the Appellant with a view to protect the interest of the parent company. Despite this fact the Appellant has charged commission at the rate of 0.50% and therefore the same should be considered to be at Arm's length from Indian transfer pricing perspective. 8:0 Re.: Penalty Proceedings under section 271(1)(c) of the Act: 8:1 On the facts and in the circumstances of the case, the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. It was submitted by the ld. A.R that as the assessee during the year under consideration had not earned any exempt income, thus no disallowance could have been made under Sec.14A. In support of his aforesaid contention the ld. A.R relied on the recent orders of the Hon‟ble Supreme Court in the case of CIT (Central)-1 Vs. Chettinad Logistics (P) Ltd. (2018) 257 taxman 2 (SC) and PCIT-18 Vs. M/s Oil Industry Development Board. [SLP (Civil) Diary No. 2755/2019] (arising out of impugned final judgment and order dated 16.02.2018 in ITA No. 197/2018 passed by the High Court of Delhi), dated 08.02.2019. The ld. A.R drawing support from the aforesaid judicial pronouncements submitted that it has been held by the Hon‟ble Apex Court that Sec.14A cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. It was submitted by the ld. A.R that as the assessee had not earned any exempt income during the year under consideration viz. A.Y. 2012-13, thus no disallowance under Sec.14A was called for in its hands. Insofar the part disallowance of deduction under Sec. 10AA by the A.O was concerned, it was averred by the ld. A.R that the issue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement" (for short "APA‟) which had been finalised on 08.01.2019, as per which the guarantee commission had been settled @ 0.73% and the assessee had already offered the incremental amount to tax in terms of the modified return of income filed pursuant to signing of the APA, hence the ground of appeal No. 6 would be rendered as infructuous. 5. Per contra, the ld. Departmental Representative (for short "D.R‟) relied on the orders of the lower authorities. 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material as well as judgments placed on our record. We find that the A.O had worked the disallowance under Sec.14A r.w. Rule 8D at ₹ 21,73,951/-, as against the disallowance of ₹ 1,22,050/- that was suo motto offered by the assessee in its return of income. Resultantly, the A.O had made an addition of ₹ 20,51,901/- under Sec.14A r.w. Rule 8D to the returned income of the assessee. Admittedly, the assessee during the year under consideration had not earned any exempt income. The said fact is discernible from the submission that was filed by the assessee vide its letter dated 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income of ₹ 32,52,00,938/-. Insofar the difference of ₹ 15,61,86,050/- i.e excess of the claim of deduction under Sec.10AA as against the total business income was concerned, the same was partly "set off‟ by the assessee against the Short Term Capital Gain (for short "STCG‟) of ₹ 9,42,03,318/-, while for the balance loss of ₹ 6,19,82,738/- was carried forward to the subsequent assessment year. The A.O after deliberating on the claim of deduction raised by the assessee under Sec.10AA held a conviction that the same was to be allowed after aggregating the income and loss of various units, irrespective of the fact as to whether the same were eligible or not for the deduction under the other heads. As a result thereof, the A.O backed by his aforesaid conviction quantified the assesses entitlement towards deduction under Sec.10AA, as under: Business income before deduction U/s 10AA (as per computation) ₹ 32,52,00,938/- Short term capital gain ₹ 9,42,03,318/- Total income considered for Sec.10AA ₹ 41,94,04,256/- Deduction u/s. 10AA out of total claim of ₹ 48,13,86,995/- which is allowed to the extent of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by the view taken by the Hon‟ble High Court of Bombay in the case of CIT Vs. Black & Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom). We thus in terms of our aforesaid observations are of the considered view that the lower authorities had erred in disallowing part of the assesses claim of deduction under Sec.10AA by wrongly aggregating the income and loss of various units while quantifying its entitlement towards deduction under Sec.10AA of the I.T Act. In terms of our aforesaid observations, we vacate the disallowance under Sec.10AA of ₹ 6,19,82,739/- made by the A.O. The Ground of appeal No. 2 is allowed. 9. Insofar the claim of the assessee that the A.O had erred in not granting the full credit of tax deducted at source as was claimed by the assessee in its return of income is concerned, we find that the assessee is stated to have also filed a rectification application dated 14.02.2017 with the A.O, requesting him to rectify the error apparent on record as regards allowing of short credit of TDS. We are of the considered view that the said claim of the assessee as regards the failure on the part of the A.O to allow credit of TDS of ₹ 21,13,229/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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