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TMI Blog2020 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... be excluded from the estimated Contract value and estimated loss should be recomputed at Rs. 434.24 Crores as against Rs. 252.07 Crores, considered by the learned CIT(A). 3. The assessee is a public limited company and is engaged in the business of civil construction like Dams, Tunnels, Underground Structures, Barrages, Break Water Construction, Power Projects, Chimneys, etc. During the year under consideration, it claimed that Extension of Time (EoT) claim of Rs. 200 crores should be excluded from estimated contract value for the purposes of recognizing revenue under Accounting Standard-7 (AS-7). The Assessing Officer (AO) rejected the contentions of the assessee on the basis of reasons recorded in AY 2008-09 to AY 2010-11. In appeal, the Ld. CIT(A) also rejected the claim of the assessee following earlier year's orders. We find that similar issue arose before the ITAT 'H' Bench, Mumbai in assessee's own case for AYs 2008-09, 2009-10 and 2010-11. The Tribunal vide order dated 06.04.2016 held : "14. The next ground relates to the claim of exclusion of Rs. 150 crores relating to EOT claims of BWSL project. The assessee has voluntarily included the same in the contract receipts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar facts, the Tribunal has decided the issue against the assessee in AY 2008-09 to AY 2010-11. 8. We have heard the rival submissions and perused the relevant materials on record. Similar issue arose before the Tribunal in assessee's own case for AY 2008-09 to AY 2010-11. The Tribunal held : "11. The next issue contested by the revenue relates to the partial relief granted by the Ld CIT(A) in respect of disallowance relating to corporate social responsibility expenses. The AO disallowed the claim of Rs. 1.29 crores made by the assessee under the head 'Corporate Social Responsibility' (CSR) by holding that the same cannot be considered to be business expenditure. The Ld CIT(A) noticed that the said expenditure included a sum of Rs. 80.99 lakhs incurred by the assessee through Clinton Foundation towards various health schemes. But the assessee could not provide any material to show that the said expenditure benefited its workers. Further a sum of Rs. 5.80 lakhs relating to foreign tour expenses was also found included in CSR expenses. Hence the Ld CIT(A) confirmed the disallowance of both the above said expenses. With regard to the remaining expenses of Rs. 40.10 lakhs, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses) was disallowable u/s 14A of the Act in as much as no expenditure was in fact incurred during the year in relation to exempt Income. The learned CIT(A) also erred In confirming disallowance of other expenses u/r 8D(2)(iii) when no such disallowance was warranted. b) Without prejudice to above, even if Rule 8D of the I.T. Rules need to be applied, then the same should be applied for only on those investments on which dividend has been earned and claimed exempt during the year. Accordingly, the disallowance be restricted to Rs. 71,071/- 10. Before us, the Ld. counsel submits that the assessee would not press the above ground of appeal. Considering the facts of the case and the contentions of the Ld. counsel, the 3rd ground of appeal is dismissed as not pressed. 11 The 4th ground of appeal 4. On facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the claim for set off of share of loss from AOP amounting to Rs. 16,06,57,704/-, under the provisions of section 70 of the Income Tax Act, 1961 against business income the appellant is not allowable, thereby confirming the action of the assessing officer. The claim of the appellant be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -ordinate bench of Tribunal in the assessee's own case relating to AY 2003-04 and 2007-08, referred above by holding that the assessee has acted as a "Contractor" in various projects and not as a developer. Consistent with the view taken in the above said years, we uphold the order of Ld CIT(A) on this issue." 18. Fact being identical, we follow the above order of the Co-ordinate Bench and dismiss the 5th ground of appeal. 19. The 6th ground of appeal 6. On facts and in circumstances of the case and in law, the learned CIT (A) erred in confirming the determination of Arm's Length Price by the Transfer Pricing Officer at LIBOR + 400 bps instead of LIBOR + 300 bps on loan given by the appellant to its Associated Enterprise. The transfer pricing adjustment of Rs. 1,14,19,186/- be deleted. 20. The Transfer Pricing Officer (TPO) noted that the assessee has issued a loan amounting to USD 43 million to its Associated Enterprise (AE) HMEL in order to finance the business activities of HMEL. The loan has tenure of 3 years and is repayable at any time before the maturity at the option of the borrower with a prior notice of 10 days. The facts regarding the loan are as under : Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015, the same should be accepted. 22. We have heard the rival submissions and perused the relevant materials on record. In the Instant case we find that the assessee has advanced an unsecured loan amounting to USD 4,30,00,000 equivalent to INR 191,00,60,000 to its AE i.e. HCC Mauritius Enterprises Ltd. (HMEL) for the purpose of acquisition of shares of Karl Steiner AG, a Switzerland based total service contractor operating in the European market. The tenure of loan was 3 years and interests were payable @ LIBOR + 300 bps on completion of tenure of the loan. The assessee submitted before the TPO that the rate of interest charged by it is more than the prevailing market rate. The TPO has reproduced the submissions of the assessee on comparability of lending to the AE by Exim Bank and by the assessee at page 22 and 23 of his order. The TPO has tabulated at page 23 the comparable security of the two loans. However, we find that the TPO has not examined the submission by the assessee that the security that the assessee had was better than the security obtained by Exim Bank. As the TPO has arrived at the ALP at LIBOR + 400 bps, without contradicting the submission of the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to its AE, HCC Mauritius Enterprises Limited, without appreciating the law which provides that any income arising from an international transaction shall be computed with regard to the arm's length price u/s 92(1) of the Act wherein actual charging of fees is not a precondition for determining the ALP, in this case the international transaction of corporate guarantee. (b) On the facts and circumstances of the case and in law, the Ld. CIT(A) was, not justified in deleting the adjustment made on corporate guarantee for the reason that since no guarantee fee was actually charged on the loans by the assessee to its AE, HCC Mauritius Enterprises Limited without considering that the transfer pricing is applicable to transaction capable of generating income chargeable to tax and merely because assessee does not charge it from the related party, the basic nature of transaction will not undergo it change. Therefore, the decision of the ld.CIT(A) is contrary to the law explained by the coordinate bench decision in the case Tally solutions 160 ITD 465 (Bangalore Tribunal), which was considered jurisdictional High Court decision in the case of Vodafone 368 ITR 1 (Bombay). 5. On the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bangalore Tribunal in the case of Xchanging Solutions ITANo. 1294/Bang/2012 &166/Bang/2014, the Hon'ble ITAT, Bangalore, in which it has been held that issuance of Corporate Guarantee is an international transaction and it impacts the assets of the enterprises. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in applying the decision of Bharti Airtel (ITA No. 5816/Del/2012) which held that retrospective amendment by bringing an explanation below section 92 of the Act was applicable prospectively to the subsequent assessment years post amendment without considering the earlier decision of the tribunal to the contrary like Everest Kanto Cylinders Ltd. etc. and other decisions in the transfer pricing field upholding the retrospective amendments such as Sony Ericsson Mobile Communications 374 ITR 118 (Del), Marubeni India Pvt. Ltd. v. DIT 354 ITR 638 Delhi, IHG IT Services 23 ITR (Trib.) 608 (SB) Delhi, Everest Kanto Cylinders Ltd. 34 taxmann.com 19 (Mumbai Tribunal), Vodafone India Services Pvt. Ltd. (359 ITR 133) (Bom) and Patni Computers 215 taxman 108 (Bom). 25. Before us, the Ld. DR submits that the word 'guarantee' as the name suggests is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no exempt income disallowance is to be made u/s 14A r.w.r. 8D. 10. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing to re-compute the disallowance u/s 14Ar.w.r. 8D after eliminating strategic investment not earning dividend. 29. The Ld. CIT(A) has observed and held that : "The submission of the appellant states that (a) investment made out of free reserves (b) That application of rule 8D should confine to dividend income of Rs. 207,59,563/- (c) That disallowance be, without prejudice to other submissions, Rs. 71,071/- only. 6. The above is to be viewed on background of disallowance of Rs. 5,96,55,700/- made by appellant. Thus here the appellant seeks to reduce disallowance already made which was declined by assessing officer. The reason for some is that lot of clarity on disputed issues has emerged as a result of judicial decision that came later and claims were to be modified to bring in tune with legally settled principles. 7. The matter is examined. The claim was before Assessing officer to reduce disallowance under section 14A as clear from penultimate para in page 5 of also. Having made a claim the Assessing officer should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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