9911796707
TMI Blog2020 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... of rate prevalent in the countries where loan was received. In the result the ground of appeal raised by the assessee is allowed and resultantly the ground of appeal raised by the revenue has become infructuous. Notional interest income on infusion of additional funds in wholly owned subsidiary - HELD THAT:- CIT(A) after considering the submissions of concluded that the delay in receipt of share is short and as per Circular of Reserve Bank of India, the interest would be LIBOR plus 150 and directed the TPO/AO to charge interest for 6 month at LIBOR plus 150 basis point for the period between the date of remittance and by adding 15 days and the date of allotment of shares. The coordinate bench of this Tribunal in ITO Vs Sterling Oil Resources (P) ltd [ 2016 (4) TMI 163 - ITAT MUMBAI] held that adjustment on account of notional interest on share application money, which had been recharacterised as loan, merely because there was delay in allotment of share, was not sustainable in law. Further, this Tribunal in Aditya Birla Minacs Worldwide Ltd [ 2016 (8) TMI 1417 - ITAT MUMBAI] also took the same view that share application money cannot be treated as loan amount; merely there is delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that marked to market loss are on account of restatement of trading asset and liability and its ascertainment and computation is not disputed by assessing officer. CIT(A) also held that after the decision in CIT Vs Woodward Governor India (P) ltd. [ 2009 (4) TMI 4 - SUPREME COURT] marked to market loss is allowable deduction. And it cannot be termed as unascertained liability as has been provided in clause (c) of Explanation-1 to section 115JB(2). Accordingly cannot be added back to the book profit. No contrary fact or law is brought to our notice to arrive on other finding. Addition on account of provision of gratuity for calculation of book profit under section 115JB - HELD THAT:- CIT(A) after considering the submissions of the assessee observed provisions of gratuity is based on the actuarial valuation and therefore ascertained liability. The assessing officer has not disputed actuarial valuation and cannot be treated unascertained liability as has been provided in clause (c) of Explanation-1 to section 115JB(2). No contrary fact or law is brought to our notice to arrive on other finding. Therefore, we affirm the action of ld CIT(A) and dismiss the ground of appeal rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DITION ON ACCOUNT OF ARM'S LENGTH ADJUSTMENT TO INCOME FROM INTEREST ON LOANS ADVANCED TO SUBSIDIARIES: 1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeal) -15, Mumbai ("CIT(A)") erred in directing the Additional Commissioner of Income Tax - 10(1), Mumbai ("the AO") and the Additional Commissioner of Income Tax (TP) -11(2) ("the TPO") to recompute the addition u/s. 92C of the Income-tax Act, 1961 ("the Act") on account of loans given to Associate Enterprise ("AEs") by adopting 6 months benchmarking at LIBOR + 150 basis points for loans having maturity between three to five years and 6 months LIBOR + 250 basis points for loans having maturity period beyond more than five years. 2. The Appellant prays that it be held that the transaction of loan given to the AEs are at arm's length and no further addition is warranted u/s. 92C of the Act. GROUND NO. II: WANT OF NATURAL JUSTICE AS REGARDS TREATING EQUITY INVESTMENT IN OVERSEAS SUBSIDIARY AS AN INTERNATIONAL TRANSACTION: 1. On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n UK to ALP recommended by the Transfer Pricing Officer (TPO) without appreciating the fact that the Guarantee Commission is charged at the rate of 0.75% of loan amount by HSBC, Mumbai, India." 2. " erred in holding that the benchmarking of interest rates on foreign currency loans would be LIBOR based and not rupee loan based thereby overlooking the high opportunity cost lost by the assessee company through foreign AE lending as against other competitive domestic lending." 2.1 " erred in directing the AO to adopt the External Commercial Borrowing guidelines of the RBI as a benchmark ignoring that the ECB guidelines are for inward borrowing whereas the case facts pertain to outward lending to assessee's AEs." 3. " erred in deleting the imputation of notional interest of ₹ 17,82,00,000/- on infusion of additional funds to the wholly owned subsidiary of the assessee." 3.1 " erred in admitting and not remanding the additional evidence furnished by the assessee to the AO and thereby violated the provisions of Rule 46A of I.T. Rules." 4. " erred in holding that the deduction u/s 80IB & 80IC of the Act amounting to ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,71,04,416/-. On appeal the ld CIT(A), the order of TPO in suggesting the upward adjustment was deleted by following his own order for AY 2006-07 and 2007-08. We have seen that on similar grounds of on similar set of facts in assessee's own case for AY 2006-07 in ITA No. 1875/Mum/2011 dated 12.06.2019, the Tribunal while following its order for AY 2007-08 passed the following order; "13. We have considered rival submissions and perused the material on record. Undisputedly, the assessee itself has charged guarantee commission on the corporate guarantee provided to the AE @ 0.75%. The guarantee fee charged has been benchmarked by the assessee by obtaining a quotation from HSBC India which has been used as an external CUP. In our view, the method adopted by the assessee to benchmark the guarantee commission cannot be faulted with. It is necessary to observe, while deciding the appeal of the Revenue in assessee's own case in assessment year 2007-08, vide ITA no. 5557/Mum./2012, dated 5th January 2018, the Co-ordinate Bench has held that guarantee fee charged @ 0.75% is at arm's length. It is relevant to observe, in various other cases involving similar nature of dispute no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated enterprises (AE's) situated in Germany, rate of interest was to be determined on the basis of rate prevailing in Germany where loan has been consumed. 10. Considering the decision of jurisdictional High Court the AO/TPO is directed to recompute the interest on the basis of rate prevalent in the countries where loan was received. In the result the ground of appeal raised by the assessee is allowed and resultantly the ground of appeal raised by the revenue has become infructuous. 11. Ground No. 3 in revenues appeal and Ground No. II & III in assessee's appeal relates to notional interest income on infusion of additional funds in wholly owned subsidiary. The ld AR for the assessee submits that the assessee made investment in its overseas subsidiary in the form of equity in Wockhardt EU of ₹ 142, 57,00,000/-. It was further submitted that there was delay in allotment of shares. The TPO reclassified the investment in equity share as loan and suggested addition of ₹ 17,82,00,000/-. The ld. AR for the assessee submits that no income arises on account of making application for shares and subscribing to the capital. To support his submissions the ld AR for the assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely because there was delay in allotment of share, was not sustainable in law. Further, this Tribunal in Aditya Birla Minacs Worldwide Ltd (supra) also took the same view that share application money cannot be treated as loan amount; merely there is delay in issuance of shares by subsidiary. Considering the consistent view of the Tribunal, we are of the view that share application money cannot be treated as loan amount only because of delay in issuance of shares by its subsidiary. 15. In the result the grounds No. II& III of the assessee's appeal are allowed and resultantly the ground of appeal by revenue is dismissed. Since, we have accepted the second contention of the ld. AR for the assessee; hence, discussions on other submissions of the assessee have become academic. 16. Ground No. 4 in revenue's appeal relates to allocation of R & D expenses to the 80IB and 80IC units. The ld. DR for the revenue relied on the order of the assessing officer. 17. On the other hand the ld. AR for the assessee submits that this ground of appeal is covered in favour of the assessee and against the revenue in assessee's own case for AY 2001-02 to 2007-08 by the decisions of the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's appeal relates to weighted deduction under section 35(2AB). The ld. DR for the revenue relied on the order of the assessing officer. 21. On the other hand the ld. AR for the assessee submits that this ground of appeal is also covered in favour of the assessee and against the revenue in assessee's own case for AY 2006-07 by the decisions of the Tribunal. 22. We have considered the submissions of the parties and perused the order of the tax authorities below. During the relevant period under assessment year the assessee the assessee claimed weighted deduction under section 35(2AB). The assessing officer after issuing show cause and receiving reply concluded that all the clinical trial are got conducted by assessee through third parties and the payment made to third parties are not qualified for weighted deduction. The ld CIT(A) followed the order of Tribunal in AY 2004-05 and dismissed the appeal of the assessee. However, we have noted that in AY 2006-07, the Tribunal by following the order for AY 2007-08 restore the issue to the file of assessing officer by passing the following order; "6. We have considered rival submissions and perused the material on record. On a perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra). While doing so, the Assessing Officer is also directed to examine the ratio laid down by the Hon'ble Supreme Court in Commissioner of Customs v/s Dilip Kumar & Co. & Ors., vide judgment dated 30th July 2018, in Civil Appeal no.3327 of 2007. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. These grounds are allowed for statistical purposes." 23. Considering the decision of the Tribunal in assessment year 2006-07, we respectfully following the same we are inclined to restore the issue to the Assessing Officer for adjudication afresh as per the direction date 12.06.2019 in ITA No. 1967/Mum/2011. In the result the ground of appeal raised by both the parties are allowed for statistical purpose. 24. Ground No. 6 in revenue's appeal relates to disallowance under section 40(a)(ia) for want of TDS for payments made to non-residents on account for pilot bio study, clinical research . The ld. DR for the revenue relied on the order of the assessing officer. 25. On the other hand the ld. AR for the assessee submits that this ground of appeal is also covered in favour of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail submissions and relied on the decisions in CIT Vs Woodward Governor India (P) ltd. (supra) and Apollo Tyres Ltd Vs CIT (supra). The ld CIT(A) after considering the submissions of the assessee observed that marked to market loss are on account of restatement of trading asset and liability and its ascertainment and computation is not disputed by assessing officer. The ld CIT(A) also held that after the decision in CIT Vs Woodward Governor India (P) ltd. (supra) marked to market loss is allowable deduction. And it cannot be termed as unascertained liability as has been provided in clause (c) of Explanation-1 to section 115JB(2). Accordingly cannot be added back to the book profit. No contrary fact or law is brought to our notice to arrive on other finding. Therefore, we affirm the action of ld CIT(A) and dismiss the ground of appeal raised by the revenue. 30. Ground No. 8 relates to deleting the addition on account of provision of gratuity for calculation of book profit under section 115JB. The ld DR for the revenue supported the order of the assessing officer. 31. On the other hand the ld AR for the assessee submits that the additions/ reduction for the purpose of computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tyres (supra) and Goetze India Ltd Vs CIT(32 SOT 101). The ld CIT(A) after considering the submissions of the assessee observed the provision of section 14A cannot be imported to clause (f) of Explanation 1 to section 115JA. The Special bench of Delhi Tribunal recently in ACIT vs. Vireet Investment (P) Ltd (supra) held the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Thus, considering the recent decision of the Special Bench of Tribunal we uphold the order of the ld CIT(A). In the result this ground of appeal is dismissed. 36. In the result the appeal of the revenue is partly allowed. ITA No. 4866/Mum/2013 by assessee. 37. We have already discussed and decided the Ground No. I to IV of assessee's appeal, while discussing the various grounds of appeal in Revenue's appeal. 38. Ground No. V relates to disallowance under section 14A. the ld AR for the assessee submits that during the year under consideration the assessee earned exempt income of ₹ 80,000/-. The assessing officer invoked the provisions of Rule 8D and disallowed ₹ 15,86,540/- under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
