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TMI Blog2020 (8) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax in addition to rent - HELD THAT:- It is not in dispute that assessee had duly offered rental income as well as amounts received towards amenities and service charges under the head income from house property . We find that the ld. AR referred to the decision rendered in group companies case of the assessee by this Tribunal in the case of Ewart Investments Ltd., [ 2019 (2) TMI 1647 - ITAT MUMBAI] wherein this issue was restored to the file of the ld. AO. The ld. AR fairly prayed for similar direction to be given in the impugned case. We have gone through the said decision and respectfully following the said decision, we deem it fit and appropriate to restore this issue to the file of the ld. AO and decide the issue before us on the same lines as directed. Set off of interest charged and paid to the Income Tax department against interest granted by the Income Tax department on refunds in the same year - HELD THAT:- Issue decided in own case [ 2019 (11) TMI 411 - ITAT MUMBAI] issue is already covered positively in favour the assessee. Disallowance u/s.14A - AO applied the computation mechanism provided in Rule 8D(2) of the Rules and made the disallowance - HELD THAT:- We hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent years, we hold that there is absolutely no case made out by the revenue for disallowing this sum of 12.66 Crores during the year under appeal. Disallowance of pension payment to wholetime Directors - allowable business expenditure - HELD THAT:- We find there is absolutely no dispute that the wholetime Directors to whom pension of 89 lakhs was paid by the assessee company had rendered tremendous services to the assessee company which was duly recognised by the assessee company by way of Board resolution appreciating their services and sanction for payment of pension was accorded thereon. Hence, the business expediency of the subject mentioned transaction has been duly approved by the assessee and it cannot be said that it is not incurred for the purpose of the business of the assessee. We find that the case of the assessee squarely falls within the ambit of the decision of the Hon ble Supreme Court in the case of Sassoon J. David Co. Pvt. Ltd.[ 1979 (5) TMI 3 - SUPREME COURT] . Thus pension to wholetime Directors on the basis of Board resolution of the assessee company is incurred wholly and exclusively for the purpose of business of the assessee and is allowable as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta companies. TSL continues to acquire shares and securities of its existing industrial enterprises. The dividend income supplemented by the profit made on sale of investments is utilised to augment the resources of the Company for increasing the long term investments in promoted companies. TSL also subscribes to the Rights Issues made during the year by the other Tata companies and increases its holdings in several promoted companies. The Company has two Liaison Offices located at: a)Washington DC USA b)Beijing, China The role of the Liaison Offices is to interact with the Government and the business community to promote the Tata Name and Brand and to oversee Tata business interest in these countries. As per the Tata group organizational structure, about 66 percent of the equity capital of TSL is held by public charitable trusts endowed by members of the Tata family. The biggest of these trusts are the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, which were created by the families of the sons of Jamshetji Tata. 2.2. Tata Limited UK is one of the associated enterprises (AEs) of the assessee company. AE acts as purchasing agent, representative, traders in comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE (being the borrower). Accordingly, he arrived the arm's length guarantee fee to be at 0.792% being 60% of 1.32%. Since the assessee has charged fee of 0.25% from its AE, he directed the ld. TPO to make adjustment only to the extent of the 0.542% ( 0.792-0.25). 2.4. Aggrieved, the assessee is in appeal before us. 2.5. At the time of hearing, the ld. AR fairly submitted that the grounds raised by the assessee with regard to the fact that the issue of corporate guarantee would not fall within the ambit of international transaction is not pressed by her. The same is reckoned as the statement made from the Bar and accordingly, the grounds raised by the assessee that the corporate guarantee issue is not an international transaction are hereby dismissed as not pressed. We find that the Hon'ble Jurisdictional High Court in number of occasions had restricted the Arm's Length Price (ALP) from the guarantee fee to be at 0.5%. We find that these decisions were subsequently followed by the Co-ordinate benches of this Tribunal and one such decision which was quoted by the ld. AR at the time of hearing in the case of Virgo Engineers Ltd. vs. DCIT in IT(TP)A No.3718/Mum/2017 for A.Y.2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restore this issue to the file of the ld. AO and decide the issue before us on the same lines as directed by this Tribunal in ITA No.3623/Mum/2017 dated 28/02/2019 from para 5 & 6 thereon. Accordingly, the ground No.2 raised by the assessee is allowed for statistical purposes. 4. The ground No.3 raised by the assessee is with regard to the set off of interest charged and paid to the Income Tax department against interest granted by the Income Tax department on refunds in the same year. 4.1. We have heard rival submissions and perused the materials available on record. This issue is already covered positively in favour the assessee by the order of this tribunal in assessee's own case for A.Y.2008-09 in ITA No.3192/Mum/2013 dated 06/11/2019 wherein it was held as under:- "2. Set off of Interest on Income Tax Refund with Interest charged on income tax demands Ground No.1 of Assessee Appeal The brief facts of this issue is that the assessee received interest from income tax department to the tune of ₹ 43.81 crores and also paid interest to income tax department on its tax demands to the tune of ₹ 6.57 crores. The assessee sought to set off the interest paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t see how this order can be cited _as .precedent inasmuch as the Assessee before the Tribunal and before us paid interest to the Income Tax Department amounting to ₹ 10,26,906/-. The Assessee claimed that this was business expenditure and this should have been allowed. The Assessee has received the interest of ₹ 1,07,57,930/-. It was submitted that the amount of interest paid by the Assessee should have been allowed to be set off against the interest deposited with the Department and taxed in the hands of the Assessee. The argument was that the interest paid to and received from is the same party i.e. Government of India and therefore, both transactions should be taken together. 5. We do not find that the Tribunal has, in permitting this exercise, in any way violated any of the provisions of the Income Tax Act, 1961. It was a peculiar situation between the Assessee and the Department. The Tribunal has followed the similar exercise in the case of very Assessee on the prior occasion as well. In such circumstances we are of the opinion that the second question also does not raise any substantial question of law." 2.2. Respectfully following the said decision, the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the ld. CIT(A) held that interest on borrowed capital utilised for making investments would be eligible for deduction u/s.36(1)(iii) subject to the provisions of Section 14A of the Act. Against this observation, we find that revenue is in appeal before us. We find that assessee is a promoter investment holding company and exercise controlling interest in various Tata companies. Out of these investments, the assessee receives income by way of dividends, interest on investments, royalty income from brand, capital gains etc., Out of this only dividend income is exempt. All other receipts thereon are taxable receipts. Even otherwise, there is absolutely no bar for allowability of interest u/s.36(1)(iii) of the Act if the borrowed funds were utilised for making investments which are meant for the purpose of business of the assessee. There is absolutely no dispute that assessee is a promoter investment holding company thereby, it had to exercise controlling interest in various Tata group companies. For the purpose of making these investments if the assessee had to use the borrowed funds, if any, then the interest paid on such borrowings would be governed by the provisions of Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- (a) Whether the disallowance of interest made in the second limb of Rule 8D(2) of the rules is to be computed with relation to net interest or gross interest ? We find that this issue is already decided in favour of assessee in its own case by this tribunal in ITA No.3192/Mum/2013 for A.Y.2008-09 dated 06/11/2019 wherein netting of interest income with interest paid for computing disallowance under second limb of Rule 8D(2) of the Rules was permitted by this Tribunal by following various judicial precedents. Accordingly, this aspect of the issue is decided in favour of the assessee. (b) Disallowance under Rule 8D(2)(i), 8D(2)(ii) and 8D(2)(iii) are to be made by considering those investments which had actually yielded exempt income to the assessee. We find that this issue is also covered in favour of the assessee in its own case by the decision of this Tribunal in ITA No.3192/Mum/2013 for A.Y.2008-09 dated 06/11/2019. Accordingly this aspect of the issue is also decided in favour of the assessee. (c) Disallowance made under Rule 8D(2) should be treated as cost of investment. We find that this aspect of the issue was stated to be not pressed by the ld. AR at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials and agencies. The ld. AO further observed that assessee had invested ₹ 1700 Crores in Tata Realty Investment and Infrastructure Ltd., which was utilised for buying lands from Unitech group by Tata Realty Investment and Infrastructure Ltd. It was noticed by the ld. AO that the Unitech Group in turn had utilised the funds for acquiring the 2G mobile telephone spectrum license. The ld. AO observed that as per the report dated 23/06/2011 sent by DIT (Investigation), New Delhi, Unitech Group during the course of investigation had admitted that Ms. Nira Radia was rendering various consultancy services to Unitech Group and Tata Realty Investment and Infrastructure Ltd., However, it was claimed by both Unitech group and Tata Realty Investment and Infrastructure Ltd., that no payments were made to VCCPL. Based on this, the ld. AO concluded that the payments made by the assessee company to VCCPL were in respect of land transactions and acquisition of 2G licenses. The ld. AO further concluded that both these transactions are not meant for the purpose of assessee's business and since, assessee had not produced the details of specific services rendered by VCCPL for which the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rendering such services and receives payments from these companies for the same. It is also seen that the name of the Tata Realty Investment and Infrastructure Ltd., does not appear in the list of Tata entities covered by the agreement. The ld. CIT(A) observed that in the light of the fact that services have been rendered by VCCPL with respect to the transaction noted by the ld. AO, no consideration has been passed on either by Tata Realty Investment and Infrastructure Ltd., or by Unitech group and the fact that none of the other parties have any agreement with VCCPL for rendering of services, it is clear that VCCPL was appointed by the assessee to carryout these activities. This is actually the observation made by the ld. AO in his assessment order. But the ld. CIT(A) had observed that however, it could not be stated that the entire payment represents payment for services rendered by VCCPL towards Tata Realty Investment and Infrastructure Ltd., and Unitech group. He summarises the entire transaction as under:- Two facts are admittedly clear that VCCPL rendered certain services to Tata Realty Investment and Infrastructure Ltd., and Unitech Group that received investment of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies that are listed out as belonging to Tata Group of companies which are covered within the ambit of this agreement:- Tata companies The Tata companies are substantively those that have signed the TATA Brand Equity and Business promotion agreement with TSL. Key companies {including their operating divisions and subsidiaries) are: Tata Sons Limited and the Tata Trusts Tata Industries Limited The Tata iron and Steel Co. Ltd. Tata Motors Ltd. The Tata Power Co. Ltd. Tata Chemicals Ltd. The Indian Hotels Co. Ltd. . Tata Tea Limited Tata Consultancy Services Ltd. Tata Teleservices Limited including Tata Teleservices (Maharashtra) Ltd., Videsh Sanchar Nigam Limited Rallis India Limited Tata Elxsi Limited . Voltas Ltd. . Tata Coffee Ltd. Trent Ltd. . . Titan Industries Ltd. CMC Limited " Tata International Limited Tata Autocomp Systems Ltd. 7.7. From the aforesaid list, admittedly, it could be seen that Tata Realty Investment and Infrastructure Ltd., does not figure in the said list. From the aforesaid agreement dated 21/11/2006, it could also be seen that Ms. Nira Radia is a media relations professional and VCCPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ₹ 12.66 Cores towards media relation agency fees. We also find that similar services were rendered by VCCPL to the assessee in earlier years as well as in subsequent years which were duly allowed as deduction by the Revenue as under:- Fees Paid (excluding service tax) Year Amount (Rs Crores) AY 2004-05 8.07 AY 2005-06 9.12 AY 2006-07 9.12 AY 2007-08 10.45 AY 2008-09 12.31 AY 2009-10 12.31 AY 2010-11 12.31 AY 2011-1 2 12.31 AY 2012-13 (upto 31st Oct. 2011) 7.18 7.8. Hence, in view of the aforesaid observations and applying the principle of consistency as has been held by the Hon'ble Supreme Court in the case of Radhasaomi Satsang reported in 193 ITR 321 (SC), in allowing such claim to the assessee in earlier as well as in subsequent years, we hold that there is absolutely no case made out by the revenue for disallowing this sum of ₹ 12.66 Crores during the year under appeal. Hence, the ground No.5 raised by the assessee is allowed and ground No.3 raised by the revenue is dismissed. 8. The ground No.6 raised by the assessee is with regard to disallowance of pension amount. 8.1. We find that assessee had raised a ground challenging the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided on mercantile basis and not actually paid, whereas in the instant case, there is absolutely no dispute that the sum of ₹ 89 lakhs was actually paid by the assessee company to its wholetime Directors on account of pension in recognition of their services rendered based on the Board resolution. Hence, reliance placed by the ld. CIT(A) on the decision of Hon'ble Calcutta High Court to justify his enhancement of disallowance of ₹ 89 lakhs does not advance the case of the revenue. We find there is absolutely no dispute that the wholetime Directors to whom pension of ₹ 89 lakhs was paid by the assessee company had rendered tremendous services to the assessee company which was duly recognised by the assessee company by way of Board resolution appreciating their services and sanction for payment of pension was accorded thereon. Hence, the business expediency of the subject mentioned transaction has been duly approved by the assessee and it cannot be said that it is not incurred for the purpose of the business of the assessee. We find that the case of the assessee squarely falls within the ambit of the decision of the Hon'ble Supreme Court in the case of Sassoon J. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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