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TMI Blog2022 (6) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ength guarantee commission that the assessee ought to have earned and this addition is accordingly directed to be restricted to 0.5% of the loan amount. Adjustment pertaining to interest on delayed receivable - delayed realisation of receivables from the AE - TPO/Learned AO to recompute the interest adjustment on delayed receivables after allowing credit period of 30 days - HELD THAT:- As the facts and circumstances in the present Assessment Year is identical to the facts and circumstances as it prevailed in Assessment Year 2015-16 [ 2021 (11) TMI 1076 - ITAT BANGALORE] Accepting the prayer of the parties, the issue is set aside to the TPO/AO for consideration afresh on the lines indicated by the Tribunal in the order passed for Assessment Year 2015-16 in assessee's own case. Disallowance under section 14A - HELD THAT:- As been the submission of the learned Counsel for the assessee that it did not earn any exempt income during the relevant previous year and therefore there can be no disallowance under section 14A of the Act. In this regard, he relied on the decision of the Tribunal in assessee's own case in Assessment Year 2015-16 [ 2021 (11) TMI 1076 - ITAT BANG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 92B of the Act. 3. The Learned TPO/Learned AO/Hon'ble DRP has erred in not considering the fact that corporate guarantee provided to its AE has been given in the capacity as parent company and with the purpose of furthering its own business interest. 4. The Learned TPO/Learned AO/Hon'ble DRP has erred in assuming that a concrete benefit is accrued to the Associated Enterprise ( AE ) without considering the fact that the provision of guarantee by the Appellant is a shareholding activity. 5. The Learned TPO/Learned AO/Hon'ble DRP has erred in not considering the fact that the promoters of the Appellant have also provided personal guarantee for the line of credit sanctioned by State Bank of India, California to the AE, thereby evidencing the fact that the corporate guarantee by the Appellant and personal guarantee provide by the promoters is to further the business interests of the Appellant. 6. The Learned TPO/Learned AO/Hon'ble DRP has erred in applying an arbitrary approach to benchmark the corporate guarantee transaction by erroneously using Comparable Uncontrolled Price ( CUP ) method as the most appropriate transfer pricing method, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciate that the Appellant had not incurred any expenditure towards earning any exempt income and hence section 14A read with Rule 8D cannot be invoked. 15. The Learned AO/Hon'ble DRP erred in invoking the provisions of section 14A read with Rule 8D without establishing a direct and proximate connection between the expenses incurred and the exempt income earned by the Appellant. 16. The Learned AO/Hon'ble DRP ought to have appreciated that the Appellant had sufficient own funds and had not made the investments from the borrowings. 17. The learned AO/Hon'ble DRP has erred in considering the interest on specific borrowing of while computing disallowance under Rule 8D. 18. Notwithstanding the above, the Learned AO/DRP failed to follow the similar directions of the Hon'ble DRP given in AY 2015-16 to exclude foreign investments while computing the section 14A disallowance. Set- off of Brought forward losses not granted 19. The Learned AO has erred in not giving effect to the brought forward business loss and unabsorbed depreciation against the assessed income. Deduction under section 10AA of the Act not recomputed 20. Notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed objections before the DRP was confirmed by the DRP. The AO passed the final order of assessment incorporating the directions of the DRP against which the assessee has raised ground Nos. 2 to 7 before the Tribunal. 4. As far as the question whether the transaction of providing bank guarantee would amount to an international transaction or not, the law by now is well settled and this Tribunal in the case of United Spirits Ltd., in IT(TP)A No. 2701/Bang/2017, order dated 05.04.2022, held that providing bank guarantee was an international transaction. The Bench, however, took the view that charging of guarantee commission at 0.5% in the value of the corporate guarantee would be an appropriate addition. The following were the relevant observations of the Tribunal in this regard: 8.6.1 The Bombay High Court in CIT v Everest Kento Cylinders Ltd. [2015] 378 ITR 57 dismissed the revenue's appeal and upheld the charging of guarantee commission at 0.5% on the corporate guarantee. Thus, the contention of the learned AR that TP adjustment should not be made cannot be accepted. The co-ordinate bench in the case of Manipal Global Education Services Pvt. Ltd. ITA No. 388 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the draft order of assessment of the AO which incorporated the order of the TPO. The DRP confirmed the order of the AO with regard to the question whether the impugned transaction would amount to an international transaction or not. On the quantum of addition, the DRP substituted SBI short term deposit interest rates instead of the libor rate of interest and thereby the addition made by the AO stood enhanced. 9. Aggrieved by the order of the AO incorporating the directions of the TPO, assessee has raised ground Nos. 8 to 11 before the Tribunal. At the time of hearing, it was agreed by the parties that identical issue had come up for consideration in assessee's own case in Assessment Year 2015-16, in IT(TP)A No. 2639/Bang/2019, the Tribunal in its order dated 16.11.2021 remanded the issue to the AO/TPO for fresh consideration. The following were the relevant observations of the Tribunal in this regard: 5.2 Aggrieved, the assessee has raised this issue before the Tribunal. The gist of the submissions made by the learned AR are as follows:- (a) The weighted average method adopted by TPO is incorrect. (b) The assessee has not charged interest on outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantum of disallowance that should be made under section 14A of the Act. As far as this issue is concerned, it has been the submission of the learned Counsel for the assessee that it did not earn any exempt income during the relevant previous year and therefore there can be no disallowance under section 14A of the Act. In this regard, he relied on the decision of the Tribunal in assessee's own case in Assessment Year 2015-16 (supra) wherein the Tribunal held that in the absence of any exempt income, no disallowance under section 14A of the Act can be made. However, on perusal of the order of the Revenue authorities as well as ground No. 18 raised by the assessee, it appears that the assessee earned dividend income and there is no specific ground in the grounds of appeal on this issue that the assessee did not earn any exempt income. In these circumstances, we are of the view that it would be just and appropriate to set aside this issue to the AO for fresh consideration, after affording assessee opportunity of being heard. 12. As far as ground No. 19 is concerned, it would be sufficient if the AO is directed to give effect to brought forward business loss and unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court [b] Commissioner of Income-tax-IV, Nagpur vs. Sunil Vishwambharnath Tiwari, 2015, Bombay High Court [ii] If deduction under section 40A of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. 7. Applying the same analogy, it can be held that if deduction u/s. 40[a][ia] of the Act is not allowed, the same would have been to be added to the profits of the undertaking on which the Assessee would be entitled for deduction u/s. 10A of the Act. This view is fortified by the decision of Bombay High Court in the case of 'Commissioner of Income Tax v. Gem Plus Jewellery India Ltd.,' [2011] 330 ITR 175 [Bom], wherein it is held thus: 13. By reason of the judgment of the Supreme Court in Commissioner of Income Tax v. Alom Extrusions Limited [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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