9911796707
TMI Blog2018 (4) TMI 1925X X X X Extracts X X X X X X X X Extracts X X X X ..... ") erred in upholding part disallowance of a sum of Rs. 24,58,395/- u/s. 14A of the Income Tax Act, 1961 ("the Act"). 2. He failed to appreciate and ought to have held that: - Investments had been made out of own funds and internal cash accruals and has not incurred any expenditure in relation to tax -free income - That own funds were sufficient to cover tax - free investments. - No other expenses were incurred in relation to earning the dividend income. 3. The Appellant prays that the aforesaid disallowance u/s 14A be deleted. Without Prejudice to Ground I Ground II 1. The appellant also prays that on the basis of reasonableness the disallowances u/s 14A to be restricted to the extent of 1 % of exempt income. 2. The above view has been accepted by Commissioner of Income Tax (Appeals)'s in appellant's own case in the past years. GROUND III: Disallowances of interest on share holders deposits amounting to Rs. 1,37,70,563/- as it not at arms length 1. On the facts and circumstances of the case and in law, the CIT(A)-15 erred in confirming the action of Assessing Officer ("the AO") by making adjustment in adding interest @ 9.05% amounting to Rs 1,37, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 erred in not directing the AO, to allow the long term capital loss amounting to Rs 1,90,49,831/- on sale of investments. 2. The Appellant prays that the AO be directed to allow the said long term capital loss and grant set off and/or carry forward thereof as per law. 2. The Revenue in its cross appeal has raised the following grounds of appeal: On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in directing that the expenses disallowed under section 14A amounting to Rs.2,96,54,962/- be not added to the book profit u/s.115JB of the Act under Clause 'f' of Explanation 1 to that section, contrary to the expressed provision to add any expenses relating to income u/s.10 of the Act. 2. Without prejudice to the fact that a sum of Rs.24,58,359/- has been upheld for disallowance under section 14A by the CIT(A), he has erred in directing to not add any amount in the computation of book profit under section 115JB by relying on the decision of the ITAT, Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 14A should not exceed to exempt income. In support of its submission, the Ld. AR of the assessee relied upon the decision of Joint Investment P. Ltd. Vs. CIT [372 ITR 694 (Del.) and Daga Global Chemicals Pvt. Ltd. Vs. ACIT in ITA No. 5592/Mum/2012 (Mum. Trib.) The Ld. DR for the Revenue relied upon the order of authorities below. However, the Ld. DR not disputed the amount of exempt income of Rs. 28,380/- earned by assessee during the relevant Financial Year. The Ld. DR for the Revenue also conceded that Rule 8D is not applicable for the A.Y. under consideration. 5. We have considered the rival submission of the parties and gone through the orders of authorities below. We have noted that the assessee earned exempt income of Rs. 28,380/- in the form of dividend income. The Hon'ble Delhi High Court in case of Joint Investment Pvt. Ltd. (supra) held that the window for disallowance indicated in section 14A is only to the extent of disallowing expenditure incurred by assessee in relation to tax exempt income. These proposition or portion of tax exempt income surely cannot swallow the entire amount. Thus, respectfully following the decision of Hon'ble Delhi High Court in Joi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for not charging any interest on the shareholder deposits and thereby it cannot take any recourse for charging interest till the year 2015 by which PTFSI is required to make payment to the company. There has been no inflow or outflow relating to the above deposit during the Previous Year 2011- 12 and hence it is outside the purview of transfer pricing provisions. We are of the view that the assessee cannot be asked to do something which is impermissible in law and expenditure incurred in compliance of law or the direction of the statutory authorities, the same is allowable. This view is supported by the case law relied on by the assessee of Hon'ble Bombay High court in the case of CIT v. Hukumchand Mills Ltd. [1993] 202 ITR 474 . Further, another aspect argued by the learned Counsel is that interest and principal amount itself is doubtful of recovery, the question of taxing hypothetical interest does not arise. This view is also supported by the decision of Hon'ble Supreme Court in the case of UCO Bank v. CIT [1999] 237 ITR 889/104 Taxman 547. In view of the above discussion, we are of the considered opinion that no addition on account of transfer pricing adjustment can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation of book profit under section 115JB of Rs. 2,96,54,962/-. At the outset of hearing, the Ld. AR of the assessee submits that the ground of appeal raised by Revenue is also covered in assessee's own case for A.Y. 2012-13 in ITA No. 1716/Mum/2017 and by the decision of Special Bench in ACIT Vs. Vireet Investment (P.) Ltd. [82 taxmann.com 415 (Del. SB). On the other hand, the Ld. DR for the Revenue fairly conceded that this ground of appeal is covered in favour of assessee. 14. We have considered the rival submission of the parties and gone through the order of authorities below. We have noted that identical ground of appeal was raised by assessee in appeal for A.Y. 2012-13. The Tribunal passed the following order: 57. The next issue in this appeal of assessee is against the order of DRP confirming the action of the AO/TPO making addition of disallowance under section 14A of the Act r.w.r 8D of the Rules, while computing book profit under section 115JB of the Act. For this assessee has raised following grounds: - GROUND NO. 9: ADDITION OF RS. 2,73,960/- BEING AMOUNT DISALLOWED U/S. 14A OF THE ACT WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT On the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal are allowed with similar direction. 20. In the result, ground no. II & III are allowed. 21. Ground No. IV relates to addition on account of Transfer Pricing Adjustment towards interest on outstanding balances of the Associate Enterprises for Rs. 44,21,973/-. The Ld. AR of the assessee submits that this ground of appeal is covered in favour of assessee in assessee's own case for A.Y. 2012-13. On going through the order of Tribunal for A.Y. 2012-13. The Ld. DR for the Revenue conceded that this ground of appeal is covered in favour of assessee. 22. We have considered the submission of both the parties and noted that similar ground of appeal was raised by assessee in appeal for A.Y. 2012-13. The co-ordinate bench of Tribunal passed the following order: 24. We find from records that the AO has treated the debit balance outstanding on the year end as an "International Transaction" and have made proposed addition of notional interest. Now the question arises whether outstanding debit balance with the associate company cannot be regarded as an 'International Transaction' within the meaning of section 92B of the Act. Further, Ld Counsel drew our attention to section 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on loan and advances to Associate Enterprises for Rs. 60,48,000/-. At the outset of hearing, the Ld. AR of the assessee submits that this ground of appeal is also covered in favour of assessee in assessee's own case for A.Y. 2012-13. The Ld. AR of the assessee further submits that corporate guarantee given to third party in favour of Associate Enterprises is not an international transaction as envisaged under section 92 of the Act. In support of his submission, the Ld. AR of the assessee relied upon the decision of Bharti Airtel Ltd. v. Addl CIT (63 SOT 113( (Del.), Siro Clinpharm Private Ltd. v DCIT (ITA No. 2618 of 2014)(Mum.), Marico Ltd. v. ACIT (70 taxmann.com 214) (Mum.) & Videocon Industries Ltd. v. Addl. CIT (55 taxmann.com 263)(Mum.).On the other hand, the Ld. DR for the Revenue fairly conceded to the submission of Ld. AR of the assessee. 27. We have considered the submission of the parties and find that similar ground of appeal was raised by assessee before the Tribunal in appeal for A.Y. 2012-13. The co-ordinate bench of the Tribunal passed the following order: 16. We find that Delhi Tribunal in the case of Bharti Airtel Ltd. v. Addl. CIT [2014] 63 SOT 113/43 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate guarantees in question did not constitute ' international transaction' within meanings thereof under section 92B, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment of Rs 33,10,161. The assessee gets the relief accordingly." 17. We further notice that the decision of Ahmedabad Tribunal in the case of Micro Ink Ltd. v. Addl. CIT [2016] 157 ITD 132/[2015] 63 taxmann.com 353 (Ahd. - Trib.), which has followed the decision of Bharti Airtel (supra) held that issuance of corporate guarantees was in the nature of shareholder's activity/quasi capital, thus, could not be included in the ambit of international transaction u/s. 92(1) of the Act. Further, Ahmedabad Tribunal has distinguished the decision of Hon'ble Bombay High Court in the case of CIT v. Everest Kento Cylinders Ltd. [2015] 378 ITR 57/[2015] 232 Taxman 307/58 taxmann.com 254, wherein the assessee had actually charged for corporate guarantee fee, unlike in the case of the assessee as well as in the case of Micro Ink Ltd. (supra), for providing corporate guarantee. The Mumbai Tribunal in the case of Siro Clinpharm (P.) Ltd. v. Dy. CIT (in ITA No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be taken into consideration while making any TP adjustments in respect of such transactions and has relied on the OECD Transfer Pricing Guidelines issued in 2010. As stated in para 1.59 of the said guidelines, the business strategies should also be examined in determining comparability for transfer pricing purposes and certain illustrations of such business strategies are also given therein. As stated in para 1.60 of the said guidelines which has been relied upon by the assessee, business strategies also could include market penetration schemes and taxpayer seeking to penetrate a market or to increase its market share might temporarily charge a price for its product that is lower than the price charged for otherwise comparable products in the same market. As explained further, a taxpayer seeking to enter a new market or expand (or defend) its market share might temporarily incur higher costs and hence achieve lower profit levels than other taxpayers operating in the same market. The relevant facts of the present case do not indicate that there was any such business strategy adopted by the assessee in not charging commission in respect of guarantees issued for its AEs. As a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
