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TMI Blog2024 (1) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... he same, we are convinced that the assessee was prevented by sufficient cause from filing this appeal in time. Accordingly, we condone the delay and proceed to admit the cross objection for hearing. 3. The revenue has raised the following grounds of appeal:- "1. Whether on the facts and circumstance of the case, the Ld. CIT(A) has erred in law as well as in (facts in deleting the adjustment made by the AO/TPQ amounting to Rs. 4,34,42,803/- for International transaction in respect to the corporate guarantee to it's AE & in deleting the adjustment made by the AO/TPO amounting to Rs. 3,09,32,411/- for International transaction on royalty Income. 2. Whether on the facts and circumstance of the case, the Ld.CIT (A) has erred in law as well as facts to direct to re-compute the amount of disallowance u/s 14A. 3. Whether on the facts and circumstance of the case, the Ld.CIT(A) has erred in law as well as in facts in allowing VAT subsidy of Rs. 23.89 crores as Capital Receipt received by the assessee company. 4. Whether on the facts and circumstance of the case, the Ld. CIT(A) has erred in law as well as in facts in allowing relief given on account of taxation of STCG at con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment proceedings, however, the same is to be treated as the revenue receipts as there is a direct nexus of the VAT subsidy with the revenue generated and, thus made the addition thereto. The ld. Assessing Officer also made disallowance u/s 14A of the Act applying Rule 8D of the Income Tax Rules, 1962 (hereinafter 'the Rules'). The ld. Assessing Officer further noticed that during the year assessee has shown short term capital gain of Rs. 9,21,75,000/- and while examining the capital gain it was observed that the assessee has paid taxes treating it to be long term capital asset and paid concessional tax rate as provided u/s 112 of the Act. Income assessed at Rs. 519,61,39,830/-. 5.1. Aggrieved the assessee preferred appeal before the ld. CIT(A) and partly succeeded. 6. Aggrieved revenue is now in appeal before this Tribunal and the assessee has raised cross-objections on the grounds as extracted supra. First, we will take up the revenue's appeal in ITA No. 2644/Kol/2018. 7. Ground No. 1, is raised against the deletion of adjustment made by the Assessing Officer/TPO towards corporate guarantee to its AE at Rs. 4,34,42,803/- and towards royalty income at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had already offered income of Corporate guarantee fee @ 0.30% which is higher than 0.25% as held by the Tribunal for Assessment Year 2012-13 and, therefore, taking consistent view, we fail to find any inconsistency in the finding of the ld. CIT(A), who has deleted the impugned addition observing that there being no change in the factual matrix during the year and the guarantee fee have been charged at a rate higher than 0.25% which was held to be ALP of this transaction by this Tribunal in the assessee's own case for Assessment Year 2012-13. Thus, no interference is called for in the finding of the ld. CIT(A) and issue is decided against the revenue. 10. Another issue which has been raised in Ground No. 1 relates to deletion of adjustment for royalty income. Ld. Assessing Officer/TPO has made upward adjustment for royalty income on account of licensing of trade name from associate enterprise Strategic Food International Company LLC, Dubai (in short 'SFIC Dubai'). The assessee while expanding its operation in foreign countries, primarily in the middle east, made strategic investment in SFIC Dubai, which is also engaged in manufacturing and marketing of bakery products. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. TPO in its order passed u/s 92CA(3) of the Act, had never found any infirmity either in terms of agreement or in Functional Asset and risk (FAR) analysis concerning royalty receipts. The ld. CIT(A) thus held that the TPO erred in departing from accepted basis and no determining the ALP @ 21.84% of the brand value of Rs. 50.04 Crores. 11. Aggrieved, the revenue is now in appeal before this Tribunal. 11.1. The ld. D/R vehemently argued supporting the order of the ld. Assessing Officer and also referred to the written submission stating that OECD guidelines recognised the fact that intangible parts are riskiest components of the business and that weighted average cost of capital method cannot be applied in a blanket matter in each and every case. The ld. D/R further submitted that WACC is applied to value the business as a whole and the same cannot be applied to value intangibles which on a standalone basis is considered riskiest than the business as a whole. Further referring to the annual report of the company stated that the company is working on new products and also improving existing products through packaging and marketing. 11.2. On the other hand, the ld. Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion model. The discount rate takes into account the time value of money and the risk or uncertainty of the anticipated cash flows. As small variations in selected discount rates can generate large variations in the calculated value of intangibles using these techniques, it is essential for taxpayers and tax administrations to give close attention to the analysis performed and the assumptions made in selecting the discount rate or rates utilised in the valuation model. 6.171 There is no single measure for a discount rate that is appropriate for transfer pricing purposes in all instances. Neither taxpayers nor tax administrations should assume that a discount rate that is based on a Weighted Average Cost of Capital (WACC) approach or any other measure should always be used in transfer pricing analyses where determination of appropriate discount rates is important. Instead the specific conditions and risks associated with the facts of a given case and the particular cash flows in question should be evaluated in determining the appropriate discount rate. 6.172 It should be recognised in determining and evaluating discount rates that in some instances, particularly those associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same has never been disputed by the revenue authorities and even in the subsequent years also the same has not been disputed. Therefore, no interference is called for in the finding of the ld. CIT(A) and the grounds raised by the revenue is dismissed. 12.2. Next issue for our consideration is disallowance u/s 14A of the Act. The ld. Assessing Officer made disallowance at Rs. 41,61,314/- by applying Rule 8D(2)(iii) of the Rules @ 0.5% of the average investment after giving benefit of suo moto disallowance of Rs. 5,74,186/- by the assessee. When the matter came up before the ld. CIT(A), he in view of the judgment of the Hon'ble Jurisdictional High Court in the case of Commissioner Of Income Tax vs M/S Ashika Global Securities Ltd on 11 June, 2018, ITAT 100 of 2014 GA 2122 of 2014, directed the Assessing Officer to re-compute the amount only with respect to average cost of pending closing stock statement which actually yielded exempt income. 12.3. Aggrieved the revenue is now in appeal before this Tribunal. 12.4. The ld. D/R supported the order of the ld. Assessing Officer and the ld. Counsel for the assessee relied on the order of the ld. CIT(A). 13. We have heard rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of Bihar and Odisha, we find that firstly introduction of amendment in Section 2(24)(xviii) of the Act is prospective in nature and applicable from Assessment Year 2016-17 and onward. Secondly, so far as the nature of the subsidy is concerned, the alleged incentive was assured under the Industrial policy for the purpose of encouraging the assessee to set up new industries in the State. We find that the objective contained in the Industrial policy was not to reduce operation costs of the company or facilitate working of existing undertaking. Therefore, in our view, the subsidy received in form of VAT reimbursement from the State Governments was towards industrialisation in the State and to generate employment and, therefore, the entrepreneurs with the attraction of such subsidy (VAT Subsidy) plan to establish and commence business operations in such areas and for establishing such business has to make capital expenditure in the form of land, building, plant and machinery and such investments are partly reimbursed by the subsidies granted by the State Governments. Therefore, the alleged subsidy has been rightly held to be capital receipt by the ld. CIT(A) which thus calls for no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the line Notwithstanding anything contained in clause (42A) of section 2....., we are of the considered view that the depreciable asset which forms part of the block of asset even if held for more than three years cannot be brought under the category of long term capital asset for the purpose of concessional rate of tax. Under these given facts and circumstances, we are of the considered view that the alleged gain during the year from sale of depreciable fixed asset is a short term capital gain and is liable for levy of tax at normal tax rates and not under special rate provided u/s 112 of the Act. Thus, Ground No. 4 of the revenue is allowed. 21. Ground No. 5 is general in nature. 22. Now, we take up the grounds raised in the Cross-objection No. 09/Kol/2020 filed by the assessee. 23. Ground No. 1 relating to the claim of education cess as an business expenditure has not been pressed and the same is dismissed as not pressed. 24. Ground No. 2 relates to taxability of dividend distribution of non-residents as per rate provided in the agreement for avoidance of double taxation between India & U.K. 24.1. We notice that the assessee filed a detailed written submission to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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