2022 (2) TMI 1326 - AT - Income Tax

Revenue appeals dismissed, assessee appeals partly allowed. Delays & section 263 issues dismissed.

ACIT, Circle-1, LTU Bangalore Vs. M/s. Tejas Networks Ltd., M/s. Tejas Networks Ltd. Versus. ACIT, Circle-1, LTU Bangalore, DCIT, Circle-1, LTU Bangalore Vs. M/s. Tejas Networks Ltd., M/s. Tejas Networks Ltd. Bangalore 560 100 Vs. DCIT, Circle-1, LTU Bangalore And M/s. Tejas Networks Ltd. Bangalore 560 100 Vs. Principal CIT, Central, Bangalore

ACIT, Circle-1, LTU Bangalore Vs. M/s. Tejas Networks Ltd., M/s. Tejas Networks Ltd. Versus. ACIT, Circle-1, LTU Bangalore, DCIT, Circle-1, LTU Bangalore ... Issues Involved:1. Delay in filing the appeal.2. Transfer Pricing adjustments.3. Disallowance of deduction under section 35(2AB) of the Act.4. Deduction under section 35(1)(iv) of the Act.5. Disallowance under Rule 8D read with Section 14A.6. Initiation of penalty proceedings.7. Interest under section 234B of the Act.8. Non-grant of foreign tax credit and short credit of tax deducted at source.9. Computation of book profit under section 115JB.10. Validity of the order passed under section 263 of the Act.Detailed Analysis:1. Delay in Filing the Appeal:The appeal was delayed by 1694 days. The assessee attributed the delay to a misunderstanding due to a change in counsel. The Tribunal held that delay could be condoned only for sufficient and good reason supported by cogent evidence. The Tribunal found no sufficient cause to condone the delay, noting that the delay was due to negligence and inaction on the part of the assessee. Therefore, the appeal was dismissed unadmitted.2. Transfer Pricing Adjustments:The Tribunal addressed multiple grounds related to transfer pricing:- Interest on loan advanced to AE: The Tribunal followed its earlier order and determined the ALP at 12 months LIBOR plus 300 basis points, deciding in favor of the assessee.- Interest on outstanding balance from AE: This issue was decided in favor of the assessee based on the decision of the Hon’ble High Court of Bombay in the case of CIT-9 Vs Indo American Jewellery Ltd.- Imputing Guarantee Commission: The Tribunal directed the AO/TPO to make TP adjustments at 0.50%, following previous Tribunal orders, deciding in favor of the assessee.3. Disallowance of Deduction under Section 35(2AB):The Tribunal found that the issue was covered by its earlier orders, where it had reversed the findings of the AO. Hence, the grounds of the assessee were allowed, and the issue was decided in favor of the assessee.4. Deduction under Section 35(1)(iv):The issue was remitted to the file of the AO for fresh examination, following the Tribunal’s decision in the assessee’s own case for A.Y. 2014-15.5. Disallowance under Rule 8D read with Section 14A:The Tribunal remitted the issue to the AO for re-examination to verify if the investment that yielded exempt income was made out of interest-free own funds.6. Initiation of Penalty Proceedings:This ground was found to be preposterous and did not require adjudication.7. Interest under Section 234B:This ground was consequential in nature.8. Non-grant of Foreign Tax Credit and Short Credit of Tax Deducted at Source:The AO was directed to give corresponding TDS credit to the assessee.9. Computation of Book Profit under Section 115JB:The Tribunal admitted additional grounds regarding the computation of book profit and remitted the issue to the AO for reconsideration while passing a fresh order.10. Validity of the Order Passed under Section 263:The Principal CIT invoked section 263, finding the AO’s order erroneous and prejudicial to the interest of the revenue due to lack of proper verification. The Tribunal upheld the Principal CIT’s order, noting that the AO failed to make necessary verification regarding the computation of book profit and disallowance under section 14A. The Tribunal directed the AO to carry out an independent enquiry and pass a fresh assessment order after giving an opportunity of hearing to the assessee.Conclusion:The appeals filed by the revenue were dismissed. Appeals filed by the assessee were partly allowed for statistical purposes, with certain issues remitted back to the AO for fresh consideration. Appeals related to the delay in filing and the order under section 263 were dismissed.