2022 (11) TMI 1355 - AT - Income Tax

Tribunal Rules in Favor of Assessee on Transfer Pricing and Disallowance Issues

The Tribunal allowed the Assessee's appeal partly, particularly on the transfer pricing adjustments and disallowance under Section 14A, while dismissing ... Validity of assessment u/s 92CA - period of limitation as prescribed u/s 92CA(3A) r.w.s. 153 - HELD THAT:-The order passed by the Transfer Pricing Officer is barred by limitation and therefore, the transfer pricing adjustments made in the Final Assessment Order, dated 26.02.2015 are deleted. As respectfully following the above decision of the Tribunal [2022 (10) TMI 255 - ITAT MUMBAI] preferred by the assessee for the Assessment Year 2011-12, in the case of the Appellant, Additional Ground No. 1 raised by the Assessee in the present appeal is allowed. Disallowance u/s 14A r.w.r 8D - addition to suo-moto disallowance offered by the Assessee - HELD THAT:- The Assessing Officer is directed to verify the investment which yielded exempt income during the year and re-compute disallowance under Section 14A read with Rule 8D(2)(iii) of the Rules by taking into consideration only the investments which yielded exempt income during the previous year for the purpose of calculating Average Value of Investment. Disallowance of deduction for foreign exchange loss on revaluation of shareholders deposits - HELD THAT:- Ground raised by the Assessee is dismissed since, admittedly, the very basis on which the Assessee had set up this alternative/without prejudice claim does not survive. Further, in our view the two pleas set up by the Assessee are not alternative but mutually destructive. While preparing return of income the Assessee has treated the exchange loss on revaluation of Shareholders‟ Deposits as capital in nature, during the assessment proceedings the Assessee has claimed the same to be Revenue in nature while retaining the stand that the exchange gain on revaluation of Shareholders‟ Deposits in earlier years is capital in nature. While there is no bar on taking any inconsistent or alternative pleas, mutually repugnant and contradictory pleas which are destructive of each other cannot be permitted to be urged simultaneously. Computing the amount of MAT credit to be carried forward without including surcharge and cess - HELD THAT:- As considered the rival submissions. Assessing Officer is directed to re-computed the amount of MAT Credit to be carried forward, after including surcharge and cess as per law. Disallowance of interest u/s 36(1)(iii) - Assessee was holding investment in overseas entities - HELD THAT:- As decided in assessee own case [2022 (10) TMI 255 - ITAT MUMBAI] loans and advances given by the assessee company to its subsidiary company was raised for the assessment year 1989 -90 and it was decided in favour of the assessee. In the present case, we are concerned with the assessment years 1998-99 to 2002-03. The Tribunal has consistently applied the ratio of its decision rendered for assessment years 1989-90 and assessment year 1997-98. We do not find that there is any change in the factual position. Decided in favour of assessee. TDS u/s 194H - Disallowance being credit card commission paid without deducting tax at source - effect of amendment - HED THAT:- As decided in assessee own case [2022 (10) TMI 255 - ITAT MUMBAI] commission to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act . Also the second proviso to Section 40(a)(ia) of the Act being beneficial to the assessee and declaratory/curative in nature, must be given retrospective effect. Decided against revenue. Issues Involved:1. Transfer Pricing Adjustments2. Disallowance under Section 14A of the Income Tax Act3. Deduction for Foreign Exchange Loss on Revaluation of Shareholders Deposits4. Computation of MAT Credit5. Grant of Credit for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)6. Short Granting of Interest under Section 244A of the Income Tax Act7. Disallowance of Interest under Section 36(1)(iii) of the Income Tax Act8. Disallowance of Credit Card Commission Expenses under Section 40(a)(ia) of the Income Tax ActDetailed Analysis:1. Transfer Pricing Adjustments:The Assessee challenged the transfer pricing adjustments made by the Transfer Pricing Officer (TPO) on the grounds of being barred by limitation. The Tribunal agreed with the Assessee, citing the Madras High Court's decision in M/s Pfizer Healthcare India Pvt. Ltd. vs. DCIT, which stated that the period of 60 days for passing the TPO order should exclude the last date of the assessment period. Consequently, the Tribunal held that the TPO's order dated 30.01.2015 was beyond the prescribed time limit, making the transfer pricing adjustments invalid.2. Disallowance under Section 14A of the Income Tax Act:The Assessee contested the disallowance of INR 8,55,98,057/- under Section 14A read with Rule 8D, arguing that the suo-moto disallowance of INR 4,22,19,634/- was sufficient. The Tribunal directed the Assessing Officer to re-compute the disallowance by considering only those investments which yielded exempt income during the year, following the Special Bench decision in ACIT Vs Vireet Investments Private Limited.3. Deduction for Foreign Exchange Loss on Revaluation of Shareholders Deposits:The Assessee claimed a deduction for foreign exchange loss on revaluation of shareholders' deposits, which was initially treated as capital in nature. The Tribunal dismissed this claim, noting that the Assessee had treated the exchange gain on revaluation as capital in earlier years, and mutually contradictory pleas cannot be entertained.4. Computation of MAT Credit:The Assessee argued for the inclusion of surcharge and cess in the computation of MAT credit. The Tribunal directed the Assessing Officer to re-compute the MAT credit, including surcharge and cess as per law.5. Grant of Credit for TDS and TCS:The Assessee sought directions for the grant of credit for TDS and TCS amounting to INR 2,06,85,502/-. The Tribunal remanded the issue to the Assessing Officer for verification and appropriate credit as per law.6. Short Granting of Interest under Section 244A of the Income Tax Act:The Assessee claimed that interest under Section 244A was short-granted. The Tribunal directed the Assessing Officer to re-compute the interest after giving credit for the correct amount of TDS and TCS.7. Disallowance of Interest under Section 36(1)(iii) of the Income Tax Act:The Revenue challenged the deletion of disallowance of INR 32,73,14,212/- under Section 36(1)(iii). The Tribunal upheld the DRP's decision, noting that the investments were made for commercial expediency and business purposes, following the precedent set in the Assessee's own case for earlier years.8. Disallowance of Credit Card Commission Expenses under Section 40(a)(ia) of the Income Tax Act:The Revenue contested the deletion of disallowance of credit card commission expenses. The Tribunal dismissed this ground, citing the decision in ITO (TDS) (OSD)-3(4) vs. The Indian Hotels Company Ltd., which held that no TDS was required on credit card commission payments to banks, following the CBDT Notification No. 56 of 2012.Conclusion:The Tribunal allowed the Assessee's appeal partly, particularly on the transfer pricing adjustments and disallowance under Section 14A, while dismissing the Revenue's appeal on all grounds. The Tribunal's decisions were based on established precedents and legal interpretations, ensuring that the Assessee's claims were addressed in accordance with the law.