Tribunal partially allows appeal, directs AO to adjust guarantee fee, disallows depreciation, restores expenses for fresh examination

The appeal filed by the assessee was partly allowed by the Tribunal. The Tribunal directed the Assessing Officer to adjust the corporate guarantee fee to 0.5% based on precedent. Depreciation on intangible assets was disallowed in line with previous rulings. The disallowance of expenses under Section 14A was restored to the AO for fresh examination. The provision for post-retirement medical scheme and prior period expenses were also disallowed initially but restored to the AO for further verification. The Tribunal emphasized adherence to precedents and allowed the appeal for statistical purposes, providing the assessee an opportunity to substantiate claims with evidence.

---

---

Issues Involved:
1. Transfer Pricing Adjustment on Corporate Guarantee
2. Disallowance of Depreciation on Intangible Assets
3. Disallowance of Expenses under Section 14A read with Rule 8D(iii)
4. Disallowance of Provision for Post Retirement Medical Scheme
5. Disallowance of Prior Period Expenses

Detailed Analysis:

1. Transfer Pricing Adjustment on Corporate Guarantee
The first issue pertains to the addition of Rs. 2,16,986/- on account of commission on a corporate guarantee given to an Associated Enterprise (AE). The assessee argued that this ground is covered in its favor by several Tribunal decisions, notably the case of Everest Kanto Cylinder Ltd. The Tribunal in that case upheld a guarantee commission rate of 0.5%, confirmed by the Hon'ble Jurisdictional High Court. The Departmental Representative (DR) contended that each case must be judged individually and noted that corporate guarantee commissions of 2% to 3% have been accepted in other cases. The Tribunal, considering the precedent set by the co-ordinate bench in the case of Videocon Industries vs. DCIT, directed the Assessing Officer (AO) to adjust the corporate guarantee fee to 0.5%. Therefore, this ground of appeal was partly allowed.

2. Disallowance of Depreciation on Intangible Assets
The second issue involves the disallowance of Rs. 11,90,285/- claimed as depreciation on intangible assets. The Authorized Representative (AR) of the assessee conceded that this issue is covered against the assessee in its own case for AY 2009-10. The Tribunal, acknowledging the precedent, dismissed this ground of appeal.

3. Disallowance of Expenses under Section 14A read with Rule 8D(iii)
The third issue concerns the disallowance of Rs. 1,56,87,826/- under Section 14A read with Rule 8D(iii) of the Income-tax Act. The assessee argued that this ground is covered in its favor by the Tribunal's decision in its own case for AY 2009-10. The Tribunal restored this ground of appeal to the file of the AO to decide the issue afresh, in accordance with the Tribunal's directions in the order dated 31.07.2015. This ground of appeal was allowed for statistical purposes.

4. Disallowance of Provision for Post Retirement Medical Scheme
The fourth issue relates to the disallowance of Rs. 7,19,965/- on account of provisions for a post-retirement medical scheme. The AR argued that this issue is covered against the assessee in its own case for AY 2009-10. The Tribunal, following the precedent set in the assessee's own case for AY 2009-10 and AY 2007-08, upheld the disallowance, dismissing this ground of appeal.

5. Disallowance of Prior Period Expenses
The fifth issue involves the disallowance of Rs. 5,24,659/- claimed as prior period expenses related to service tax. The AR contended that these expenses are covered under Section 43B and are allowable in the year of payment. The AO and the CIT(A) disallowed the claim, noting that the assessee had not provided evidence that the expenditure was debited in the previous year's Profit & Loss Account. The Tribunal restored this ground of appeal to the AO for fresh examination, directing the AO to verify if the claim is covered by Section 43B and to provide the assessee an opportunity to submit necessary evidence. This ground of appeal was allowed for statistical purposes.

Conclusion
The appeal filed by the assessee was partly allowed, with specific directions for fresh examination and adjustments by the AO on certain issues. The Tribunal's decision emphasized adherence to precedents and provided the assessee an opportunity to substantiate its claims with adequate evidence. The order was pronounced in the open court on 15th March 2017.

---