Appeal partly allowed with fresh directions for transfer pricing & assessment adjustments.

The appeal was partly allowed, with specific directions given to the Transfer Pricing Officer (TPO) and Assessing Officer (AO) for fresh consideration and adjustments in accordance with the Tribunal's findings and previous decisions. The Tribunal emphasized the importance of proper benchmarking and verification of facts before making any adjustments. Notably, adjustments regarding Corporate Guarantee to Associated Enterprise were restricted to 0.5% of the guarantee amount until a certain date, and various disallowances were deleted based on commercial expediency and absence of exempt income. Penalties and interest levies were rendered infructuous due to rectification orders.

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Issues Involved:
1. Adjustment pertaining to Corporate Guarantee (CG) to Associated Enterprise (AE)
2. Adjustment pertaining to Interest on Loan given to AE
3. Disallowance of Interest under section 36(1)(iii) of the Act
4. Disallowance under section 14A read with Rule 8D
5. Mismatch of income as per Form 26AS data
6. Short grant of IDS credit
7. Non-grant of set-off of brought forward business losses and unabsorbed depreciation
8. Levy of Interest under section 234A
9. Levy of Interest under section 234B
10. Penalty under section 271(1)(c) of the Act

Detailed Analysis:

1. Adjustment pertaining to Corporate Guarantee (CG) to Associated Enterprise (AE):
The assessee provided a corporate guarantee to its AE, which was withdrawn effective from 1 April 2012. The TPO made an adjustment of Rs. 20,58,028 under Section 92CA(3) of the Act. The DRP upheld this adjustment. The Tribunal noted that in a similar case for A.Y. 2013-14, the adjustment was restricted to 0.5% of the guarantee amount following the decision of the Hon'ble Bombay High Court in CIT vs. Everest Kanto Cylinder Ltd. The Tribunal directed the TPO to restrict the adjustment to 0.5% till July 2013 when the guarantee was in existence.

2. Adjustment pertaining to Interest on Loan given to AE:
The assessee granted loans to its AE, LMI, with interest rates of 13% and 14%. The TPO made an adjustment of Rs. 13.07 crore. The Tribunal noted that in previous years, the issue was restored to the TPO for fresh benchmarking. The Tribunal directed the TPO to consider the precarious financial condition of the AE and apply appropriate CUP for benchmarking, considering the loans as "stressed assets." The Tribunal also directed the TPO to consider the LIBOR rates for benchmarking.

3. Disallowance of Interest under section 36(1)(iii) of the Act:
The AO disallowed Rs. 64,95,182 under Section 36(1)(iii) on the grounds that interest-free funds were advanced to subsidiaries out of interest-bearing funds. The Tribunal noted that in previous assessment years, it was held that the assessee had sufficient interest-free funds and the advances were given for commercial expediency. The Tribunal deleted the disallowance.

4. Disallowance under section 14A read with Rule 8D:
The AO disallowed Rs. 5,13,050 under Section 14A read with Rule 8D. The Tribunal noted that the assessee did not earn any exempt income during the year and followed the decision in the assessee's own case for A.Y. 2013-14, wherein it was held that no disallowance under Section 14A is warranted when no exempt income is earned. The Tribunal directed the AO to delete the disallowance.

5. Mismatch of income as per Form 26AS data:
The AO made an addition of Rs. 24,03,464 due to a mismatch in Form 26AS data. The Tribunal restored the issue to the AO to verify and reconcile the entries in Form 26AS and grant appropriate relief to the assessee.

6. Short grant of IDS credit:
The issue was rendered infructuous due to a rectification order passed by the AO on 18.03.2019.

7. Non-grant of set-off of brought forward business losses and unabsorbed depreciation:
The issue was rendered infructuous due to a rectification order passed by the AO on 18.03.2019.

8. Levy of Interest under section 234A:
The issue was rendered infructuous due to a rectification order passed by the AO on 18.03.2019.

9. Levy of Interest under section 234B:
The issue was rendered infructuous due to a rectification order passed by the AO on 18.03.2019.

10. Penalty under section 271(1)(c) of the Act:
The Tribunal noted that this ground of appeal is premature and needs no adjudication.

Conclusion:
The appeal was partly allowed, with specific directions given to the TPO/AO for fresh consideration and adjustments in accordance with the Tribunal's findings and previous decisions. The Tribunal emphasized the need for proper benchmarking and verification of facts before making any adjustments.

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