TaxTMI 
TaxTMI 
2015 (2) TMI 631
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....is no business purpose or commercial expediency in money advanced to Videocon Energy Holdings Ltd. and the reasons assigned by him for doing so are wrong and contrary to the facts of the case, the provisions of the Income Tax Act, 1961 and the Rules made there under. (b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in holding that the assessee has not proved that the amount advanced to Videocon Energy Holdings Ltd. is from its own funds and hence the disallowance is justified which is wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961 and the Rules made there under. (c) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in holding that the . , 3 consequent income, in the shape of dividend would be exempt income in view of the intended purpose and the provisions of section 14A of the Income Tax Act, 1961 would apply without appreciating that the said provisions of section 14A are not applicable to advance given in form of share application money as no exempt income can arise therefrom. ....
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....t u/s. I15JB without appreciating the fact that as per clause (f) of explanation to section 115JB the amount or amounts relatable to any income to which section 10 apply has to be added to the book profit and section 14A applies to dividend income which is exempt u/s. 10(34)." 3 "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deletion of adjustment of Rs. 17,47,750/- made by the AO u/s. 92CA (3) of (lie Act without appreciating the fact that export incentives need to be excluded from the export price of the transaction for determination of ALP." 4 "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deletion of adjustment of Rs. 17,47,750/- made by the AO u/s. 92CA(3)relying on the decision of Mumbai ITAT in the case of Arviva Industries Ltd. Vs. ACIT [ITA No. 5152/Mum/2009] without appreciating the fact that the in the said case TPO had adopted the rate on which the same fabric was sold in the domestic market, whereas in the instant case, the TPO has considered the actual export price charged to M/s. VDC Technologies SPA vis-à-vis the other AEs." 5 "The appellan....
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....Income Tax (Appeals) erred in not appreciating that the investments have been made out of own funds, reserves and internal accruals which are much more than the investments yielding exempt income and hence no disallowance of proportionate interest can be made u/s. 14A of the Income Tax Act, 1961. 3. (a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 12,05,11,644/- being the amount disallowed by Ld. Assessing officer by invoking the provisions of Section 14A read with rule 8D, to the book profit for the purpose of Section 115JB of the Income Tax Act, 1961 which is wrong and contrary to the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 14A(2), 14(A)(3) and Rule 8D are deeming provisions and the same cannot be extended to provisions of section 1 15JB of the Act. 4. (a) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in....
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.... Currencies and the same was transferred to loans and advances given" and as such the price chargeable as interest on such money has to be based on LIBOR rate and also that the said notification was not relevant or applicable to the present case. (c) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming an upward transfer pricing adjustment of Rs. 15 64,368 (wrongly mentioned at Rs. 954265/- u/s. 92CA of the Income Tax Act, 1961 on account of interest chargeable on Share Application' Money Pending Allotment with M/s. Global Energy Inc. USA (associated enterprises of appellant) by determining the arm's length interest rate at 12% and the reasons assigned by him for doing so are wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961, and the Rules made thereunder. (d) Without prejudice to ground of appeal no.6(c) above, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the Arm's length price chargeable as interest on the share application money pending allotment with its AE's based on interest rates specified by MCA (Ministry of Company Affairs) Notification with....
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....ion of corporate guarantee was a shareholder function and furtherance of appellant's global expansion of business. (e) Without prejudice to the above ground, on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the arm's length guarantee fees @ 4.688% p. a. and @ 3.097% p.a. in respect of guarantee given for Videocon Global Ltd. and Videocon Global Energy Holdings Ltd. BVI respectively on entire amount of guarantees outstanding without reducing the Margin money kept in the form of Fixed Deposits by Associated Enterprises themselves (USD 20 millions in case of Videocon Global Ltd. and USD 30 millions in case of Videocon Global Energy Holdings Ltd.) 7. (a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming addition of Rs. 4,85,11,463/- made by ld. Assessing officer based on aggregate peak credit balance in the combined accounts of M/s. Sai Enterprises and M/s. Trishul Enterprises as "bogus purchases" by treating the same as cash held outside the book to finance purchase of raw materials from undisclosed parties which is wr....
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....e Income Tax Act, 1961, and the Rules made thereunder. (ii) On the facts and in the circumstances of the case and in law, the directions of the CIT(A) amounts to enhancement and the same is done without giving any show cause notice for doing the same, which is wrong and contrary to the provisions of the Income Tax Act, 1961, and the Rules made thereunder. 8. On the facts and in the circumstances of the case and in law the lower authorities erred in not granting credit for Tax Deducted at Source of Rs. 3,54,69,129/- claimed by the appellant, without assigning any reasons for doing so, which is wrong and contrary to the facts and circumstances of the case, provisions of the Income Tax Act, 1961 and Rules made thereunder. 9. On the facts and in the circumstances of the case and in law the lower authorities erred in charging interest u/s 234A of Rs. 5 1.20,249 /- which is wrong and contrary to the facts of the case, provisions of Income Tax Act 1961 and rules made thereunder. 10. On the facts and in the circumstances of the case and in law lower authorities erred in charging interest u/s 234B of Rs. 23,63,77,293 /- which is wrong and contrary to the facts of the case, provi....
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....he Income Tax Rules, 1962, by rejecting the explanation given by the appellant which is wrong and contrary to the provisions of income Tax Act, 1961, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the investments have been made out of own funds, reserves and internal accruals which are much more than the investments yielding exempt income and hence no disallowance of proportionate interest can be made u/s. 14A of the Income Tax Act, 1961. 3. (a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 62,20,32,998/- being the amount disallowed by id. Assessing officer by invoking the provisions of Section 14A read with rule 8D, to the book profit for the purpose of Section 11 5JB of the Income Tax Act. 1961 which is wrong and contrary to the provisions of the income Tax Act, 1961, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to appreciate th....
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....ment with its AEs based on interest rates specified by MCA (Ministry of Company Affairs) Notification without appreciating the fact that share application money was given to the foreign Associate Enterprises in Foreign Currencies and the same was transferred to "loans and advances given" and as such the price chargeable as interest on such money has to be based on LIBOR rate and also that the said notification was not relevant or applicable to the present case. 6.(a) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the transaction of corporate guarantee extended by the appellant to its AE as international transaction without appreciating that it does not fall within the definition of "International transaction" u/s.92B prior to amendment by Finance Act, 2012 and thereby erred in determining the ALP in respect of such transaction. (b) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming ALP of the corporate guarantees extended by the appellant to banks on behalf of its AEs and thereby erred in making an upward transfer pricing....
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....y Rs. 470,51,020/- and Rs. 399,26,540/- respectively by holding that the appellant has no evidence in respect of purchases of said plant and machinery and moulds and appellant has never procured and put to use the said assets, which is wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961, and the Rules made thereunder. (c) On the facts and in the circumstances of the case and in law, the lower authorities erred in confirming of reduction of the book value of Capital work in Progress by Rs. 2,38,28,727/- by holding that the appellant could not produce any cogent evidences to substantiate the claim of purchases accounted under Capital work in Progress on account of Trial run and trial productions, which is wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961, and the Rules made thereunder. (d) On the facts and in the circumstances of the case and in law, the lower authorities erred in making addition of Rs. 1,77,54,674/- being purchases accounted under Raw material and consumables by holding that appellant could not produce any iota of evidence to substantiate the claim of purchases of raw material and consumables from all....
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.... here that grounds of appeal filed by the assessee were lengthy, narrative and argumentative raising basic issue and alternative issues with regard to impugned additions. It was submitted by Ld. AR that charts filed in respect of each of the appeal may be referred while disposing of the grounds of appeal filed by the assessee. It is in these circumstances we have proceeded to decide these appeals. 3. Ground No.1 raised by the assessee for all the three assessment years raises common issue which relates to disallowance of interest claimed under section 36(1)(iii) of the Income Tax Act, 1961 (the Act) in respect of advances made to subsidiary of the assessee company namely Videocon Energy Holding Ltd. The facts relating to this ground in each of the year are same except difference of figures. Discussion on facts, during the course of hearing was made to the facts relating to assessment year 2008-09. Therefore, for the sake of convenience we will refer to the facts relating to A.Y. 2008-09 and the decision taken in respect of facts and law in respect of A.Y 2008-09 with regard to first ground will be applicable to the other years. 3.1 During the assessment year 2008-09 the asses....
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....ties, properties alongwith other activities. Taking into account all these facts Ld. CIT(A) has confirmed the action of the AO with regard to disallowance of interest on advances made to Videocon Energy Holding Ltd. amounting to Rs. 66,75,96,365/-. While upholding the disallowance Ld. CIT(A) has rejected the contention of the assessee that in respect of assessment years 2005-06, 2006-07 and 2007-08 similar disallowance was deleted by Ld. CIT(A) on the ground that: (i) The company to whom advance was made is different legal entity and money advanced is in the shape of share application money kept in the same shape for more than three/four years which can hardly be called as the stated indented business purpose of the assessee. (ii) As per sub-section (2) of section 73 and sub-section (2A) of Companies Act, when money received from the applicants is not refunded within eight days then the company would be liable to repay that money with interest @15% per annum. (iii) Regulation 18 of SEBI (ICDR) regulation lays down similar provision to issue refund of share application money within 15 days and in default the refund money would be eligible for interest @15% as per regulation 99....
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.... the interest free advances were made out of own capital. It was submitted that this proposition has again been confirmed by Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd., 366 ITR 505 (Bom) by following the aforementioned decision in the case of Reliance Utilities & Power Ltd. (supra) that where assessee's capital, profit reserves, surplus and current account deposits are higher than the investment in tax free securities, it would have to be presumed that investment made by the assessee would be out of interest free funds available with the assessee and no disallowance was warranted. It was submitted by Ld. AR that though the decision in the case of CIT vs. HDFC Bank Ltd.,(supra) was rendered in respect of disallowance made under section 14A with regard to interest portion but the same principle would equally be applicable to disallowance made under section 36(1)(iii) of the Act as their Lordships of Hon'ble Bombay High Court in the case of CIT vs. HDFC(supra) while holding so have followed the decision rendered in the case of Reliance Utilities & Power Ltd. (supra), which was in respect of disallowance made under section 36(1)(iii) of the Act. Thus, it was pleade....
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....facts. Even the basis of the calculation made by the AO clearly depicts that own funds of the assessee are to the tune of Rs. 6174.03 crores against which interest free advances made to sister concern are only to the tune of Rs. 66,75,96,375/-, which is far less than the own funds of the assessee. The law has been clearly laid down by Hon'ble Jurisdictional High Court regarding disallowance to be made under section 36(1)(iii) in the case of CIT vs. Reliance Utilities & Power Ltd.(supra) in which it was laid down that if the profits of the assessee in the relevant financial year, coupled with substantial shareholder funds, are sufficient to meet the interest fee advance to sister concern then presumption would be that investment in sister concernS were made by the assessee out of interest free funds and no part of interest on borrowing could be disallowed on the basis that investment were made out of interest bearing funds. Again this proposition was contested by the Revenue before Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd.(supra). The said decision relates to disallowance under section 14A but applying the decision of CIT vs. Reliance Utilities & Power Ltd. (su....
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.... there was no basis for deeming that the Assessee had used the borrowed funds for investment in tax free securities. On this factual aspect, the ITAT did not find any merit in the contention raised by the Revenue and therefore, accordingly answered the question in favour of the Assessee. On going through the order of the CIT (Appeals) dated 28th March 2005 as well as the impugned order, we do not find that the CIT (Appeals) or the ITAT erred in holding in favour of the Assessee. In this regard, the submission of Mr Mistry, the learned Senior Counsel appearing on behalf of the Assessee, that this issue is squarely covered by a judgment of this Court in the case of Commissioner of Income Tax v/s Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Born) is well founded. The facts of that case were that the Assessee viz. M/s Reliance Utilities and Power Ltd. had invested certain amounts in Reliance Gas Ltd. and Reliance Strategic Investments Ltd. It was the case of the Assessee that they themselves were in the business of generation of power and they had earned regular business income therefrom. The investments made by the Assessee in M/s Reliance Gas Ltd. And M/s Relian....
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....e force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (1982) 134 ITR 219 the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal." 5. We find that the facts ....
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.... that any notional interest income is assessable in the hands of the assessee. What is the case of the Revenue is that disallowance of interest claimed by the assessee on borrowed funds. In view of sufficient own funds available with the assessee, according to aforementioned decision of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd.(supra) and HDFC Bank Ltd. (supra) no such disallowance under section 36(1)(iii) could be made. For the sake of completeness of facts in respect of other assessment years, the figures are as under: Assessment Year Amount advanced to Videocon Energy Holdings Ltd.(Rs. In crores) Assessee's own capital and reserves. (Rs. In crores) 2009-10 66.75 5875.50 2010-11 67.66 6385.90 In view of the above discussions, Ground No.1 of the assessee's appeal for assessment year 2008-09, 2009-10 & 2010-11 is allowed and additions confirmed by Ltd. CIT(A) are deleted. 4. Ground No.2 of assessee's appeal for A.Y 2008-09, 2009-10 and 2010-11 are common and relate to one issue i.e. disallowance made under section 14A r.w. rule 8D. We will discuss facts relating to A.Y 2008-09 and as the facts for r....
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....as to be restricted to Rs. 4,72,922/-. The said chart is placed at pages 45 to 46 of the paper book and for the sake of completeness, the same is reproduced below: SALARY A)100% of the salary cost of Investments Dept. i. Sanjay Chudnaik ii.Deepak Pednekar iii.C.R Girtap B)10% of the salary costs of V.N.Dhoot, Chairman & Managing Director C)10% of the salary costs of Senior Management (1 person) Total Total salary debited to P&L Ratio of Salaries Total Salary to Disallowed Direct Expenses: DMAT A/c. Maintenance Charges, DMAT Transfer charges, etc. Indirect Expenses: Ratio of Salary Is Applied To Other Indirect Expenses: (Other than those directly related to manufacturing,....
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....otal Investments as on 31.03.08 closing (C) = [(A) + (B)] 27,35,06,01,079 As on 31.03.2007 Investments Yielding Taxfree Income Government and Trust Securities 4,08,445 Mutual Fund 16,17,07,000 Equity Shares 2,00,35,47,487 (D) 2,16,56,62,932 Investment Yielding Taxable Income (E) 16,51,56,35,383 Total Investments as on 31.03.07(F)+ [(D) + (E)] 18,68,12,98,315 Average taxfree Investments [(D) +(D)]/2 3,88,05,68,341 Average taxable Investments [(B) + (E)]/2 19,13,53,81,356 Average total Investments [(C)+ (F)]/2 23,01,59,49,697 %average taxfree investment to total investments 16.86 Expenses....
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....f the assessee towards expenses incurred for earning tax free income. It is the case of the assessee that unless the allocation of expenses as done by the assessee is rejected by way of speaking order, the disallowance to the extent it has been done as per formula laid down in rule 8D is unjustified, the disallowance cannot be calculated under section14A r.w.rule 8D unless the AO recorded his non satisfaction to the correctness of the claim of the assessee. Reference in this regard was made to the provisions of section 14A(2) and case law to contend that unless non-satisfaction is recorded by the AO regarding the claim of the assessee, no disallowance under section 14A would be made. 4.7 We have heard both the parties on this issue. As per requirement of section 14A(2), the AO is under an obligation to determine the amount of expenditure incurred in relation to an income which is not included in the total income with the method prescribed under Rule 8D in a case where AO, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of the expenditure incurred by it in relation to income which does not form part of t....
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....margin of the assessee the TPO did not include export incentive received by the assessee as part of the price and accordingly, corresponding adjustment of Rs. 17,44,750/- was made. Before Ld. CIT(A) the assessee relied upon the decision of Mumbai ITAT in the case of Arviva Industries P. Ltd. vs. ACIT, 48 SOT 418 to contend that such exclusion by the TPO was not permissible. Ld. CIT(A), relying upon the said order has held that the action of TPO in excluding export incentive received by the assessee on account of exports to the AE while doing the bench marking was not proper. The Revenue is aggrieved and has raised aforementioned grounds. 6.1 Ld. DR relied upon the order passed by TPO and on other the other hand, Ld. AR relied upon the aforementioned decision of ITAT in the case of Arviva Industries P. Ltd. vs. ACIT (supra). 6.2 We have heard both the parties and their contentions have carefully been considered. In the aforementioned decision of Mumbai Tribunal in the case of Arviva Industries P. Ltd. vs. ACIT (supra) it has been held that there cannot indeed be any rational in comparing domestic invoice price of the goods with export invoice price of the goods without t....
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....ird party. However, TPO did not accept such submission and after analyzing the secured loan finances of the assessee he has worked out the average rate of interest or cost of borrowing at 6.44% per annum. Adding 3% per annum to the said rate on account of risk involved the TPO arrived at interest rate of Rs. 9.44% per annum and arrived at a conclusion that the said rate should have been charged by the assessee. In this manner the Arms Length Price of the impugned transaction was computed and TPO arrived at a figure of Rs. 97,55,83,142/- which was added to the income of the assessee. 7.1 Before Ld. CIT(A) it was submitted that according to various decisions LIBOR has been accepted as most suitable bench mark, therefore, the impugned transaction of the assessee is at Arms Length and addition is liable to deleted. However, Ld. CIT(A) did not accept such submission of the assessee and relying upon some decisions of ITAT he has held that FD rate is also one of the methods of bench marking of international transactions relating to interest received and further risk factor has also to be looked into. Therefore, Ld. CIT(A) has held that TP adjustment was rightly made. 7.2 Similarly f....
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.... the assessee to its AE, which was located in Germany, it was held that EURIBOR based interest rate was most appropriate comparable uncontrolled rate. 7.5 Reliance was also placed on following decisions in which similar proposition has been upheld. (1) Four Soft Limited v. DCIT, 142 TTJ 358. (2) DCIT vs. Tech Mahindra (2011) 46 SOT 141 (3) Cotton Natural (I) Pvt. Ltd. vs. DCIT (2013) 32 taxman.com 219. (4) M/s. Aithent Technologies Pvt. Ltd., Delhi ITAT. 7.6 On the other hand, Ld. DR placed reliance on para 5.2 of the order of the TPO. He also placed reliance upon the order passed by Ld. CIT(A) in which reference has been made to the decision of ITAT in the case of Wipro which reported as 33 Taxman.com 263, wherein FD rate has been considered to be one of the methods for bench marking such international transactions. Thus, it was pleaded by Ld. DR that addition upheld by Ld. CIT(A) should be maintained. 7.7 We have heard both the parties and their contentions have carefully been considered. To contend that impugned transactions of the assessee with its AEs are at arms length, in view of the fact that interest charged by the assessee is in accordance with the LI....
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.... LIBOR has been accepted by the Tribunal as per following observations: " 9. On principle, we do concur with the view of the co-ordinate bench in the above said decision that the assessee is a tested party and economic/commercial as well as geographical condition in which the assessee is doing business are relevant to he considered for the purpose of determining the arm's length price. However, the Tribunal has followed the earlier decision of the co-ordinate bench to maintain the rule of consistency and accordingly directed the TPO/Assessing Officer to determined the arm's length price by considering the LIBOR + 2% on the loan given to the AE. Accordingly, to maintain the consistency on the point, we direct the Assessing Officer/TPO to determine the arm's length interest by considering the LIBOR + 2% on the transaction of loan given to the AE." In view of above discussion, we are of the opinion that since assessee is charging interest from its AE at LIBOR standards, therefore, the impugned addition for both the years is liable to be deleted and the same is deleted. Ground No.4 for A.Y 2009-10 and Ground No.4 for A.Y 2010-11 are allowed and impugned additions are deleted. 8. ....
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.... "(4) Any allotment of securities shall be completed within sixty days from the receipt of application money and in case the company is not able to allot the securities within the said period of sixty days, it shall repay the application money within fifteen days thereafter, failing which it will be required to be re-paid with interest at the rate of twelve percent per annum: Provided that the monies received on such application shall be kept in a separate bank account and shall not be utilized for any purpose other than- (i) for adjustment against allotment of securities; or (ii) for the repayment of monies where the company is unable to allot securities." 8.4 The contention of the assessee that applying aforementioned rules no TP adjustment can be made is correct for more than one reason. Firstly; the said notification is issued on 14/12/2011 and will not be applicable either to assessment year 2009-10 or assessment year 2010-11. Secondly; it is not described that the similar Rule would be applicable to the assessee where such application is made to foreign entity i.e. AEs of the assessee. Therefore, the basis adopted by TPO in the shape of MCA Regulation cannot be ap....
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....year 2010-11. Ld. CIT(A) did not accept such submission of the assessee on the ground that there was no material to support such contention. In this view of the situation, after hearing both the parties, we are of the opinion that it will serve the interest of justice if this issue to this extent is verified by the AO that whether or not the said concern is AE of the assessee. Therefore, the issue is restored back to the file of AO for re-examination in the manner aforesaid. This is being done in view of the fact that no such TP adjustment has been made in respect of A.Y 2010-11. Therefore, to this extent the matter is restored back to the file of AO and if it is found that Sapphire Overseas Inc. is not an AE of the assessee then no TP addition will be made with regard to the said amount. 8.6 So far as it relates to addition made in respect of A.Y 2010-11, the interest charged by the assessee is @4.75% which is in accordance with LIBOR rates, which is 4.68%. The addition has been made by the TPO according to the aforementioned MCA regulation, which we have held that the same would not be applicable to impugned transaction. Therefore, the impugned addition for A.Y 2010-11 is liab....
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....s given guarantee were primarily covered by pledged securities, hypothecation of debtors balances and other assets of the assessee as is evident from the details of loans viz-a-viz securities there apart from corporate guarantee provided by the assessee; (v) Details furnished in Table described that the value of securities provided by the AEs to obtain loans from banks/lenders was much more than the loans obtained. In the case of SBTL it was 2.27 times. In the case of VGL it was 3.61 times and in the case of VGEHL it was 1.35 times. All these submissions of the assessee and table are recorded at pages 104 and 105 of the order passed by Ld. CIT(A). However, Ld. CIT(A) did not accept any of such submission and referring to the aforementioned decision of Mumbai ITAT in the case of Mahindra & Mahindra(supra), he has upheld the addition against which the assessee is aggrieved and has raised Ground No.6. 9.3 Similarly, for assessment year 2010-11 Ld. CIT(A) has followed his order for A.Y 2009-10 and has upheld the addition. The assessee is aggrieved. 9.4 After narrating the fact, it was submitted by Ld. AR that the addition is not warranted and has wrongly been upheld by Ld. CIT(A)....
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....the benefit of the AE which does not involve any cost to the assessee and which does not have any bearing on profits, income, losses or assets of the enterprise, will not fall within the ambit of "international transaction" as defined in section 92B of the Act. For this purpose reliance has been placed on the decision in the case of Bharati Airtel Ltd. vs. ACIT (supra), which is later on followed by Chennai ITAT in the case of Redington India Ltd. vs. JCIT (supra). In the alternative it is the contention of the assessee that if above argument is not accepted then bench mark of the guarantee rate should be restricted to 0.20% to 0.50% for which also assessee has relied upon the decisions of the Tribunal which have been mentioned in the earlier part of this order. 9.8 We have also carefully considered such submissions of Ld.AR and we have carefully gone through the decision of Co-ordinate Bench in the case of Bharati Airtel Ltd. vs. ACIT (supra), copy of which is filed in the paper book at pages 289 to 326. In the said case the assessee had issued corporate guarantee to Deutsch Bank, New Delhi Branch. This corporate guarantee was issued on behalf of its AE and had guaranteed repay....
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....y type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business". In view of the discussions above, the scope of these transactions, as could be covered under Explanation to Section 92 B read with Section 92B(l), is restricted to such capital financing transactions, including inter alia any guarantee, deferred payment or receivable or any other debt during the course of business, as will have "a bearing on the profits, income , losses or assets or such enterprise". This pre-condition about impact on profits, income, losses or assets of such enterprises is a pre-condition embedded in Section 92B(l) and the only relaxation from this condition precedent is set out in clause (e) of the Explanation which provides that the bearing on profits, income, losses or assets could be immediate or on a future date. The contents of the Explanation fortifies, rather than mitiigates, the significance of expression ' having a bearing on profits, income, losses or assets' appearing in Section 92 B(l). 32. There can be number of situa....
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....on has some impact on profits, income, losses or assets. Clearly, these conditions are not satisfied on the facts of this case. 34. There is one more aspect of the matter. The Explanation to Section 92 B has been brought on the statute by the Finance Act 2012. If one is to proceed on the basis that the provisions of Explanation to Section 92 B enlarge the scope of Section 92 B itself, even as it is modestly described as 'clarificatory' in nature, it is an issue to be examined whether an enhancement of scope of this anti avoidance provision can be implemented with retrospective effect. Undoubtedly, the scope of a charging provision can be enlarged with retrospective effect, but an anti-avoidance measure, that the transfer pricing legislation inherently is, is not primarily a source of revenue as it mainly seeks compliant behaviour from the assessee vis-à-vis certain norms, and these norms cannot be given effect from a date earlier than the date norms are being introduced. However, as we have decided the issue in favour of the asssessee on merits and even after taking into account the amendments brought about by Finance Act 2012, we need not deal with this aspect of the mat....
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....their domestic law provisions which are quite at variance with the Indian transfer pricing legislation. Unlike elaborate wordings of Section 92 B of the Indian Income Tax. Act, 1961 defining 'international transaction', Section 247 of the Canadian Income Tax Act only gives an inclusive definition which does not even really attempt to define the expression ' transaction'. It is nobody's case that the relevant legal provisions are in pan materia. We need not, therefore, deal with those foreign judicial precedents. Suffice to say that have reached our conclusions on the basis of the legal provisions under section 92B and no judicial precedent, contrary to our understanding of these legal provisions, has been cited before us. There is a decision of the co-ordinate bench in the case of Mahindra & Mahindra (supra), referred to in the DRP order, but that decision does not deal with the scope of amended section 92B and leaves the issue open by stating that post insertion of Explanation to Section 92B, the matter will have to be examined in the light of the amended law. We have held that even after the amendment in Section 92 B, by amending Explanation to Section 92 B, a corporate guarantee....
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....e corporate and bank guarantees for the over-all interests of its business. 94. The ITAT, Delhi Bench, in the case of Bharti Airtel Ltd. (supra), has held that providing of corporate guarantee does not involve any cost to the assessee and, therefore, it is not "an international transaction", even under the definition of the said term as amended by the Finance Act, 2012. This is because, the guarantee provided by an assessee does not have any bearing on profits, income, loss or assets of the assessee., 95. In view of the nature of corporate and bank guarantees given by the assessee company and in the light of the above order of the ITA1 Delhi Bench, we hold that the TP addition made against corporate and bank guarantees is not sustainable in law. The addition is therefore deleted". 9.12 No material has been brought on record by the Revenue authorities to show that the corporate guarantee issued by the assessee to its AEs involved any cost or it was having bearing on profits, income, losses or assets of the AE. If it is so then we see no reason to differ from the aforementioned two decisions of the Co-ordinate Benches, in which it has been held that the corporate bank guaran....
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.... Jhadav to the Sales Tax Department on 1/3/2012. Based upon such information the AO required the assessee to furnish all the details relating to the purchases made from above mentioned two entities. The assessee filed all required details and submitted that the purchases are made by the assessee from aforementioned two concerns, which are concerns of one Mr. Suresh Amritlal Parekh and he has supplied these material to the assessee. The payment is made by account payee cheques in the name of these parties and assessee had never to deal with the two persons whose affidavits have been referred. The assessee has not only given all details and submitted that the purchases are genuine but also filed confirmation letter from Mr. Suresh Parekh stating therein that the goods were actually supplied to the assessee. In respect of delivery of the goods it was submitted that delivery was given at the place of the assessee, therefore, assessee does have evidence of transport of the goods. The AO rejected all such contentions of the assessee. However, the AO observed that the raw material so purchased was used by the assessee in the manufacturing process and the finished goods, which have actuall....
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....ve facts the AO made additions (i) of Rs. 1,70,26,380/- on account of depreciation on plant and machinery and moulds on the ground that these purchases were from Hawala dealers; (ii) reduced written down value of plant and machinery and moulds by Rs. 4,70,51,020/- and Rs. 3,99,26,540/- respectively by holding that the assessee does not have evidence in respect of purchase of said plant and machinery and moulds and assessee has never procured and put them into use; (iii) a sum of Rs. 12,38,28,727/- was reduced from the book value of capital work-in-progress by holding that assessee could not produce cogent evidence to substantiate the claim of purchases accounted under "capital work-in-progress on account of trial run and trial production". The additions so made have been confirmed by Ld. CIT(A) in the impugned orders. 10.5 It is the submission of the assessee that all these purchases were made against respective bills of the respective concerns and these were the concerns of Shri Suresh Amritlal Parekh who provided the material to the assessee as per invoices. The persons whose affidavits/statements are provided by the AO to the assessee are not known to the assessee does not ha....
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....ade addition merely on the basis of observations made by Sales Tax Department, without conducting any independent enquiry, the addition made was justified, particularly keeping in view the fact that assessee had discharged primary onus cast upon on him by showing purchases in the books of account, payment by way of account payee cheques and producing vouchers of sale of goods, it was held that addition was liable to be deleted. (3) M/s. Jagdamba Trading Co. vs. ITO (2007) 16 SOT 66 (Jodh). In this case, on the basis of affidavit filed in Sales Tax proceeding, a sum of Rs. 2,20,000/- was added to the income of the assessee and it was held that in view of evidence filed by the assessee to support purchases and payments made through account payee cheques addition could not be made as affidavit of the sellers were filed during the course of Sales Tax proceedings would have no evidentiary value against the assessee particularly on the fact that assessee was not given any opportunity to cross examine the said affidavits. (4) ACIT vs. G.V.Sons , ITA No,.2238,2239 & 2240/Mum/2012 dated 05/12/2014: In this case during the survey made under section 133A in group cases, where stat....
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....made through account payee cheques/RTGS. It is only on the basis of presumption, it is the case of AO that the said amount which is deposited in the bank account of the sellers have come back to the coffers of the assessee. For raising such presumption there should be material on record to suggest that the amount paid by the assessee has again came back to the coffers of the assessee. In these circumstances, we are of the opinion that it would serve the interest of justice if the issues raised in Ground No.7 of both the impugned assessment years is restored back to the file of AO with a direction to re-adjudicate this issue in the manner aforesaid after giving the assessee a reasonable opportunity of hearing and placing all the material on record. After giving such opportunity to the assessee the AO will re-decide this issue as per provisions of law. Ground No.7 for both the years are allowed for statistical purposes in the manner aforesaid. 11. It may be mentioned here that Ground No.8, 9, 10 & 11 for assessment year 2009-10 and 2010-11 raise issue regarding granting of credit for TDS and levy of interest under section 234A, 234B and 234C of the Act. During the course of hearin....