TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 166
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer ('the AO)') in pursuance of the direction issued under section 144C(5) of the Act by the learned Dispute Resolution Panel-II, Mumbai (DRP) on the following amongst other grounds : 1. The transfer pricing proceedings initiated by the Assessing Officer under section 92CA(1) of the Act are without any jurisdiction and ought to be quashed. 2. On the basis of the facts and in the circumstances of the case and in law, the learned Assessing Officer in pursuance of the direction given by the learned Dispute Resolution Panel erred in assessing the income of the appellant at Rs. 59,66,67,420. 3. The learned Dispute Resolution Panel erred in not directing the Assessing Officer to delete the transfer pricing adjustments proposed by the Transfer Pricing Officer ('the TPO'), as he failed to follow the provisions of section 92A(3) of the Act, hence, the transfer pricing adjustments are bad in law and the appellant's international transactions should be accepted at the arm's length as per section 92 of the Act. 4. On the basis of the facts and in the circumstances of the case and in law, the learned Assessing Officer in pursuance of the direction gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aking the addition of Rs. 12,33,521 being estimated at 10 per cent. of the total expenditure incurred on food, equipment hire, etc., by the appellant. The whole of the expenditure is incurred for the purpose of the business of the appellant." 2. At the outset, learned senior counsel, Dr. K. Shivram submitted that ground Nos. 1, 3 and 10 are general in nature, hence, the same are not pressed. The assessee has also filed a separate letter dated October 29, 2015, stating that, these grounds are not pressed. Accordingly, these grounds are dismissed as not pressed. 3. Regarding ground No. 4, which is on account of adjustment of Rs. 27,05,83,190 on account of the arm's length price determination of international licence revenue receivable from associated enterprise, the learned senior counsel, submitted that, after the order of the Dispute Resolution Panel dated December 31, 2013, the Dispute Resolution Panel has passed a corrigendum, vide order dated March 12, 2014, whereby the Dispute Resolution Panel has deleted the addition relying upon the Tribunal order for the assessment year 2008-09 in the assessee's own case. Therefore, this ground has become infructuous. Accordingly, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s rendered and has deleted the adjustment." However, the learned Transfer Pricing Officer after detail analysis held that in a third party situation, such a loan would not have been given without charging interest and the transaction is otherwise also covered under the purview of international transaction as defined in section 92B, therefore, it needs to be benchmarked and arm's length price has to be determined. After taking into account all the factors, he held that the effective rate of interest would be 14.5 per cent. and since it is an unsecured loans, therefore, 3 per cent. should be added extra ; and, accordingly, he computed the arm's length price interest to Rs. 208,57,971 at 17.5 per cent. The Dispute Resolution Panel, however, directed to restrict the adjustment after calculating the interest based on SBI PLR rate of 12.2 per cent. 7. We find that this issue had come for consideration before the Tribunal in the assessment years 2007-08 and 2008-09. The Tribunal had taken note of the fact that the assessee had also received loans/advances on which the assessee did not pay interest. For verification the matter was set aside to the Assessing Officer. The relevant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ; (ii) US$ 20,22,472 to ICICI Bank, UK, for a term loan given by the bank in the relevant year for financial facility to M/s. Nimbus Sports International Pte Ltd., Singapore ; (iii) US$ 8.9 million as corporate guarantee on behalf of its associated enterprise, NSI, in connection with its media rights agreement with BCCI. This is to meet all rights and obligations of the associated enterprise in case it cannot fulfil its duties. The assessee exposes itself to certain risks for which it has not received any compensation. An independent third party would not expose itself to such risk without adequate compensation ; or on the other hand would have taken some sort of guarantee given by the third party for the guarantee given by it, and such counter-guarantee was not obtained in this case. (iv) US$ 10 million worth of loan notes were issued by its associated enterprise, NSI, to third parties. The same were underwritten by the assessee. The assessee exposes itself to certain risks for which it has not received any compensation. An independent third party would not expose itself to such risk without adequate compensation." He further noted that since under the arm's length con....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the appellant has not debited the expenditure to the profit and loss account and not claimed deduction of the same. Hence, the question of disallowance under section 40(a)(ia) does not arise." 12. Learned senior counsel, Dr. K. Shivram, filed a detailed note with respect to non-applicability of TDS provision for the alleged advertisement commission paid to the advertising agencies. However, he submitted that here in this case the payees have already been assessed to tax and have paid taxes on the said amount and, therefore, in view of the proviso inserted in by the Finance Act, 2012, to section 40(a)(ia), such a disallowance cannot be made. Now, there are umpteen decisions, wherein, it has been held that the said proviso is clarificatory in nature, therefore, the amendment should be held to be applicable with retrospective effect. The list of some of the decisions are as under : (i) Rajeev Kumar Agarwal v. Addl. CIT [2014] 34 ITR (Trib) 479 (Agra) ; [2014] 149 ITD 363 (Agra) ; (ii) Asst. CIT v. Bhavook Chandraprakash Tripathi (Pune) (Trib) 775- 802-803 ; (iii) Santosh Kumar Kedia v. ITO ITA No. 1905/Kol/2014 dated March 4, 2015 [2015] 43 ITR (Trib) 687 (Kol) ; and (iv) Antho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e deemed as the assessee has deducted and paid the tax and, consequently, no disallowance under section 40(a)(ia) can be made. In the decisions relied on by learned counsel, it has been held that such an amendment is curative and clarificatory in nature and, therefore, it has to be given retrospective effect. Now, there is a Delhi High Court judgment in the case of CIT v. Ansal Land Mark Township P. Ltd. (I. T. A. No. 160 of 2015 order dated August 26, 2015) [2015] 377 ITR 635 (Delhi), wherein the hon'ble High Court has held that the said proviso is directory and curative and has retrospective effect from April 1, 2015. Thus, we hold that if the payee has furnished the return of income under section 139 and has taken into account such sum for computing the income in such return of income and has paid taxes then, the assessee cannot be treated as assessee-in-default within the meaning of section 201(1) and, accordingly, the assessee shall be deemed to have deducted the tax and, accordingly, no disallowance under section 40(a)(ia) can be made. Such a provision has been brought in the statute to curb the mischief and, therefore, it has to be reckoned as curative in nature and sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers, we find that there is no dispute that all the investments have been made in the subsidiary company as the strategic investment so as to get controlling interest in such subsidiaries. The investment was not made for earning of any dividend income. Besides this, the dividend income itself is Rs. 7,24,508, therefore, disallowance under section 14A cannot be more than the exempt income especially in view of the decision of the hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015] 378 ITR 33 (Delhi), wherein, the hon'ble High Court has held that, if there is no dividend income, then there cannot be any corresponding disallowance. On the same principle, if the dividend income is Rs. 7.24 lakhs, then the disallowance cannot be more than that. Accordingly, we hold that such a huge disallowance of Rs. 2,21,51,600 is uncalled for and therefore, we direct the Assessing Officer to restrict the disallowance to Rs. 7,24,508. Accordingly, ground No. 9 is treated as partly allowed. 20. In the result, the appeal of the assessee is partly allowed. 21. Now, we shall take-up the Revenue's appeal, vide which the following grounds have been raised : "1. On the facts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6816/Mum/2010, order dated August 7, 2013, the Tribunal has dealt and discussed this issue after observing and holding as under : '7. As regards ground No. 3(d), the learned representatives of both the sides have agreed that the issue involved therein relating to the addition made on account of notional interest payable by Nimbus Sport International P. Ltd. on outstanding trade balances with the assessee is squarely covered in favour of the assessee by the order of the Tribunal dated June 12, 2013 (supra) passed in the assessee's own case for the assessment year 2005-06 wherein a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in paragraphs 19 and 20 of its order : "19. We have heard the arguments of both sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that a similar issue involved in the assessee's own case for earlier years, i.e., assessment years 2003-04 and 2004-05 has been decided by the Tribunal in favour of the asses see. The learned Departmental representative, however, has submit ted that a similar issue was decided by the Tribunal in fav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow that as a result of not realising the debts from the associated enterprises, there has been any impact on profits, incomes, losses or assets of the asses see. In view of these discussions, in our considered view, a continuing debit balance per se, in the account of the associated enterprises, does not amount to an international transaction under section 92B in respect of which the arm's length price adjustments can be made. The factum of payment has to be considered vis-a-vis terms of payment set out in the transaction arrangement and not in isolation with the commercial terms on which the transaction in respect of which payment is, according to the Revenue authorities, delayed. In any event, even when an arm's length price is made in respect excessive credit period allowed under the comparable uncontrolled price method, stated by the Transfer Pricing Officer, the comparable has to be dues recoverable from a debtor and not a borrower. It appears that the Transfer Pricing Officer has adopted interest at 2.19 per cent. LIBOR on balances which exceed 30 days, but LIBOR rate is relevant only in the case of lending or borrowing of funds, and not in the case of commercial over....