TaxTMI 
TaxTMI 
2018 (11) TMI 864
X X X X Extracts X X X X
X X X X Extracts X X X X
....of outdoor media advertising services. 1.2 The assessee, vide letter dated 11/06/2018, has intimated that the name of the assessee has been changed from Laqshya Media Private Limited to Laqshya Media Limited with effect from 27/09/2017 and also filed revised Form No. 36B reflecting the aforesaid change. Finding the same in order, we proceed to dispose-off the same as agitated before us by respective representatives. 1.3 As evident from grounds of appeal, the grievance of the assessee arises out of following additions:- No. Nature Amount 1. Transfer Pricing Adjustment on account of Corporate Guarantee 1,27,17,000/- 2. Transfer Pricing Adjustment on account of interest on loan given to AE 12,71,07,358/- 3. Disallowance of interest u/s 36(1)(iii) 4,08,16,288/- 4. Disallowance u/s 14A 2,58,300/- 5. Mismatch in Form 26AS data 1,02,227/- 6. Short Grant of TDS 2.1 The events leading to the dispute are that certain international transactions as reported by the assessee in Form No.3CEB were referred u/s 92CA(1) to Ld. Transfer Pricing Officer [TPO] for determination of Arm's Length Price [ALP]. The Ld. TPO,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r due repayment of term loan availed by 'Right Angel Media FZ, LLC', a step down subsidiary of the assessee company. The corporate guarantee was reduced to 51 million vide amendment to deed of guarantee dated 04/01/2010 and further reduced to AED 40 million. The Ld. TPO had proposed the adjustment of 2.25% against the same which came to Rs. 141.30 Lacs. The said adjustment, upon confirmation by Ld. DRP, is under appeal before us. Though the Ld. AR urged that the said transaction was not an international transaction but at the same time, fairly conceded that the stated issue stood partly covered in assessee's favor by the order of this Tribunal in assessee's own case for AY 2010- 11 [ITA No. 500/Mum/2015 dated 04/01/2017] and also for AY 2011-12 [ITA No. 1774/Mum/2016] wherein the adjustment against the same has been sustained to the extent of 0.50% in terms of the judgment of Hon'ble Bombay High Court rendered in CIT Vs. Everest Kento Cylinders Ltd. [378 ITR 57]. There being no change in material facts or circumstances, taking the same view, we restrict the rate of impugned additions to 0.50% as against 2.25% taken by the lower authorities. This ground stand partly allowed. The Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same were not justified under the circumstances. In the alternative, it was submitted that the aforesaid loans, being in foreign currency, were to be benchmarked at LIBOR rates. However, the aforesaid submissions could not find favor with Ld. TPO who, keeping in view the rate of interest of 13%-14% being charged by the assessee in earlier years as per contractual terms and accepted by revenue, benchmarked the same in similar manner which gave rise to impugned adjustment of Rs. 12.72 crores in the hands of the assessee. 5.3 The Ld. DRP opined that granting of loan to AE was an international transaction which was to be benchmarked appropriately regardless of the fact that whether the assessee charged interest against the same or not or whether the AE was in position to repay the loan or not. Arguments of commercial expediency/ strategic investment / real income were not relevant for determination of ALP of the international transaction and nothing prevented the assessee to write-off the interest which ultimately could not be recovered. The plea to benchmark the same at LIBOR was also rejected since, upon perusal of loan agreement, it was concluded that the loan was repayable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was entitled for interest ranging from 13%-14% and the same has also been recognized as income in the earlier years. However, for the impugned AY, no interest has been charged by the assessee primarily in view of the fact that the aforesaid loans became doubtful due to losses sustained by its AE. The primary argument of Ld. AR rest on the premise that the loans being stressed asset / non-performing assets and therefore, are to be benchmarked at Nil rate of interest. However, the fact remains the same that the assessee has advanced loan pursuant to loan agreements / arrangements to its AE and was entitled to certain rate of interest. These loan transactions as entered into by the assessee with the AE squarely falls within the ambit of Section 92(1) / 92B as an international transactions as accepted by the assessee in its TP study and the statutory provisions mandates that the income from such transactions is to be computed on the principle of arm's length price irrespective of the fact that no such income has actually accrued to the assessee. This being so, the argument of principles of commercial expediency or notional income or revenue neutrality as raised before us fails si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onal in nature. When the legal provisions are not in pari materia, as the provision of normal computation of income and the provision of computation of income in the case of international transactions between the associated enterprises, what is held to be correct in the context of one set of legal provisions has no application in the context of the other set of legal provisions. Keeping in view the same, we reject the various contentions raised by Ld. AR, in this regard. 5.7 Now the only question that survives for our consideration is applicable interest rate against the same. The Ld. AR has supported the argument that the same should be benchmarked at LIBOR with the following judicial pronouncements:- (i) Cotton naturals India Pvt. Ltd. [55 Taxmann.Com 523 Hon'ble Delhi HC] (ii) Tata Auto-comp Systems Ltd [374 ITR 516 Hon'ble Bombay High Court] (iii) Transport Corporation of India Ltd. [ITA 117/Hyd/2016 Hyderabad Tribunal] (iv) Piramal Glass Limited [ITA No. 157/Mum/2016 Mumbai Tribunal] (v) Instrumentarium Corporation Ltd. [ITA 1584/Kol/2009 Kolkata Tribunal] The Ld. AR submitted that the assessee had advanced loans in foreign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been drawn to the financial structure of the assessee during impugned AY to submit that similar facts exist in this year also. Upon careful consideration, we find that the issue is repetitive in nature and the same has already been dealt with by this Tribunal for earlier AY 2010-11 which has been followed in AY 2011-12. For ease of reference, the relevant observation of the Tribunal in its order for AY 2010-11 could be reproduced in the following manner:- 5.5 We have heard various contentions and perused relevant material including cited case laws. After analyzing the various judicial pronouncements, we find strength in the various arguments of Ld. AR. The perusal of Net worth statements reveals that as on 31/03/2010, the assessee's capital structure stood as follows:- Liabilities Amount (Rs. In Crores) Assets Amount (Rs. In Crores) Shareholders' Fund 249.00 Fixed Assets 27.45 Loan Funds 64.22 Investments 12.60 Loans & Advances 143.23 Net Current Assets 4.82 Profit & Loss A/c 125.12 TOTAL 313.22 313.22 It can be observed that agai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom their own viewpoint but that of a prudent businessman. 5.6 Keeping all these factors in mind and on the facts and circumstances of the case, we are inclined to delete impugned additions. The ground of assessee's appeal succeeds. The ratio of the above decision has been followed in AY 2011-12. Similar facts exist in the impugned AY and there is no material change in the factual matrix. Further, there is only a marginal increase of Rs. 0.53 Crores in loans granted by the assessee to its subsidiary during the impugned AY. Therefore, respectfully following the consistent stand of the Tribunal in assessee's own case for AYs 2010-11 & 2011-12, the impugned additions of Rs. 214.05 Lacs stand deleted. The suo-moto disallowance of Rs. 194.10 Lacs as made by assessee while computing its income remain intact since the same has been added back in terms of the provisions of Section 43B. This ground raised in this regard, stand allowed to the extent as discussed hereinabove. 7.1 The next issue pertains to disallowance u/s 14A. The assessee has earned exempt dividend income of Rs. 85,136/- from certain mutual funds. The assessee's opening & closing investments stood at Rs. 12.6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Vs. Vegetable Products Limited [1973 88 ITR 192]. The decision in PCIT Vs. Bhushan Steel Ltd., in turn, placed reliance on the decision of Hon'ble Supreme Court rendered in Apollo Tyres Ltd. Vs. CIT [255 ITR 273] which held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115J. Similar view has been expressed by our jurisdictional Bombay High Court rendered in CIT Vs. JSW Energy Limited [2015 60 Taxmann.com 303], CIT v. Essar Teleholdings Ltd. [ITA No. 438 of 2012, dated 07/08/2014] & CIT Vs. Bengal Finance & Investments Pvt. Limited [ITA No. 337 of 2013 dated 10/02/2015]. Therefore, respectfully following the catena of judgment in assessee's favour, we hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. 7.5 The grounds raised in this regard stand allowed in terms of our above order. 8. The root of next issue lie in the fact that certain incomes as reflected in Form 26AS were not found to be credited in the Profit & Loss Account and the income to the extent of Rs. 1.02 Lacs could n....