TaxTMI 
TaxTMI 
2016 (7) TMI 1499
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....actions of the assessee. The TPO vide his order dated 31.12.2013 recommended a transfer pricing adjustment of Rs. 71,05,654 on account of corporate guarantee issued by the assessee on behalf of an AE and another transfer pricing adjustment of Rs. 9,60,867 on account of interest on advances given by the assessee to its AE. Both these transfer pricing adjustments were incorporated in the assessment order passed on 11.02.2014. The Assessing Officer further made certain additions and disallowances to the returned income and assessed the total income of the assessee at Rs. 17,53,50,351 under the normal provisions of the Act and at Rs. 26,78,15,875 u/s 115JB of the Act. Assessee's claim of TUF subsidy being capital in nature, was also declined. 3. First transfer pricing adjustment of Rs. 71,05,654 incorporated in the assessment order is on account of fees for guarantee issued by the assessee in favour of its Associated Enterprise. The relevant facts are that the assessee during the period under consideration had given various guarantees to Banks on behalf of its subsidiary company Grabal Alok UK Ltd. The assessee had not benchmarked any of these guarantees in its transfer pricing stud....
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.... Limited (ITA No.2631/Mum/2015) dated 13th April 2016. 7. Without prejudice to the above, it was argued by ld. AR that guarantee commission rate of 0.5% must be applied in view of the decision of Hon'ble Bombay High Court in the case of M/s Everest Kento Cylinders Ltd., [2015] 378 ITR 57 and the decision of Tribunal in ITA No.542/Mum/2012, order dated 23-11-2012. Following more decisions were also relied upon :- i) Everest Kanto Cylinder Limited Vs. ACIT (ITA No. 550/Mum/2014); ii)Manugraph India Ltd (ITA No 4761/Mum/2013); iii)Aditya Birla Minacs Worldwide Ltd. (7033/M/2012); iv)Glenmark Pharmaceuticals Limited (ITA No 5031/Mum/2012); v)Cox & Kings Limited (ITA No. 135.4 & 7770/Mum/2014) dated 4 November 2015; vi) Manugraph India Limited (ITA No.491/Mum/2015) dated 16 September 2015 vii) Hindalco Industries Limited (ITA No. 4857/Mum/2012) dated 16 September 2015. 8. On the other hand, ld. DR relied on the order of lower authorities and contended that the transaction of provision of bank guarantee, in the facts of the present case has a bearing on the assets of the assessee at the time of the transactions and also....
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....assessee from its AE in a similar transaction with an unrelated party. Arms length interest so computed by the TPO at Rs. 9,60,867 was incorporated in the assessment order as the transfer pricing adjustment for this international transaction. The action of the AO was confirmed by the CIT(A), against which the assessee is in further appeal before us. 11. It was contended by ld. AR that no disallowance can be made for strategic investment made in the subsidiary company. As per ld. AR since sufficient own funds were available with the assessee to cover the investment so made, no disallowance should be made as per verdict of Hon'ble Jurisdictional High Court in the case of Reliance Utilities & Power Limited, 313 ITR 340. He further contended that investment so made in share application money of the company should be excluded. 12. On the other hand, ld. DR relied on the order of lower authorities. 13. We have considered rival contentions and found from the record that during the year under consideration, the assessee had given advances to its Associate Enterprise Grabal Alok International Ltd ('GAlL') of Rs. 81,08,748/-. The said advance were given in the normal course ....
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....nts as observed from the aforesaid chart, a presumption may be drawn that the amount had been invested lout of own funds. 18. From the record we found that in the appellate order passed for AY 2008-09 and AY 2009-2010, the CIT(A) has accepted the fact of the investments (including share application money) being funded through own funds of the assessee and has deleted the disallowance of interest expenditure. Further the assessee had sufficient owned funds of Rs. 144.1 crores for making incremental investments during the year of Rs. 5.24 crores in Alok Industries Limited (excluding share application money converted into shares during the year. In view of the decision of Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd. 366 ITR 505 and Reliance Utilities & Power Ltd., 313 ITR 340 as well as various judicial pronouncements referred by ld. AR, no disallowance on account of interest is to be made u/s.14A, when the investments are made from own funds. Accordingly, we direct the AO not to make any disallowance on account of interest. 19. In view of the above disallowance u/s.14A works out at Rs. 12,44,207/- as under :- Sl. No Particulars Amount in Rupees 1 ....
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....that even if a claim is not made before the AO, it can be made before the Appellate authority. Further the Bombay High Court in the case of CIT vs Pruthvi Brokers & Shareholders Pvt. Ltd (349 ITR 336), having considered the decisions of the Supreme Court in the case of Goetze India Ltd. (supra) and also National Thermal Power Company Ltd. v CIT (supra), held that the Appellate authorities are entitled to consider the new claim of the assessee and adjudicate upon the same on merits of the case. As all the facts are available on record, we adjudicate assessee's claim of TUF subsidy. From the record we found that the assessee has received reimbursement of interest cost as per TUF scheme. The object of the scheme was to encourage the upgradation of technology. Therefore, the income to the extent of duty credit and reimbursement of interest cost under TUF scheme, which though credited to profit and loss account, should be treated as capital receipt, not chargeable to tax. The issue under consideration is squarely covered by the decision of Hon'ble Punjab & Haryana High Court in the case of Shri Sham Lal Bansal (200 Taxman 14)(P&H). We find that identical issue under the Technology Upgra....
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....iture and neither such a case has been set up by the Department. The only objections of the Department are that the subsidy has been given after commencement of production and, secondly that it was for repayment of loans. Both these factors do not distract from the nature of the subsidy being treated as capital, as explained by the Hon‟ble Supreme Court in the case of CIT vs. Ponni Sugars Chemicals Ltd. [2008] 306 ITR 392 (SC). 3. We have heard learned counsel for the appellant. 4. Learned counsel for the revenue submitted that the subsidy was not given at hte time of setting up of the industry but after commencement of production for repayment of loan. In such situation, the amount should have been treated as revenue receipt as per judgment of the Hon‟ble Supreme Court in Sahney Steel & Press Works Ltd. & Ors. v. CIT (1997) 228 ITR 253. 5. We are unable to accept the submission. 6. The purpose of scheme under which the subsidy is given, has been discussed by the Tribunal. To sustain and prove the competitiveness and overall long term viability of the textile industry, the concerned Ministry of Textile adopted the TUFS scheme, envisag....