TaxTMI 
TaxTMI 
2018 (10) TMI 1669
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....(hereinafter referred to as TPO) in adding an amount of Rs. 2,44,893/- to the total income through an adjustment made to the Arm's Length Price with regards to international transactions entered into by the Appellant with its Associated Enterprises, without considering the facts of the case and the submission of Appellant in this respect. 2. In view of the above, the learned ACIT be directed to allow the whole of the above adjustment made. B. DISALLOWANCE UNDER SECTION 14A OF THE ACT Rs. 1,14,81,363/- (PARA 5 OF THE ORDER) 3. On the facts and in the circumstances of the case and in law, the Honorable CIT (A) erred in confirming the action of the learned ACIT in disallowing an amount of Rs. 1,14,81,363/- u/s, 14A, by applying Rule 8D , without appreciating the facts of the case and the submission of the Appellant. 4. In view of the above, the learned ACIT be directed to allow the whole of the above addition made. C. DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA OF THE ACT FOR FUTURE YEARS (PARA 8 OF THE ORDER) 5. On the facts and in the circumstances of the case and in law, the Honorable CIT (A) erred in confirming the ....
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....ssessee had rendered marketing and promotional services, the cost of which has been recovered without charging any markup thereon. As the transaction was not at arm's length, 10% mark-up was imputed there upon to bring the transaction on par with arm's length price. Accordingly, Rs. 2,44,896/- was adjusted to this transaction, representing 10% on the cost of expenditure recovered. 5. Upon the assessee's appeal, the ld. CIT(A) confirmed the TPO's action and inter alia observed as under: It can be seen from the above table that the appellant has recovered expenses totaling to Rs. 2,44,48,960/- which it has incurred towards Marketing and Communications expenses on behalf of the AEs. Even if these Marketing and Communication expenses were the payments initially made to the third party by the appellant then to there would be element of services rendered in identifying the parties to render services to the AEs, commensuraling paper work, utilization of appellant's money for the purposes etc, In a third party situation, there could be no such practices followed. In the facts of the case, it is clear that the appellant initially performe....
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....ons or such other relevant factors as the Board may prescribe, namely :- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed23 by the Board. 11. It is undisputed that the method of computation of arm's-length price adopted by the transfer pricing officer is not as per any of the method prescribed under the act for the extant period. In similar circumstances, the Hon'ble jurisdictional High Court in the case of CIT vs. Kodak India (P) Ltd. [2017] 79 taxmann.com 362 (Bombay) vide order dated 11.07.2016 in ITA No. 15 OF 2014 has held as under: The assessee, an Indian subsidiary of an American company sold its imaging business to Indian subsidiary of another American company. The Assessing Officer held that even if transaction was between two domestic non-AEs, yet it would still be considered to be an international transaction and Chapter X of Act would be applicable as holding companies of both the companies had entered into a global agreement for sale of its ....
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....curred any expenditure in relation to exempt income and hence no disallowance was called for. Without prejudice to the above contention, it has worked out the disallowance under Rule 8D at Rs. 52,99,794/- being the 0.5% of average investments. The submission of the assessee was considered, however, the same was not found to be acceptable by the AO as the assessee failed to compute the attributable expenses for earning exempt income. Further, the argument of the assessee that it has not utilized interest bearing funds was not found to be acceptable as assessee has not furnished any fund.flow statement in this regard. The AO in this regard referred to and relied upon decision of Hon'ble Bombay High Court dated 12.8.2010 in the case of M/s. Godrej & Bo'yce Mfg. Co. Ltd., Mumbai and accordingly observed that the provisions of Rule 8D of the I.T. Rules 1-962 is applicable for the A.Y.2008-09 onwards. Therefore attributable expenses for earning exempt income have to be computed as per the procedure mentioned in the said rules. However, as the assessee had failed to compute the same as per Rule 8D of Income-tax Rules, 1962, though notified and applicable for the current asse....
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....dition is permissible for disallowance of interest. Furthermore, the learned counsel submitted that in assessment year 2010-11 in assessee's case this tribunal had held that addition u/s.14A is not sustainable inasmuch as there is no satisfaction by the assessing officer. He submitted that in the present case also there is no satisfaction by the assessing officer that assessee has incurred expenditure for earning the interest-free income. Hence, the ld. Counsel of the assessee submitted that no addition in this regard is sustainable. Furthermore, learned counsel submitted that assessee has sufficient interest-free funds. Hence referring to the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd., Mumbai vs. Dy. CIT (in Writ Petition No. 1753 of 2016 vide order dated 25.02.2016), the learned counsel submitted that no addition for the disallowance of interest is sustainable. Furthermore, without prejudice to the above, the learned counsel referred to the decision of ITAT Special Bench in the case of the ACIT vs. Vireet Investment Pvt. Ltd. (in ITA No. 502/Del/2012 and CO No.68/Del/2014 vide order dated 16.06.2017 (SB)(Del)) for the proposition that only investments ....
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.... case of the assessee that financials for the current year are same. In this view of the matter disallowance on account of interest for making the tax-free investments is not sustainable. Furthermore, the learned counsel of the assessee placed reliance upon the decision of Hon'ble jurisdictional High Court in the case of HDFC Bank Ltd.(supra) is also cogent in this regard. Further, we find that as regards the disallowance of 0.5% on the average value of investment is concerned the submission of the learned counsel of the assessee is cogent that the special bench in the case of Vireet Investment Pvt. Ltd. (supra) has held that for computing the average value of investment only investments which yield exempt income is to be considered. Accordingly, we remit this issue to the file of assessing officer to consider the issue afresh in light of the decision of special bench in the case of ACIT vs. Vireet Investment Pvt. Ltd. (supra) for the necessary computation in this regard. Apropos ground no. 3: 20. Brief facts of the case are as under: The Assessing Officer observed that in Exhibit 12 of Clause 26 of notes to the account, the assessee company have claimed that it has an....