TaxTMI 
TaxTMI 
2019 (8) TMI 287
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....me Tax Act (Act) and declaring Rs. 8484.51 Lakhs as book profits u/s. 115JB of the Act. The AO completed the assessment by making various additions. 3. In the appeal filed by the assessee before the Ld. CIT(A), the assessee got partial relief. 4. Aggrieved by the order passed by the Ld. CIT(A), both the parties are in appeal before us. We shall first take up the common issues in the appeals of both the parties. 5. The first common issue relates to disallowance made u/s. 14A of the Act while computing total income: 5.1. During the year under consideration, the assessee received dividend income of Rs. 306.46 Lakhs and claimed the same as exempt. The assessee did not make any disallowance u/s. 14A of the Act. The AO, however, computed the disallowance by applying the provisions of Rule 8D and accordingly, disallowed a sum of Rs. 351.06 Lakhs, which consisted of disallowance made out of interest expenditure of Rs. 331.54 Lakhs and disallowance made out of administrative expenses of Rs. 19.51 Lakhs. 5.2. During the appellate proceedings, the Ld. CIT(A) took support of the decision rendered by the Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturi....
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....he case of Vireet Investment Pvt. Ltd., [165 ITD 27] and contended that the amount computed u/s. 14A of the Act cannot be adopted for the purpose of Section 115JB of the Act. 6.4. On the contrary, Ld. DR supported the order passed by Ld. CIT(A). 6.5. We notice that the Delhi Special Bench of ITAT in the case of Vireet Investment Pvt. Ltd., ((supra)) held that the amount disallowed u/s. 14A cannot be imported for the purpose of Section 115JB of the Act, meaning thereby, the AO is required to compute disallowance for the purpose of Clause(f) of Explanation (1) to Section 115JB of the Act in an independent manner. In the instant case, the Ld. AR submitted that the investment held by the assessee had been brought forward from earlier years and most of the investments have been made long back. During the year under consideration, the assessee has earned dividend income and has also sold some of its shares. Thus we notice that there is no much of activity for the purpose of earning exempt income. Under these set of facts, in order to put this issue at rest, we are of the view that the amount of disallowance computed u/s 14A of the Act, in the facts and circumstances of the case, wo....
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....e same. We further noticed that the TPO has rejected M/s. Escorts Ltd., only for the reason that the data was not available for the period under consideration, since M/s. Escorts Ltd., was following different financial year. Since M/s. Escorts Ltd., is a listed company, the quarterly results published by the said company should be available in the public domain and it should be possible to collate the figures relating to the financial year under consideration. In any case this issue has been restored to the file of AO/TPO in the immediately preceding year by the Tribunal. Following the same, we set aside the order passed by the CIT(A) on this issue and restore the same to the file of AO/TPO for examining it afresh. 8. Next issue relates to TP adjustment made in respect of royalty payment. 8.1. Though the TPO made adjustment in respect of royalty payment, no separate addition was made as the assessee itself has disallowed the same u/s. 40(a)(ia) of the Act. 8.2. Before the Ld. CIT(A), assessee submitted that it had created provision for payment of royalty as per the Mercantile System of Accounting on estimated basis. Since it did not deduct tax at source, it has disallowed ....
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....f the authorities below that neither the assessee nor the TPO or even the learned CIT(Appeals) has followed this procedure prescribed in section 92C of the Act and Rule 10B of the Income-tax Rules. 1962 to determine the arm's length price in relation to the royalty payment made by the assessee to its associated enterprises and this being so, we find merit in the contention of the learned DR that this matter should go back to the AO/TPO to do such exercise. The learned counsel for the assessee has submitted that payment of similar royalty made by the assessee to its associated enterprises in the subsequent year has been accepted by the DRP. She, however, has not placed on record the copies of the relevant orders passed in the said years to ascertain whether the arm's length price of the royalty was determined in the said years by following the proper procedure. We, therefore, restore this issue to the file of the AO with a direction to verify whether the similar payment of royalty has been accepted in the subsequent years as at arm's length after undertaking the exercise as prescribed in section 92C read with Rule 10B. If it is found that such exercise has been ....
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....ion is not warranted. Accordingly we set aside the order passed by Ld CIT(A) on this issue. However, the computations given by the assessee requires verification. Accordingly we restore this issue to the file of the AO for the limited purpose of examining and satisfying himself with the figures furnished in the reconciliation statement filed by the assessee. In case of variation, the AO may make the addition to the extent of variation. 10. The next issue urged by the assessee relates to the addition made u/s. 50C of the Act. 10.1. During the year under consideration, the assessee sold a land located in Chennai for a consideration of Rs. 528.99 Lakhs to M/s. Zircon Soft Tech. Ltd. It was noticed that the stamp value of the land was fixed at Rs. 654.18 Lakhs. However, the assessee had computed capital gain by taking the sale consideration at Rs. 528.99 Lakhs, while the provisions of Section 50C mandates adopting of stamp duty valuation if it is more than the sale consideration. Accordingly, the AO adopted the sale consideration as Rs. 654.18 Lakhs and computed the capital gain. 10.2. Before the Ld. CIT(A), assessee questioned the value adopted by the AO and hence the matt....
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.... this issue and restore the same to the file of AO for examining the same afresh by duly referring the matter to DVO in order to consider the contentions of assessee in the matter of valuation of the property. After affording adequate opportunity of being heard to assessee, AO made take appropriate decision in accordance with law. 11. The next issue urged by the assessee relates to the addition made u/s 28(iv)/41(1) of the Act in respect of waiver of loan. A company named M/s Rajasthan Polymers and Reisins Ltd was amalgamated with the assessee company. The above said company had taken loan from Bank of Baroda. Post amalgamation, the assessee company became sick and hence, under revival package, the Bank of Baroda waived loan to the tune of Rs. 192.50 lakhs. The assessee did not offer the same for taxation on the plea that the waiver was in respect of term loan and hence the same is a capital receipt. The AO, however, took the view that the waiver has enriched the assessee and accordingly, by following the decision rendered by Hon'ble Supreme Court in the cases of CIT vs. Karamchand Thapper & others (222 ITR 112) and T.V. Sundaram Iyengar and Sons Ltd (222 ITR 344), held th....