TaxTMI 
TaxTMI 
2017 (7) TMI 1347
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....t page 2 to 14 of his order wherein the ld. TPO has made an upward TP adjustment of Rs. 14,62,62,878/- in respect of Guarantee commission from Venus Corporation Ltd. by applying guarantee commission rate of 3% p.a. and upward TP adjustment of Rs. 26,36,02,329/- in respect of fee for letter of comfort from VHHL by applying rate of 1.5% p.a. 3. By the impugned order, the DRP confirmed the action of the TPO by observing that the TPO determined ALP after evaluating the aspects such as terms and conditions on which loans has been given, risk undertaken, relationship between the bank and the client and economic and business interest, etc. and hence the DRP upheld the contention of the TPO. 4. At the outset, it was submitted by the ld. AR that the issue is covered by the decision of Hon'ble Tribunal in the assessee's own case for the immediately preceding A.Y. 2011-12. It has been held by Tribunal that since SBI has charged bank guarantee commission to assessee by giving 50% concession on the rate of 1.75% which works out to approximately 0.875%, considering factors and risk like country risk, currency risk and entity risk etc., guarantee commission would fall down below 0.5%. This ....
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....nd nos. 1.1 to 1.5 is treated as partly allowed. As stated above, we are not deciding the issue, whether the transaction of corporate guarantee is an 'International Transaction' or not because the Ld. Counsel for the assessee had only harped upon the issue on merits and hence the various contentions raised by the CIT DR are left open. 6. We have carefully gone through the order of the tribunal and found that exactly similar issue had been dealt by the tribunal and Guarantee Commission has been restricted to 0.50%. Accordingly, respectfully following the order of the tribunal, we direct the A.O. to restrict the TP adjustment to 0.5% p.a. We direct accordingly. It is pertinent to mention that no new guarantee were given to new AE during the year and the guarantee during the year was in continuation of the old guarantee only. The ld. DR also fairly conceded that the issue is covered by the order of the tribunal dated 24.2.2012. 7. Grievance of the assessee also relates to the disallowance of Rs. 1,65,49,73,234/- u/s.14A r.w.r. 8D. 8. We have gone through the orders of the authorities below and found that the ld. AO made disallowance u/s. 14A r.w.r. 8D as follows: D....
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....pra) are clearly applicable, wherein their Lordships have reiterated several times that if the assessee has surplus funds in the form of reserves & surplus or share capital, then presumption is that investment would have been made from surplus funds/interest free funds and not from the borrowed funds. Accordingly, we direct the AO to delete the disallowance of interest expenditure as worked out under rule 8D (2)(ii). Now coming to issue of disallowance of indirect expenditure u/r 8D (2)(iii), we agree with Ld. Counsel that the investments from where income is taxable or the investments which are for business or strategic reasons need to be removed from the working of the average value of investments as contemplated in rule 8D(2)(iii). The later proposition has been consistently held in catena of cases by this Tribunal as referred to by ld. Counsel before us. Thus, respectfully following the ratio we also hold accordingly. Further ld. Counsel has given the working of disallowance under rule 8D (2)(iii) in light of various judicial decisions and propositions which needs verification. Accordingly, we direct the AO to examine the same and compute the disallowance of indirect expenditur....
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.... reasonably presume that investment was out of own funds and no disallowance of interest is warranted. 14. Regarding disallowance of administrative expenses u/s. 14A r.w.r. 8D(2)(iii), the Hon'ble ITAT has set-aside the matter to ld. AO with the directions to exclude investments giving taxable income and strategic investments and also to verify the working of disallowance under Rule 8D(2)(iii) in light of various judicial propositions. 15. Respectfully following the order of the tribunal and the facts and figures observed by us, we delete the disallowance made on account of interest. Disallowance of administrative expenses is restored back to the file of the AO for deciding afresh in terms of the direction given by the tribunal in order dated 24.02.2017. We direct accordingly. 16. The addition of amount disallowed u/s. 14A to the book profit u/s.115JB is consequential to ground of appeal no. 2. Similar grounds have been dealt by the tribunal in para 18 on page 18. Respectfully following the same we direct the AO to restrict the addition u/s.15JB to the extent of disallowance of administrative expenses worked out in terms of direction given by the tribunal in its order date....
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....act, which is borne out from the various invoices and information received that Shri Suresh A. Parekh along with his family members had made various entities through which he is providing accommodation bills. During the course of initial investigation by the Sales Tax Department as well as by the Investigation Wing of the Income-tax Department, he had admitted that he is providing bogus bills and accommodation entries for purchase of various materials and also explained the modus operandi of his business transaction. Since the statement was taken on the back of the assessee, the Tribunal had directed the Department/AO to record fresh statement of Shri Suresh A. Parekh wherein he was given opportunity to be cross examined by the assessee. During the course of fresh statement/cross examination by the AO in the impugned assessment proceedings as discussed above, Shri Suresh A. Parekh had categorically confirmed that he deals in various electronic items in bulk and that there is huge demand in the market for supply of the aforesaid items. He had also given the name of concerns through which he had supplied various items to various corporate houses including M/s. Videocon Industries Ltd....
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.... fixed rate which is evident from the bills, copy of invoices supplied by Shri Suresh A. Parekh. The material proof for supply of material is by reference to copy of invoices which mentions delivery challans and then there is gate pass stamp when it enters the factory premises and this gate pass stamp has been impounded by the survey party which has been referred to by the AO. It has also been brought on record that more than once, stamp on different bills on different dates has been placed which is normal practice and no adverse inference can be made that these purchases are bogus qua the assessee. Apart from that, the assessee has given the details of nature of material purchased, copy of ledger account, payment details, material utilisation of the item wise details of purchases made from the concerns of Shri Suresh A. Parekh. The revenue is harping greatly on the first statement of Shri Suresh A. Parekh wherein he has admitted that he is providing accommodation bills and charging commission on them without actualsupply of goods; and neither Shri Suresh A. Parekh nor the assessee could adduce any evidence that actually material has been supplied to the assessee. From the records ....
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....e has neither been disturbed nor doubted. There could be some discrepancy about the transportation bills from the suppliers of grey market or transportation cannot be proved by documentary evidence by Shri Suresh A. Parekh, however, the other evidences showing the material purchased has been duly recorded in the books of account and also the details of material utilisation used for manufacturing, plant and machinery and inventory etc. has not be discarded or doubted, only goes to show that material has been purchased and utilized, albeit through rotation mode done by Shri Suresh A. Parekh. He has categorically stated in his statement that expenditure on delivering of goods are borne by the actual suppliers in grey market then onus is not on the assessee, because, when the material purchased has been recorded by the assessee it its books of account and neither the manufacturing account nor the other entries made in the books of account have not been rejected, then these items shown in the books of account cannot be discarded. AO has not brought on record that the details of items purchased from Shri Suresh A. Parekh is not appearing in the books of account when the assessee has spec....
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....purchases can be made, because instead of registered dealers assessee has made purchase from grey market. 30. As regard the other discrepancies as highlighted by ld. CIT DR by referring to AO's order qua the delivery part, the same loses its credibility whence it has been shown that material purchases are appearing in the books of account and consumption of the same has not been doubted. AO should have carried further this information to examine the entries in the books of account and the consumption details. As reiterated above at various places, the factum of purchase so far as the assessee is concerned cannot be disputed when the hawala person himself had admitted that he had arranged the purchases from grey market and got them supplied. This statement before the AO cannot be discarded at all. Thus, in the totality of the facts and circumstances of the case, we hold that the addition on account of so called alleged bogus purchases cannot be added as income of the assessee and the same as directed to be deleted. 22. We have carefully gone through the order of the tribunal and found that Shri Suresh A Parekh had admitted that transportation of goods and other related expend....