TaxTMI 
TaxTMI 
2020 (2) TMI 1270
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment year under dispute, the assessee filed its return of income on 29th November 2011, declaring total income of Rs. 42,50,70,569, under the normal provisions of the Act. Whereas, the assessee disclosed book profit of Rs. 550,61,38,928, under section 115JB of the Act. Subsequently, the assessee filed a revised return of income on 30th March 2018, revising the claim of TDS. While examining assessee's claim of deduction under section 80IC of the Act, in the course of assessment proceedings, the Assessing Officer noticed that in the Profit & Loss account of eligible units claimed deduction under section 80IC of the Act, the assessee has included various items of income, such as, scrap sales, claims received, misc. income, sundry balance written back, discount on purchases, etc. Being of the view that such income cannot form part of the profit derived by the eligible unit from its manufacturing activity, the Assessing Officer called upon the assessee to explain why such income should not be excluded for the purpose of computing deduction under section 80IC of the Act. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer relying upon the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or statistical purposes. 8. In grounds no.2 to 8, the assessee has challenged the disallowance made under section 14A r/w rule 8D, both under the normal provisions as well as while computing book profit under section 115JB of the Act. 9. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticing that the assessee has earned dividend income of Rs. 98,15,965, whereas, it has disallowed an amount of Rs. 7,70,250, under section 14A of the Act called upon the assessee to explain why disallowance should not be made as per rule 8D. In response to the query raised by the Assessing Officer, the assessee filed its submissions stating that no further disallowance can be made, however, rejecting the submissions of the assessee, the Assessing Officer proceeded to compute the disallowance under rule 8D for an amount of Rs. 94,93,127. The assessee having already disallowed an amount of Rs. 7,70,000, the Assessing Officer made a net disallowance of Rs. 87,23,127, under section 14A r/w rule 8D, both, under the normal provisions as well as while computing book profit under section 115JB of the Act. The aforesaid disallowance made by the Assessing Officer was also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration the assessee has not earned any exempt income, no disallowance under section 14A r/w rule 8D can be made. Therefore, the Assessing Officer is directed to delete the disallowance after verifying assessee's claim. Even otherwise also, it is now fairly well settled that while computing book profit, the Assessing Officer cannot make any adjustment by invoking the provisions of section 14A of the Act. The only adjustment which the Assessing Officer can make is as per Explanation-1(f) to section 115JB of the Act. Therefore, if there is no exempt income earned during the year, then there is no question of making any disallowance under section 14A of the Act. Subject to factual verification of assessee's claim, these grounds are allowed. 14. In ground no.9, the assessee has raised the issue as to whether provision of corporate guarantee would come within the purview of international transaction under section 92B of the Act. Whereas, in grounds no.10 to 15, the assessee has challenged the quantification of arm's length rate of corporate guarantee commission @ 2.5% per annum. 15. Brief facts are, in the course of proceedings before him, the Transfer Pricing Officer not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Bench in assessee's own case, though, we hold that the provision of corporate guarantee to the AEs is an international transaction within the meaning of section 92B of the Act, however, we are of the view that guarantee commission charged by the assessee @ 0.5% is at arm's length requiring no further adjustment. Therefore, we delete the adjustment made by the Transfer Pricing Officer and confirmed by learned DRP. Ground no.9, is dismissed and grounds no.10 to 15, are allowed. 19. In ground no.16, the assessee has challenged the adjustment made on account of interest on loan advanced to the AE. 20. Brief facts are, noticing that the assessee has advance loan to the AE, the Transfer Pricing Officer called for necessary details. On perusal of the details he found that the assessee has benchmarked the interest on loan provided to the AE by charging interest @ six months LIBOR plus 100 basis points as a Comparable Uncontrolled Price (CUP). To justify the aforesaid benchmarking, the assessee submitted that the AE had availed a loan facility from ICICI Bank, U.K., at three months LIBOR plus 120 basis points. The Transfer Pricing Officer, however, did not accept the benchmarki....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... eligible unit on the basis adopted by the assessee. Thus, from the aforesaid facts, it is clear that the direction of learned DRP is consistent with the earlier direction passed by it in assessee's own case for the assessment year 2010-11 as well as the decisions of the Tribunal for earlier assessment years. That being the case, we do not find merit in this ground. Accordingly, the ground raised by the Revenue is dismissed. 28. In ground no.2, the Revenue has challenged the directions of learned DRP not to consider the interest on term loan for computing disallowance under section 14A r/w rule 8D. 29. While deciding identical issue arising in assessee's appeal supra, we have held that in case no exempt income is earned by the assessee during the year, no disallowance under section 14A of the Act can be made. That being the case, the ground raised by the Revenue has become redundant. Suffice to say, if the assessee had sufficient interest free fund available with it to take care of the investment, disallowance of interest expenditure cannot be made. For this reason also, no disallowance under section 14A r/w rule 8D(2)(ii) can be made. In view of the aforesaid, we dismiss the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted, Explanation-1(a) to section 115JB(2) of the Act also covers wealth tax liability as the expression "Income tax" would also include wealth tax. Without prejudice, he submitted, even otherwise also, the wealth tax liability would be covered under Explanation-1(c) of section 115JB(2) of the Act, as it is an unascertained liability. Thus, he submitted, the adjustment made by the Assessing Officer should be restored. 37. The learned Sr. Counsel for the assessee submitted, wealth tax liability cannot come within the purview of Income tax as Explanation-1(a) to section 115JB(2) of the Act only contemplates income tax paid or payable. Therefore, wealth tax is not covered under the said Explanation. Further, he submitted, wealth tax liability is an ascertained liability, hence, not covered under Explanation-1(c) to section 115JB(2) of the Act. In support of his submissions, the learned Counsel relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Echjay Forgings Pvt. Ltd., [2001] 251 ITR 51 (Bom.). 38. We have considered rival submissions in the light of the decision relied upon and perused the material on record. On a reading of Explanation-1(a) to ....