TaxTMI 
TaxTMI 
2019 (9) TMI 1340
X X X X Extracts X X X X
X X X X Extracts X X X X
....'), erred in making an addition of Rs. 53,24,92,2887- to the Appellant's total income (i.e.,Rs. 25,39,55,9127- based on the provisions of Chapter X of the Income-tax Act, 1961 ('the Act') and Rs. 27,85,36,376 based on the other provisions of the Act) and the said addition being wholly unjustified is liable to be deleted. A) Ground No. 2 to 12 relate to Transfer Pricing adjustments of Rs. 25.39,55.912 based on the provisions of chapter - X of the Act. Adjustment relating to Interest _on loans granted to Associated Enterprises ('AE') - Rs. 24,45,05,5897- 2) On the facts and in the circumstances of the case and in law, the learned TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of TPO in making an addition of Rs. 24,45,05,589/- to the Appellant's total income on the alleged ground of charging interest at lower rate (i.e., at LIBOR) than the arm's length price/rate on loans granted by it to its associated enterprise (AE) Disregard of Use of controlled transaction barred by law 3) On the facts and in the circumstances of the case and in law, the learned TPO erred in and the Hon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces of the case and in law, the learned TPO erred in and the Hon'ble DRP further erred in a) not considering the without prejudice plea of the Appellant that the adjustment, if any, on account of guarantee fees to be charged to the AEs must be made based on the guarantee fee/rate obtained by the Appellant from its own bank. b) not providing the Appellant an opportunity of examining material on the basis of which rate of guarantee fee was applied. Disallowance of Sales promotion expenses of Rs. 87,83,9157- 8) On the facts and in the circumstances of the case and in law, the learned TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of TPO in making an addition of Rs. 87,83,915 to the total income of the Appellant on account of the sales promotion expenses paid by the Appellant to its AEs namely Apex Hotel Management Services i.e., AHMS (Rs. 70,32,174/-) and International Hotels Management Services i.e., IHMS (Rs. 17,51,741/-) in excess of the alleged arm's length price without considering the details submitted by the assessee. AHMS Requisite condition of issuing show cause not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gally erred in not following the decision of higher authority rendered in the Appellant's own case and thereby erred in not following principle of judicial propriety. Disallowance of interest on advances given to group companies 14) On the facts and in the circumstances of the case and in law, the Learned AO erred in and the Hon'ble DRP further erred in confirming the action of the Learned AO in making interest disallowance of Rs. 25,52, 566/- in respect of advances given to group companies of the Appellant. Disallowance of interest on share application money allotment 15) On the facts and in the circumstances of the case and in law, the Learned AO erred in and the Hon'ble DRP further erred in confirming the action of the Learned AO in making interest disallowance of Rs. 112,600 in respect of share application of Rs. 20,00,0007-pending allotment. Expenditure on replacement of carpet treated as capital expenditure 1 6) On the facts and in the circumstances of the case and in law, the Learned AO erred in and the Hon'ble DRP further erred in confirming the action of the Learned AO in making disallowance of Rs. 1,51,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowance of Rs. 2,00,01,8837- made by Appellant itself in its computation of income) is wholly unjustified and liable to be deleted. Premium on redemption of foreign currency convertible Bonds 21) On the facts and in the circumstances of the case and in law, the Learned AO erred in and the Hon'ble DRP further erred in confirming the action of the Learned AO in making the addition of Rs. 859,34,837 being pro rata premium on redemption of foreign currency convertible bonds resulting into double taxation as the Appellant had already offered the same for taxation in its computation of Total Income. Notional interest on _deposits with Taj Karnataka Ltd 22) On the facts and in the circumstances of the case and in law, the Learned AO erred in and the Hon'ble DRP further erred in confirming the action of the Learned AO in making the addition of notional interest income of Rs. 37,45,000 in respect of the deposit placed with | Taj Karnataka Ltd. Levy of interest under section 234B nd 234D 23) On the facts and in the circumstances of the case and in law, the Learned AO erred in levying interest under section 234B and 234D of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vailable on record. 4. Ground 1 is general and needs no specific adjudication. Ground No. 2 to 4 relates to addition on account of adjustment of arm's length price of interest charged on loan given to AE. The Ld.AR of the assessee submits that this ground of appeal is covered in favour of the assessee by the decision of Tribunal in assessee's own case for AY 2005-06 in ITA No.841/Mum/2010 dated 31.01.2018. The DRP while confirming the action of TPO followed the order of CIT(A) for AYs 2003-04 to 2004-05 & 2005-06, which has been by the Tribunal in favour of assessee holding that the LIBOR is acceptable arm's length interest rate. 5. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 6. We have considered the submissions of both the parties and have gone through the orders of authorities below. We have noted that the coordinate bench of Tribunal in assessee's own case for AY 2005-06 in ITA No.841/Mum/2010 dated 31-01-2018 passed the following order:- "20. Ground No. 7 of the revenue's appeal is against the action of Ld. CIT (A) in deleting the addition of Rs. 12,60,80,369/- being adjustment on account of interest charged on loan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Tribunal, we uphold the impugned order of the ld. CIT (A) deleting the addition made by the A.O./TPO in respect of international transaction involving interest charged by the assessee on outstanding interest from its AE." 23. Since, this issue has already been decided in favour of the assessee in the assessee's own case for the A.Y. 2003-04 and 2004-05 aforesaid by the ITAT holding that the LIBOR is acceptable arm's length interest rate, we respectfully following the decision of the coordinate Bench decide this issue in favour of the assessee and dismiss this ground of appeal of the revenue." 7. Considering the decision of Tribunal for AY 2005-06 wherein the Tribunal has followed the earlier order for AYs 2003-04 to 2004-05, these grounds of appeal are allowed in favour of the assessee. 8. Grounds 5 to 7 relate to non charging of fees from AE for providing letter of comfort. The Ld.AR of the assessee submits that these grounds of appeal are also covered by the decision of Tribunal for AY 2005-06 wherein the Tribunal followed the order for AYs 2003-04 and 2004-05. 9. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 10. We....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the revenue." 11. Considering the decision of Tribunal for AY 2005-06 wherein the Tribunal has followed the earlier order for AYs 2003-04 to 2004-05, therefore respectfully following the order of the coordinate bench of the Tribunal, these grounds of appeal are allowed in favour of the assessee. 12. Grounds 8 to 10 relates to disallowance of sales promotion expenses. The Ld.AR of the assessee submits that the TPO made adhoc and arbitrary adjustment which is not permissible. The ld AR for the assessee submits that this ground of appeal is covered by the order of Tribunal in assessee's own case for AY 2003-04 and 2004-5 in ITA No.6712/M/2010 & 2678/M/2009. The Ld. Counsel of the assessee also placed reliance n the following decisions:- 1. Firmenich Aromatics India P Ltd vs DCIT ITA No.2590/Mum/2017 2. CIT vs Johnson & Johnson Ltd (ITA No.1030 of 2014)(Bom HC) 3. DCIT vs RAK Ceramics I.P. Ltd (ITA No.595 o 2016)(Bom HC) 4. Kosdak India P Ltd vs ACIT (ITA No.7349/Mum/2012 13. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 14. We have considered the submissions of both the parties and seen that in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is general in nature, thus needs no specific adjudication. 18. Ground 14 pertains to disallowance of interest on advances to subsidiary and group company. The Ld.AR of the assessee submitted that the issue stands decided in favour of the assessee in assessee's own case for 2005-06 in ITA No.841/Mum/2010, which in turn, relied upon the decisions of the Tribunal for AY 2003-04 and 2004-05 ( ITA No. 6712/M/2008 &2678/M/09). 19. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 20. We have considered the submissions of both the parties and perused the record. During the year under consideration the assessee has advanced loan of Rs. 3,50,00,000/- to M/s KTC Hotel Ltd and Rs. 1,0336,844/- to Taida Trading Industries Ltd. We have noted that on identical ground of appeal is assessee's own case for AY 2005-06 in ITA No. 841/M/2010, by following the order in AY 2003-04 &2004-5 the Tribunal passed the following order: "5. We have heard the rival submissions and perused the material on record including the decision of coordinate bench. We noticed that the coordinate bench had set aside the finding of learned CIT(A) so far as the advances....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quarely covered in fear of assessee by the decision of tribunal rendered in assessee's own case for earlier years. In AY 1995-96, it was held by the tribunal wide its order dated 12 September 2006 passed in ITA No. 2527/Mum/2002 that there being no diversion of interest-bearing funds for non-business purpose as alleged by the AO, there was no justification in making any disallowance on account of interest paid on the borrowed funds. It was noted by tribunal that the share application money was finally returned to the assessee with interest @ 19% and the interest so received was duly offered by the assessee in the relevant year. Similar view has been taken by the tribunal in subsequent years i.e. assessment year 199697 to 2002-03. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to the earlier years, we respectfully follow the order of the tribunal for the said years and uphold the impugned order of learned CIT(A) giving relief to the assessee on this issue. 24. Considering the decision of tribunal, which is consistently followed from the assessment year 1996-97 onwards, no variation of facts is brought to notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No.841/Mum/2010 & which followed the order of Tribunal for AYS 2003-04 & 2004-05 in ITA No. 6712/Mum/2008 & 2678/Mum/2009. 29. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 30. We have considered the submissions of the parties and have noted that identical ground of appeal the Tribunal in assessee's own case in AY 2003-04 &2004-05 in ITA No. 6712/Mum/2008, 2678/Mum/20119, which was followed by Tribunal in AY 2005-06 in ITA No.841/Mum/2010 dated 31.01.2018 on identical grounds passed the following order:- " 15. We notice that coordinate bench has decided this issue in fear of the assessee in assessee's own case report of the list hence, respectfully following the decision of coordinate benches aforesaid, we uphold the finding of learned CIT(A) and dismissed this ground of appeal of the revenue." 31. Considering the decision of the Tribunal, which is consistently followed in all years, thus, respectfully following the same these grounds of appeals are allowed. Since, we have allowed the main grounds therefore the discussion on alternative ground of appeal for allowing depriciation has become academic. 32. Ground 19 perta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rightly held by learned CIT appeals. We, therefore, find no infirmity in the impugned order of the learned CIT(Appeals) deleting the addition is made by the AO on this issue and upholding the same, we dismiss relevant grounds of revenue's appeal." 19. Since, this issue has already been decided in favour of assessee's own case aforesaid, we dismiss this ground of appeal of the revenue by respectfully following the decision of coordinate bench in assessee's own case for the assessment years mentioned above." 34. Considering the decision of the Tribunal in AY 2005-06, wherein the order of ld CIT(A) in allowing relief to the assessee was affirmed on the identical ground of appeal, thus, respectfully following the same these grounds of appeals are allowed. 35 Ground 20 pertains to disallowance u/s 14A. The Ld.AR of the assessee submitted that the issue is squarely favour of the assessee in assessee's own case by the decision of the Tribunal for AY 2005-06 in ITA No.841 /Mum / 2010 and for AY 2004-05. 35. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. 36. We have considered the submissions of the parties and have noted that identical ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esult this ground of appeal is allowed. 38 Ground 21 pertains to addition of premium on redemption of foreign currency convertible bonds. This ground is not pressed before us. Therefore, this ground is dismissed. 39. Ground 22 pertains to addition on account of notional interest on deposits with Taj Karnataka Ltd. The Ld.AR of the assessee submitted that the assessee had placed deposit of Rs. 5.35 crores with Taj Karnataka in earlier years with interest accrual at 7% p.a. Since the financial condition of Taj Karnataka was extremely weak, it was decided to waive off interest w.e.f. 01-04-2002 and therefore, in current year, no interest was charged. The assessing Officer disallowed, as according to him, no evidence of interest waiver or copy of Board resolution was furnished and therefore, right to received interest was crystallised. Accordingly, he added an amount of Rs. 37,45,000/- to the total income. Relying on Accounting Standard 9, the Ld.AR of the assessee submitted that revenue to be recognised only when it becomes reasonably certain that the ultimate collection would be made. The ld AR submits that in past no such adjustment/addition was made on same facts, no funds wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest thereon. The assessee claimed deduction in respect of the interest payment to the third parties. The assessing authority disallowed the deduction claimed by the assessee to the extent of interest-free advances standing in the name of N on the ground that the amounts borrowed were not utilised by the assessee for its own business. On second appeal, the Tribunal held that since no additions had been made in the earlier years, the opening balance could not be considered in the year in question and the enquiry had to be limited only to the increase in the year in question. On reference to the Hon'ble Court it was held that in the instant case the status of the amount standing as outstanding due from N on the first day of the accounting year was the amount that stood outstanding on the last day of the previous accounting year; therefore, its nature and status could not be different on the first day of the current accounting year, from its nature and status as on the last day of the previous accounting year. Regarding the past years, the assessee's claims for deductions were allowed in respect of the sums advanced during those years; this could be only on the assumption that those ....