TaxTMI 
TaxTMI 
2020 (4) TMI 30
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.... its report. On receipt of the report of TPO the assessing officer passed draft assessment order and served on the assessee. The assessee exercised its option to file appeal before the ld CIT (A). On appeal the ld. CIT (A) granted partial relief to the assessee. Thus, aggrieved by the order of ld. CIT (A) both the parties have filed their respective appeal by raised the following grounds of appeal. The assessee has raised following grounds of appeal; ITA No. 4866/Mum/2013 by assessee. GROUNDS OF APPEAL BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI GROUND NO. I: ADDITION ON ACCOUNT OF ARM'S LENGTH ADJUSTMENT TO INCOME FROM INTEREST ON LOANS ADVANCED TO SUBSIDIARIES: 1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeal) -15, Mumbai ("CIT(A)") erred in directing the Additional Commissioner of Income Tax - 10(1), Mumbai ("the AO") and the Additional Commissioner of Income Tax (TP) -11(2) ("the TPO") to recompute the addition u/s. 92C of the Income-tax Act, 1961 ("the Act") on account of loans given to Associate Enterprise ("AEs") by adopting 6 months benchmarking at LIBOR + 1....
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....e CIT(A) erred in upholding the action of the AO in disallowing a sum of Rs. 22,81,641/- u/s 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962 ('the Rules') as expenses incurred towards earning exempt dividend income u/s 10(35) of the Act of Rs. 80,000/-. 2. The Appellant humbly prays that disallowance of Rs. 22,81,641/- should be deleted or be appropriately reduced. ITA No. 5378/Mum/2013 by revenue. 1. " erred in deleting the addition of Rs. 1,71,04,416/- representing upward adjustments on account of Guarnatee fee income received in relation to guarantee provided on loans to its AE in UK to ALP recommended by the Transfer Pricing Officer (TPO) without appreciating the fact that the Guarantee Commission is charged at the rate of 0.75% of loan amount by HSBC, Mumbai, India." 2. " erred in holding that the benchmarking of interest rates on foreign currency loans would be LIBOR based and not rupee loan based thereby overlooking the high opportunity cost lost by the assessee company through foreign AE lending as against other competitive domestic lending." 2.1 " erred in directing the AO to adopt the External Commercial Borrowin....
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....sessee submits that the assessee benchmarked the transaction at .75% and this ground of appeal is covered in favour of the assessee in assessee's own case for AY 2006-07 and there are no variations in the facts for the year under consideration. 6. We have considered the submissions of the parties and perused the order of the lower authorities. We have seen that the assessee in its transfer pricing study report (TPSR) reported that they have charged guarantee commissions @.75%. The Transfer Pricing officer (TPO) worked out at 2.15% and suggested upward adjustment of Rs. 1,71,04,416/-. On appeal the ld CIT(A), the order of TPO in suggesting the upward adjustment was deleted by following his own order for AY 2006-07 and 2007-08. We have seen that on similar grounds of on similar set of facts in assessee's own case for AY 2006-07 in ITA No. 1875/Mum/2011 dated 12.06.2019, the Tribunal while following its order for AY 2007-08 passed the following order; "13. We have considered rival submissions and perused the material on record. Undisputedly, the assessee itself has charged guarantee commission on the corporate guarantee provided to the AE @ 0.75%. The guarantee fee charged....
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....erest of Rs. 10,56,96,252/- and accordingly suggested upward adjustment of Rs. 4,31,73,109/- ( Rs. 10,56,96,252/- minus Rs. 6,25,23,143/-) . On appeal before ld CIT (A), it was directed that if the loan period is three years and up to five years then the rated of interest be adopted as 6 month LIBOR plus 150 basis points and in case of average period of loan is more than five years, the rate is 6 month LIBOR plus 250 basis points may be adopted. The Hon'ble jurisdictional High Court in CIT Vs Tata Autocomp (supra) held that where the assessee advances loans to its associated enterprises (AE's) situated in Germany, rate of interest was to be determined on the basis of rate prevailing in Germany where loan has been consumed. 10. Considering the decision of jurisdictional High Court the AO/TPO is directed to recompute the interest on the basis of rate prevalent in the countries where loan was received. In the result the ground of appeal raised by the assessee is allowed and resultantly the ground of appeal raised by the revenue has become infructuous. 11. Ground No. 3 in revenues appeal and Ground No. II & III in assessee's appeal relates to notional interest income on infusion ....
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....ncluded that the delay in receipt of share is short and as per Circular of Reserve Bank of India, the interest would be LIBOR plus 150 and directed the TPO/AO to charge interest for 6 month at LIBOR plus 150 basis point for the period between the date of remittance and by adding 15 days and the date of allotment of shares. 14. The coordinate bench of this Tribunal in ITO Vs Sterling Oil Resources (P) ltd (supra) (authored by the same combination) held that adjustment on account of notional interest on share application money, which had been recharacterised as loan, merely because there was delay in allotment of share, was not sustainable in law. Further, this Tribunal in Aditya Birla Minacs Worldwide Ltd (supra) also took the same view that share application money cannot be treated as loan amount; merely there is delay in issuance of shares by subsidiary. Considering the consistent view of the Tribunal, we are of the view that share application money cannot be treated as loan amount only because of delay in issuance of shares by its subsidiary. 15. In the result the grounds No. II& III of the assessee's appeal are allowed and resultantly the ground of appeal by revenue is dis....
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....by the Revenue. Facts being identical, respectfully following the consistent view of the Tribunal in the preceding assessment years in assessee's own case, we uphold the decision of learned Commissioner (Appeals) by dismissing the ground." 19. Considering the consistent view of the Tribunal on identical set of facts and respectfully following the view of the Tribunal in the preceding assessment years in assessee's own case, we uphold the decision of ld. CIT(A). in the result the Ground of appeal is dismissed. 20. Ground No. 5 in revenues appeal and Ground No. IV in assessee's appeal relates to weighted deduction under section 35(2AB). The ld. DR for the revenue relied on the order of the assessing officer. 21. On the other hand the ld. AR for the assessee submits that this ground of appeal is also covered in favour of the assessee and against the revenue in assessee's own case for AY 2006-07 by the decisions of the Tribunal. 22. We have considered the submissions of the parties and perused the order of the tax authorities below. During the relevant period under assessment year the assessee the assessee claimed weighted deduction under section 35(2AB). ....
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....TA no.5557/Mum./ 2012, dated 5th January 2018, the Tribunal has restored the issue to the Assessing Officer for fresh adjudication keeping in view various decisions cited by the assessee including the decision of the Hon'ble Gujarat High Court in Cadila Healthcare Ltd. (supra). Therefore, following the decision of the Tribunal in assessment year 2007-08, we are inclined to restore the issue to the Assessing Officer for de novo adjudication keeping in view the ratio laid down in the decisions to be cited by the assessee including the decision of the Hon'ble Gujarat High Court in Cadila Healthcare Ltd. (supra). While doing so, the Assessing Officer is also directed to examine the ratio laid down by the Hon'ble Supreme Court in Commissioner of Customs v/s Dilip Kumar & Co. & Ors., vide judgment dated 30th July 2018, in Civil Appeal no.3327 of 2007. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. These grounds are allowed for statistical purposes." 23. Considering the decision of the Tribunal in assessment year 2006-07, we respectfully following the same we are incli....
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....lowed. And relied on the decision of CIT Vs Woodward Governor India (P) ltd. (312 ITR 254 SC). And in third alternative submissions submits that ascertained liability are allowable in computing income and in support of his submissions relied on Bharat Earthmovers Ltd Vs CIT (245 ITR 428 SC). 29. We have considered the submissions of the parties and perused the order of the tax authorities below. The assessing officer while computing book profit added back provision of Rs, 51 Crore for marked to market loss without discussion or issuing show cause notice to the assessee. During the first appellate stage the assessee filed its detail submissions and relied on the decisions in CIT Vs Woodward Governor India (P) ltd. (supra) and Apollo Tyres Ltd Vs CIT (supra). The ld CIT(A) after considering the submissions of the assessee observed that marked to market loss are on account of restatement of trading asset and liability and its ascertainment and computation is not disputed by assessing officer. The ld CIT(A) also held that after the decision in CIT Vs Woodward Governor India (P) ltd. (supra) marked to market loss is allowable deduction. And it cannot be termed as unascertained liabil....
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.... section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. 34. The ld. DR for the revenue not disputed the decision of special bench, however he relied on the order of the assessing officer. 35. We have considered the submissions of the parties and perused the order of the tax authorities below. The assessing officer while computing book profit added back the disallowance of section 14A without discussion or issuing show cause notice to the assessee. During the first appellate stage the assessee filed its detail submissions and relied on various decisions including in Apollo Tyres (supra) and Goetze India Ltd Vs CIT(32 SOT 101). The ld CIT(A) after considering the submissions of the assessee observed the provision of section 14A cannot be imported to clause (f) of Explanation 1 to section 115JA. The Special bench of Delhi Tribunal recently in ACIT vs. Vireet Investment (P) Ltd (supra) held the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Thus, considering the recent decision of the Special Bench o....