TaxTMI 
TaxTMI 
2020 (4) TMI 93
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....eal in ITA No. 663/2015 against the order of the DRP in F.No. DRP/CHE/26/14-15 dated 27.11.2014 for assessment year 2010-11 and ITA Nos. 1417 & 1421/Chny/2016 against the order of the Commissioner of Income Tax (Appeals)-15, Chennai in ITA Nos. 375 & 381/CIT(A)-15/13-14, dated 09.02.2016 for assessment year 2008-09, respectively. The assessee and the Revenue filed its Cross appeals in 1040/Chny/2014; ITA No. 1075/Chny/2014 & CO No. 51/Chny/2014 against the order of the DRP, Chennai in F.No. DIT/CHE/DRP/49/2013 dated 20.12.2013, for the assessment year 2009-10. 2. Some of these appeals are pending more than 5 years. The assessee filed an adjournment petition which is rejected and the appeals are taken for the hearing. Since, none was present for the assessee, we required the Ld. DR to present the cases and on the basis of the Ld. DR's submissions and the material available on the record, the above appeals are being disposed as under: Grounds of appeal in ITA No.1392/2016 A Y 2007-08 1. The order passed by the Commissioner of Income-tax Appeals ["CIT(A)"j under section 250(6) of the Income-tax Act, 1961 (" the Act") confirming the order of the Assessing Officer ("AO") ....
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....ation under the head income from other sources instead of treating the same as business income as claimed by the appellant. 3.2 The learned CIT(A) and AO have failed to appreciate the fact that the interest of Rs. 1.69 crores was earned from inter-corporate deposits made to Indus Cityscope Constructions Pvt. Ltd., ignoring the decisions of appellate authorities which held that interest should be treated as business income. 3.3 The learned CIT(A) and AO have erred in not considering the matching concept where in order to earn an income, certain amount of expenses need to be spent, thereby, erred in not allowing any expense against the income determined. The appellant craves leave to add, substitute, amend, delete, or otherwise modify any of the grounds of appeal stated hereinabove before commencement of or at the time of hearing." 3. Since none represented the assesssee, we required the ld DR to present the case . The Ld DR invited our attention to the relevant portion of the order of the ld CIT(A) , and submitted that the assesseee , V S Net limited , subsequently merged with M/s Siva Industries and Holdings Limited ("SIHL" or "the appellant" ) is enga....
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....reement entered into with the appellant and decided to enter into an agreement with a third party to sell the land that was agreed to be sold to the appellant. Post a prolonged discussion, SICCL agreed to compensate the appellant for loss of business opportunity due to failure to execute the project and settled at a compensation of Rs. 35 crores for breach via an agreement dated April 06, 2017. Pursuant to which, SICCL paid the compensation to the appellant which is nothing but a capital receipt in the assessee's hand and hence it is not taxable . After seeking further details and information and after considering the assessee's reply etc, the A O held , inter alia, that the assessee (lender) had entered into an agreement dated 26.12.2006 with M/s Sahara India Commercial Corporation Ltd. as the borrower and 16 other parties as guarantors. The A O after going through the agreement has held , inter alia, that the assessee has not recognized any revenue on account of the agreement dated 29.12.2006 and treated Rs. 35 crores as the capital receipt. Restated agreement dated 15.02.2007 was entered into in a stamp paper purchased on 02.04.2007 (purchased much after the so called re-stat....
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....additional ground which is not accepted, as the restated agreement dated 15 Feb 2007 is found bogus. Therefore, it is a clear case of an afterthought of the assessee to avoid tax." 5. Considering the facts of the case, the assessee's submissions and on perusal of all the agreements and the AO's remand report, the ld CIT(A) held , inter alia, that the receipt of Rs. 35 crores is nothing but interest on the money given to M/s Sahara India Commercial Corporation Ltd. Compensation received is not of capital nature especially in view of the fact that Rs. 35 crores was received on 09.04.2007 merely five days after such the so called agreement was entered into. It is pertinent to note that the principle amount of Rs. 400 crores was received on 25.05.2007. M/s Sahara India Commercial Corporation Ltd itself had treated Rs. 35 crores as interest only. Therefore, the ld CIT(A) confirmed the action of AO in taxing Rs. 30,10,00,000/-. 6. With regard to the treatment of interest earned as income from other sources at Rs. 1,69,88,132/-, the appellant has submitted before the ld CIT(A) that the learned AO has failed to appreciate the fact that the interest of Rs. 1.69 crores was earned from ....
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....pense under section 14A at INR 9,34,74,475 Disallowance of consulting fee paid to bank under section 37at INR 13,70,90,436 Disallowance of escrow fee paid to bank under section 37 at INR 201,663 Transfer Pricing adjustment: INR 42,45,31,144 and thus a total additions of INR 65,52,97,718 was made in the assessee's case. Aggrieved, the assessee filed an appeal before the CIT(A) . The ld CIT(A) partly allowed the appeal . Against that order, the assessee as well as Revenue filed appeals . Let us first take the assessee's appeal. 9.2 Since there was none present for the assesssee, we required the Ld DR to present the case. The ld DR taken us through the relevant portion of the order of the ld CIT(A) and on the issue of disallowance under section 14A, the ld DR submitted from the assessee's following submissions that "The Learned Commissioner of Income Tax (Appeals) ["CIT(A)"] directed the Learned AO to recalculate disallowance under section 14A after excluding the disallowance of an amount which is not directly attributable to any particular income or receipt. However, such an order giving effect to the CIT(A)'s order has not yet been passed.", it appears that the ....
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.... rate charged on OFCD Issued. This issue is already decided against the appellant in ground no.4. This appeal is dismissed." and submitted that in the light of the above , the assessee's pleadings, that "The Learned CIT(A) disregarded the contention of the appellant as no details were furnished to substantiate as to how such expenditure incurred for the appellant's benefit and ruled against the appellant" without specifically pointing out how and on which material , the ld CIT(A) findings are wrong etc, these grounds are vague and hence the ld DR submitted they may be dismissed. 11. We heard the submissions and find merit in the submissions. Since the assessee has not specifically pointing out how and on which material , the ld CIT(A) findings are wrong etc, we find that the assessee's corresponding grounds are vague and hence we dismiss them . 12. The assessee also filed an additional ground during the pendency of the proceedings before this tribunal pleading that it has inadvertently omitted to raise an alternate ground in the above appeal viz " on the facts and circumstances of the case and in law , the appellant prays that the AO be directed to allow the co....
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....Rolta India Ltd 22.07.2007 USD 150 million Zero percent Suzlon Energy Ltd 21.09.2007 USD 200 million Zero percent Firstsource Ltd 07.11.2007 USD 275 million Zero percent Sharon Bio-medicine Ltd 27.11.2007 USD 15 million Zero percent As against the above, SVL has charged an interest of 2 percent on the investment made in OFCD. Thus, it is apparent that the interest earned by SVL on the investment in OFCD issued by its overseas subsidiaries is at arm's length price. Since, investments in equity instruments would not require any earning of interest, a nil rate of interest charged on OFCDs will also be at arm's length. As against this, the assessee charged interest at 2 percent and accordingly, there should not be any further adjustment under section 92 of the Act. 5.4.1 The DRP in the aforesaid order has held that "In all the international financial transactions, the rate of interest is to be considered at LIBOR rates and not at the rates at which the banks are lending / charging in India. Therefore, the assessee's claim of 6% interest is not adequate / comparable. Further, M/s. Avis Ventures Ltd., one....
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....e computing the profits u/s 115JB? 5. Whether ld. CIT(A) erred in deleting the addition to book profits overlooking Expl. 1(f) to sec. 11 5JB and the decision of ITAT, Bangalore bench in DCIT Vs M/s Sobha Developers. 58 taxmann.com 107 (Bang), Dabur India Ltd. Vs ACIT (ITAT, Mum) 145 lTD 175 and CIT Vs Goetze (India) Ltd. (Del) 97 DTR 169? 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored on the above issues." 16. The ld DR assailed the order of Learned CIT(A) on the above lines and pleaded to allow the Revenue's appeal. Since none was present for the assessee , we have gone through the relevant portion of the order of the ld CIT(A), which is extracted as under : " 5.3 Ground No.4 raised by the appellant is against addition of uncharged guarantee commission of Rs. 42,45,31,144/-. The AO in the assessment order held that the learned JCIT, Transfer Pricing, after due consideration of the all issues raised by the assessee has considered adjustment to the tune of Rs. 42,45,31,144/- to the value of international transactions....
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....age of commission on such guarantee to be charged, has evolved very recently within last 3 years. It is by way of Finance Act 2012, clarified that guarantee commission is an international transaction within the meaning of Transfer Pricing provisions. Similarly, there is no clarity on the percentage on the commission to be charged since it is very fact specific. However, there are certain decision of Tribunal has emerged where these issues are dealt in detail and the Tribunal has given some indicator to determine the rate to be charged on guarantee commission. The Tribunal in the following cases held that the TPO cannot adopt blanket rates from bank websites as they are not appropriate comparable's. M/s Godrej Household Products Ltd. vs. ACIT and Glenmark Pharmaceuticals Ltd. vs. Additional CIT Further, we would like to submit that the Hon'ble Dispute Resolution Panel in the appellant's own case for the AY 2009-10 has upheld a guarantee commission adjustment of 1%. We humbly request if your good self to take into consideration this significant development in the area of adjustments made to ALP on guarantee fee. The Tribunal judgements as cited hereabove....
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............................................................... .............................................................................................................................. .............................................................................................................................. .............................................................. 5.7 Additional ground No.8 raised by the appellant is against computation of book profit u/s 115JB of the IT Act. The AO in his remand report has stated as under: "In the view of the assessee, the assessing officer has erred in considering the disallowance made u/s. 14A r.w.r. 8D in MAT computation hence lowering the MAT credit. According to the assessee the disallowance u/s.14A r.w.r.8D is a notional one not debited to P&L Act. However the argument made by the assessee is not justified and hence not acceptable. By considering the line of thought of the assessee income derived by way of MAT Computation u/s. 115JB ought to be considered as also notional one. Hence the assessee also should have been objected the validity of MAT provision also. Further the assessee is fully aware that the....
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....omputation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8d of the Incometax Rules, 1962." 19. From the above, it is clear that the Assessing Officer is not prohibited from making the disallowance U/s.14A. However, the Special Bench, supra, held that the Assessing Officer can make disallowance without resorting to explanation to clause (f) of Explanation 1 to section 115JB(2). Therefore, this issue is remitted back to the Assessing Officer for making appropriate disallowance U/s.14A r w s 115JB, if the total income has to be determined and to be assessed u/s 115JB . Therefore, this issue is remitted to the AO for a fresh examination on the above lines. The corresponding grounds raised by the Revenue are treated as partly allowed for statistical purposes. Assessee's appeal in ITA No.1391/2016 for A Y 2008-09 & the Revenue's cross appeal in ITA No. 1421/2016 20. For the Assessment Year ("AY") 2008-09, the assessee filed its return of income on September 29, 2008 declaring a total income of INR 146,63,29,522. On a reference to the Transfer Pricing Officer ('TPO"), the TPO found ,....
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....hipping business. The escrow fee is paid to the escrow agent, in this case the SCB, to hold the assets until the transaction is finalized and then gives them to the appropriate party. The that Learned AO disregarded all the submissions made to substantiate the commercial expediency of those expense and disallowed them said expenses and failed to appreciate that the appellant derived business advantage enabling it to take decisions which are feasible, strategic on account of advisory services provided by SCB in respect of the above claim of the appellant and passed an order confirming the levy of penalty under section 274. The Learned CIT(A) has also disregarded the contention of the appellant as no details were furnished to substantiate as to how such expenditure incurred for the appellant's benefit and ruled against the appellant. Therefore, the assessee filed this appeal. 22. Since none was present for the assessee , we required the ld DR to present the case . The ld DR took us through the order of Learned CIT(A) and supported that order, the relevant portion of the order of the ld CIT(A), which is extracted as under : " 5.1 All the grounds raised by the appellant are....
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....ee, Daleworld Limited is a separate legal entity in its own right and the expenses of the subsidiary cannot be transported to the books of SVL as allowable expenses. Therefore, this expense not being a business expenditure of the assessee was disallowed and added to the income of the assessee. Neither during the assessment proceedings nor during the penalty proceedings, the assessee gave any explanation why these expenses were debited in its books. For this reason, the undersigned has satisfied in the assessment order that this act of assessee comes under the purview of explanation 1(B) to sec 271(1)(c) of the income Tax Act, 1961. Therefore penalty is levied on this addition. On perusal of the Escrow Agreement dated 24.12.2007, it was found that agreement was between J B Ugland Holdings AS (Norway), BB Shipping AS(Norway) and Daleworld Limited ( A wholly owned subsidiary of SVL). These three parties have appointed M/S. Standard Chartered Bank, London as the Escrow Agent. (An Escrow Agent is a third party who agrees to hold fund or assets in Escrow. The escrow agent provides this service to two parties in a transaction until certain conditions are filled). The escrow agent....
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.... mere estimated addition made in view of the overall circumstances of the case and not based on the particulars of income, which does not warrant imposition of penalty. It is a trite proposition of low that each and every case of disallowance/addition based on the facts and circumstances does not lead to imposition of penalty." It has relied upon the decision of Hon'ble ITAT Ahmedabad in the case of M/s Cadilla Health Care Ltd. vide ITA No.2430/Ahd/2012 & Co.No.242/Ahd/2012 dated 11.10.2013 for A.Y 2008-09 wherein it is held that" "Notional Interest can be added only if Optionally Fully Convertible loan was not converted into Equity within the prescribed time as specified in the Agreement. Since the OFCD was converted into Equity within the prescribed time there is no question of taxing notional interest." The appellant has submitted that the learned AO has disallowed the above expenses on the basis that it is not direct subsidiary of the company and levied penalty on the same. The very fact that the above amount is expended to SCB for the advisory services to acquire JB Ugland AS, through its wholly owned subsidiary Avis Ventures Limited (Mauritius) whic....
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....est income and disallowance u/s 14A . 1.2 The Ld CIT(A) has erred in not providing an iota of reasoning as to how the levy is not attracted in respect of interest income and U/s 14A vide a speaking order. G1.3 For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT (A) may be set aside and that of the Assessing Officer restored. 24. The ld DR assailed the order of learned CIT(A) on the above lines and pleaded to allow the Revenue's appeal. Since none was present for the assessee, we have gone through the relevant portion of the order of the ld CIT(A) , which is already extracted in para 22, supra , wherein the assessee's appeal was dealt with. 25. From the above , it is clear that the assessee has submitted that addition/disallowances are made on a subjective interpretation and there was no concealment of facts or furnishing inaccurate particulars of income and has relied upon the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts P. Ltd. 230 ITR 320. It has also relied upon the decision of Hon'ble ITAT Chennai in its own case vide ITA No.120/Mds/2014 dated 21.03.2014 for AY ....
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....er section 92CA(3) of the Act on January 24, 2013. The AO further proceeded to complete the assessment and passed the impugned Draft Assessment Order on March 28, 2013 incorporating the adjustment suggested by the TPO and forwarded a copy to the assessee . The assessee filed its objections before the Dispute Resolution Panel and on receipt of the directions of the DRP the AO passed the assessment order . Aggrieved, the assessee filed this appeal with following grounds. 1. The assessment order passed by the AO under section 143(3) read with section 144C of the Income-tax Act, 1961 ("Act") is not in accordance with the law, contrary to the facts and circumstances of the present case and is in violation of principle of equity and natural justice. Validity of the Assessment Proceedings 2. The AO erred in passing the assessment order in the name of a non-existent company and hence, the order passed by the learned AO is bad in law and liable to be quashed. Disallowance under section 14A 3. The Honourable DRP/AO have erred in law and on facts by disallowing Rs. 8,22,89,728 under section 14A of the Act read with Rule 8D of the Rules. 4.....
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....relation to' income which does not form part of total income under the Act. 13. The Honourable DRP/AO erred in law and on facts by relying upon Cheminvest Limited vs ITO (121 lTD 318), though they are on a completely different set of facts, clearly distinguishable and not applicable to the appellant's case. 14. The Honourable DRP/AO erred in law and has failed to appreciate that even if section 14A of the Act has to be applied, it cannot exceed the actual expenditure incurred by the appellant. Transfer Pricing Adjustment OFCD Interest: 15. The Honorable DRP has erred in law and on facts, in holding that the transactions between the appellant and its AE were not at arm's length and in upholding the adjustment of Rs. 11,23,02,003 made to the interest income of the appellant. 16. The Honorable DRP, TPO and the AC erred in law and on facts in not considering the valuation report provided by a professional, which proves that the effective rate of interest annualized yield on the investment in OFCDs is higher than the arm's length rate of interest on a lending in foreign currency. 17. The Honorable DRP, TPO and the AC erred in law and on facts....
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.... against all risk of default by the subsidiary AE. 25. The Honorable DRP, TPC and the AC have erred in not considering the rate of 0.25 percent adopted as guarantee commission rate by a bank in India in respect of guarantee issued in foreign currency to a Non-resident beneficiary as CUP for determining the Arm's length price on the guarantee extended by the appellant for its wholly owned subsidiaries. 26. The learned AO/TPO has erred in charging the guarantee commission on the opening balance of guarantee. 27. The learned AC has erred in not giving the TDS credit of Rs. 1,96,79,460 while computing the tax payable. 28. The earned AC has erred in not giving the MAT credit of Rs. 26,35,58,884 while computing the tax payable. 29. The Learned AC has erred in wrongly adding an additional tax amount of Rs. 1,51,00,445 without any basis. Interest under section 234B 30. The learned AC has erred in computing the interest under section 234B. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds, at any time before or at the time of hearing of the appeal Each of the above grounds is independent....
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....4A r w r 8D that the AO has disallowed the interest on loans, Rs. 1,28,93,207 u/s 14A rwr Rule 8D(i), Rs. 6,93,96,521 u/s rwr 8D(iii), being 0.5 percent of the average value of investments and thus Rs. 8,22,89,728/- has been disallowed by the AO , which were utilized for making advances to subsidiaries and for other business considerations. Total interest expense of the assessee for the year under consideration was Rs. 87,08,84,055. Out of the total interest, interest amounting to Rs. 1,99,845 was already disallowed by the assessee while computing the total income for the purpose of Income-tax. The assessee has submitted that during the year it had earned dividend income of Rs. 2.70 crores from Mutual Funds and the investments in Mutual funds were made out of internal accruals and not out of borrowed funds etc . After examining and considering assessee's submissions and the observations of the AO, the DRP held , inter alia, that the A O however, found that the entire interest of Rs. 28 crores relates to loan amount borrowed and squared up during the period under consideration. The assessee , therefore, needed to establish through a cash now statement the utilization of these borrow....
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....om compulsorily fully convertible debentures (FCCD). Unlike FCCD, the OFCD are not considered equity capital. OFCDs are nothing but debt and therefore, interest must be charged on the same. This Panel finds that even Hon ITAT Chennai has held that no adjustment is required since SIHL had charged a higher rate of interest than the prevailing LIBOR rate. Thus SIHL has charged interest rate higher than LIBOR rate. Therefore if the assessee had charged interest rate higher than LIBOR rate the TPO would have considered it as at ALP. But the assessee has charged rate at 2% where the LIBOR as mentioned by the assessee is 2.8 percent. Further spread that takes care of other expenses, risks and other incidental the investor incurs is also considered necessary by this Panel. Therefore, this Panel finds the interest rate identified by the TPO as proper as per TP provisions in the Act. The objection raised by the assessee therefore is rejected." 31. We heard the above submissions and gone through the relevant material . Since the assessee has not specifically pointing out how and on which material , the findings of the DRP are wrong etc, the assessee's corresponding grounds of the assessee ....
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....not find any reason to interfere with the directions of the DRP and hence dismiss corresponding grounds of ; the assessee , the Revenue and the CO filed by the assessee . 35. On the MAT Credit issue , we find that the DRP has directed the AO to verify the claim of the assessee from the record and decide as to whether the credit is to be given or not. Apart from complying with this direction, we direct the A O to verify the claims of the assessee in this appeal ,supra, from the record and decide as to whether other claims made by the assessee in this appeal are correct or not and if found correct to allow the due credit . Grounds of appeal in ITA No.1393/2016 A Y 2008-09 143 rw 147 " 1. The order passed by the Commissioner of Income-tax Appeals ["CIT(A)"j under section 250(6) of the Income-tax Act, 1961 (" the Act") confirming the order of the Assessing Officer ("AO") passed is not in accordance with law, contrary to the facts and circumstances of the present case and is in violation of principles of equity and natural justice. 2. Reopening of assessment 2.1 The learned AO has erred in initiating re-assessment proceedings under section 147 of the Act, without....
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.... Act, would not change the character of the receipt in the hands of the appellant. 4. Treatment of Interest earned as income from other sources 4.1 Without prejudice to the above grounds, the learned CIT(A) and the AO have erred in treating the interest earned including proportionate compensation under the head income from other sources instead of treating the same as business income. 4.2 The learned CIT(A) and AO have erred in not considering the matching concept where in order to earn an income, certain amount of expenses need to be spent, thereby, erred in not allowing any expense against the income determined. The appellant craves leave to add, substitute, amend, delete, or otherwise modify any of the grounds of appeal stated hereinabove before commencement of or at the time of hearing. 36. Since none represented the assesssee , we required the ld DR to present the case . The Ld DR invited our attention to the relevant portion of the order of the ld CIT(A) , which is extracted as under : " 5.2.1 I have considered the findings of the AO. The AO has reopened the assessment u/s 148, which was originally accepted u/s 143(1). The reason for reo....
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....uarantors have Jointly and severally agreed to provide unconditional and irrecoverable Guarantee for the due payment of all the amounts due by the borrower to the Lender. c. Definitions of Lender, Borrower, Guarantors, Facility, Disbursement, Drawdown etc were lucid (Clause 1.1). d. It was reiterated as the borrower is in urgent need of funds for its business purpose.. the amount borrowed shall be utilized by the borrower for its business (Clause 2), e. It is apparent that the 'conditions precedent and subsequent' (clause 3) relate in general about the securities such as Lands, shares, demand promissory note, post dated cheques etc in favour of the loan facility arrangements. f. It was clearly spelt about the return on the Loan facility (Clause 5), and agreed for an annual Return of Rs. 135 awes far Rs. 400 crores loan or in proportion to the Disbursed loans, pro-ratted return shall be payable by the Borrower to the Lender. Further, it was stated that the return shell be calculated on the basis of number of days elapsed from Drawdown Date. g. The non-payment of the facility and the appropriate return accrued will result in unrestricted right to t....
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.... 5. CIT Madras v South India Flour Mills Pvt. Ltd. (75 ITR 147) 6. Parle Soft Drinks Pvt. Ltd. vs KIT (TS 467 ITAT 2013) 7. ACIT vs 3i Infotech Ltd.(TD 417 ITAT 2013) 8. CIT & Others Vs. Sapthagiri Distilleries Ltd. (366 ITR 270) 9. Khanna and Anandham vs. CIT in ITA No.1286/2008, dt. 29.01.2013 5.3.2 Considering the facts of the case, submissions made by the appellant, perusal of all the agreements and remand report, I am of the view that receipt of Rs. 35 crones is nothing but interest on money given to M/S Sahara India Commercial Corporation Ltd., The appellant has furnished additional submission vide letter dated 02.01.2016 which is unsigned. Therefore, no cognizance is taken of this letter. Compensation received is of capital nature especially in view of the fact that Rs. 35 crores was received on 09.04.2007 merely five days after such and so called agreement was entered into. It is pertinent to note that principle amount of Rs. 400 crores was received on 25.05.2007. M/s Sahara India Commercial Corporation Ltd. itself had treated Rs. 35 crores as Interest only. The action of AO in taxing Rs. 3,33,00,000/- is confirmed. These ....
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....3(2). Based on the document impounded in the survey and after considering the assessee's reply and material etc, the AO treated the compensation of Rs. 48 crores received by the appellant from UTL for the breach of agreement and claimed by it as a capital receipt as an interest income and charged it to tax under the head income from other sources. Further, the appellant had taken an interest free unsecured loan of Rs. 555 crores from M/s Siva Ventures Limited ("SVL"), holding company of the appellant, which had been given to M/s Vantage Realty Private Limited ("VRPL"), a subsidiary of the appellant. During the relevant year, the appellant had factored to the extent of Rs. 100 crores of receivables and paid to EAFSL, factoring charges amounting to Rs. 7,82,68,493 upfront. The AO disallowed Rs. 7,82,68,493 under section 40(a)(ia) of the Act stating that the transaction was a colourable device to reduce taxable income and if at all the transaction was in accordance with commercial necessity, the expense was in the nature of interest expense and the assessee was liable to deduct TDS. Aggrieved the filed an appeal before the Commissioner of Income-tax (Appeals) who upheld the order p....
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....ion. 5.2.1 The appellant has submitted that security deposit of Rs. 400 crores was shown under the head Loans and advances as on 31.3.2009 and compensation received of Rs. 48 crores was shown under the head capital revenue. The appellant has made the submissions before me similar to the submissions made before the Assessing Officer. It relied upon the following case laws:- 1. CIT Vs Saurashtra Cement (SC) 2. S Zoraster & Co., VsCIT (322 ITE 59) (Mad.) 3. CIT V Bombay Burmah Trading Corporation (161 ITR 386) (SC) 4. CIT V T.I & M Sales Limited (250 TR 116) (Mad.) 5. CIT Madras V South India Flour us India P Ltd.(75 ITR 147)(Mad.) 6. Pane Soft Drinks P Ltd Vs JCIT (TS 467 ITAT2O13) (Mum. ITAT) 7. ACIT vs 3i Infotech Ltd (TD 417 THE ITAT 2013) (Mum. ITAT) It has been further submitted that mere deduction of tax at source by the payer does not alter the character of the receipt in the hands of the payee. It relied upon the decision of Honourable Supreme Court in the case of M/s State Bank of India and Anr. Vs Mula Sahakari Sakhar Karkhana Ltd., dt.6.7.2006. 5.22 The so called agreements e....
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.....1.2009 which define te tasks assigned to both the parties. As the parties themselves have not acted upon the terms and conditions as laid out in the said agreement, the appellant cannot now pleaded that other terms and conditions contained in this agreement be construed as not ambiguous. The action of Assessing Officer in adding Rs. 48,00,00,000/- as interest income is confirmed. This ground of appeal is dismissed. 5.3 Ground No.4 raised by the appellant is against addition of factoring charges of Rs. 7,82,68,493/- u/s 4O(a)(a) of the IT Act holding that the transaction is a colourable device to reduce the taxable income and otherwise also in the nature of interest expense liable to TDS. The appellant has submitted that a. Factoring is akin to bill discounting, under a new nomenclature. Banks and a financial institutions have specialized division to handle the factoring (bill discounting), For both export and domestic supply/service sectors b. Factoring/bill discounting are structured transaction wherein the receivables are transferred to the bank/financing institution at a value lower to the realizable value c. Through factoring, neither a debt....
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....ansaction are separate transaction. * To pay principal amount to holding company by way of taking loans against the receivable of ovan subsidiary company, though the assessee company could have received the money from subsidiary without entering such transaction. Moreover loans and advance given to M/s Vantage Realty Pvt Ltd., is interest free, and again M/s Vantage Reality Pvt Ltd., is also not showing any income out of the such loans. * The transaction was dealt in a manner to reduce the taxable income, by way of netting of the interest income in the shed of factoring charges. The transactions is nothing a colorable device to reduce the taxable income. 5.3.2 The Assessing Officer has held that "From the above discussions and judicial pronouncements on the issue and principal laid down, it can be concluded that claim of the assessee is not maintainable in the light of the judicial pronouncement, and as well as facts and circumstance of the case. The referred transaction was dealt in a manner to reduced the taxable income, by way of netting off the interest income under the nomenclature factoring charges" and distinguished the case laws ....
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....e discounting can be technically defined as the selling of bill of invoice discounting company before the due date of payment at a value which is less than the invoice amount. The difference between the bill amount and the amount paid is the fee of the invoice discounting company. The fee will depend upon the period left before payment date and the perceived risk. Sec.2(7) of the Interest Act defines the term 'interest' as interest on loans and advances made in India and includes (a)Commitment charges or unutilized portion of any credit sanctioned for being availed of in India. (b)Discount on promissory notes end bill of exchange drawn or made in India. Thus, where the legislature was conscious of the fact that even the discount of bill of exchange e be included within the definition of interest, the same was basically e provided for. Section 2(28A) of the Income Tax Act defines the term 'interest' as interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right of obligation) and includes any service fee or other charge in respect of the moneys borrowed or debit incurred or in....
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....quently the proposed upward adjustment of Rs. 24,75,78,358/- is deleted as providing of corporate guarantee will not constitute an international transaction for the purpose of determining the ALP 2.2 The Hon'ble DRP had fail to note the explanation (c) of section 92B wherein it was stated that Capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase of sale of marketable securities or any type of advance, payments or differed payment or receivable or any other debt arising during the course of business. 2.3 It is submitted that the decision of Hon'ble ITAT relied upon by the learned DRP in the case of M/s Redington India Ltd in ITA No.513/Mds/2014 has not become final and the department has preferred appeal before the Hon'ble High Court of Madras u/s 260A. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned DRP's may be set aside and that of the Assessing Officer restored. 44. The ld DR presented the case on the above lines and pleaded to allow the appeal. Since none represented the assessee, we have gone through the relevant portion of t....