TaxTMI 
TaxTMI 
2021 (1) TMI 50
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.... of manufacturing of specialised chemicals and pharmaceuticals. It filed its return of income on 28.09.2011 for the A.Y. 2011-12 declaring total income of Rs. 18,25,00,634/- after claiming deduction of Rs. 1,34,55,929/- u/s. 80 IC of the I.T. Act, 1961 (the Act) in respect of its unit located at Haridwar. During the assessment proceedings u/s. 143(3) of the Act, the AO observed that the assessee has entered into international transactions with its Associated Enterprise (A.E.) which requires the determination of ALP. Therefore, the matter was referred to the Transfer Pricing Officer (TPO) who passed the order u/s. 92CA(3) of the Act on 30.12.2014 proposing a total adjustment of Rs. 4,57,95,675/- on account of (i) interest on working capital ....
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....3,18,73,275/- towards interest on advances given towards investment in equity of AE to Vivimed Labs USA Inc., AE of Rs. 25,20,00,000/- and Vivimed Holding Ltd., Hong Kong., of Rs. 81,40,000/-. 4. Erred in making addition of Rs. 1,21,82,100- by charging corporate guarantee fees @ 1.75% towards corporate guarantee provided in respect of Vivimed Holdings Ltd., Hong Kong of Rs. 57,16,10,000/- & Vivimed Labs Europe Ltd. of Rs. 12,45,10,000/-. 5. Ought to have appreciated the fact that the guarantee was provided in the nature of parental obligation to its subsidiary for Working capital facility and assessee has not incurred any cost for providing such guaran tee. 6. Erred in making the addition of Rs. 5,66,728/- u/s. 14A of the Act without ....
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.... ground nos. 1 and 2 are not pressed by the assessee. 2.4. With regard to additional grounds of appeal, the Ld. Counsel for the assessee submitted that the assessee is not pressing ground nos. 10 and 11. 2.5. Accordingly, ground nos. 1 and 2, and ground nos. 10 and 11 are dismissed as not pressed. 3. With regard to the additional grounds of appeal nos. 7 to 9, the Ld. Counsel for the assessee submitted that they are legal grounds relating to issues arising out of assessment order and prayed that they be admitted and adjudicated. 3.1. Ld. DR, on the other hand, opposed the admission of additional grounds. 4. After hearing the rival contentions and material placed on record, we find that the AO has added the disallowance made u/s. 14A al....
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....action and proposed addition by charging corporate credit at 2% of the corporate guarantee given by assessee. In accordance with these findings of the TPO, the final assessment order was passed and the assessee has filed second appeal before the Tribunal. 5.2 The Ld. Counsel for the assessee submitted that though TPO has stated that these are working capital advances given to its subsidiaries, they are not advances but are the investments made by assessee in the equity of its subsidiaries and the said companies have also subsequently allotted shares to the assessee. 5.3. Ld. DR, on the other hand, supported the orders of the authorities below and drew our attention to the paper book filed by assessee wherein in its letter addressed to the....
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.... in fact investments in equity shares of the subsidiaries, then no T.P. adjustment shall be made. However, if it is found that the funds transferred by the assessee to its subsidiaries during the year were working capital advances, which were later decided to be treated as investments, then the T.P. adjustment already made by the AO shall be revived and the assessment shall be completed accordingly. 5.5. Therefore, assessee's ground of appeal no. 3 is treated as allowed for statistical purposes. 6. As regards ground no. 4 regarding corporate guarantee fee, Ld. Counsel for the assessee submitted that the A.Y. before us is 2011-12 and that amendment to S. 92B bringing the corporate guarantee fee into the ambit of international transacti....
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....in favour of the assessee. Therefore, following the principle of uniformity and consistency, we hold that corporate guarantee is not international transaction prior to amendment of S. 92B w.e.f. 1.4.2012. Therefore, grounds of appeal no. 4 and 5 are allowed. 7. As regards ground no. 6, it is case of the assessee that assessee has not earned any exempt income during relevant A.Y. and therefore, no disallowance u/s. 14A is called for. He however submitted that even if there is a disallowance u/s. 14A under normal provisions of the Act, no addition should be made to the income u/s. 115JB of the Act. He placed reliance upon the following decisions in support of his contention. i) Sri ASL Finvest Pvt. Ltd. vs. ITO in ITA No. 294/Hyd/2018 ii....