TaxTMI 
TaxTMI 
2021 (1) TMI 74
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....sidered towards earning exempt dividend income. The Assessing Officer in these cases had made deduction at 0.5% of the administrative expenses under Rule 8D(ii) for A.Y. 2013-14 Rs. 1,89,80,535/- and for A.Y. 2014-15 Rs. 2,36,37,832/-. 4. Upon assessee's appeal learned CIT(A) held that the Assessing Officer is to follow applicable portion in decision in paragraph 6 of appellate order for A.Y. 2012-13 dated 5.9.2018. This learned Counsel of the assessee has contended that learned CIT(A) has disallowed 0.5% of average investment excluding investment which did not earn taxable income. 5. We have heard both the counsel and perused the records. The learned counsel for the assessee submitted that identical issue was decided by the Tribunal in assessee's own case for the earlier assessment year. He submitted that Tribunal in the said decision had remitted the matter to the file of Assessing Officer. Per contra, the learned Departmental Representative did not dispute the proposition that same issue was considered by the Tribunal. 6. We note that in earlier year, ITAT in assessee's own case for assessment year 2010-11 & 2011-12 has noted that in the earlier order Tribunal has dir....
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.... to applied at US$ LIBOR rate+ 3% mark up. B. Ground No. 1.2 : It is allowed. The Assessing Officer is directed to delete the addtion. C. Ground No. 2 : To follow applicable portion in decision in paragraph 6 of appellate order for A.Y. 2012-13 dated 5.9.2018. The ground is partly allowed. D. Ground No. 3 : To follow same directions as in paragraph 8 of appellate order for A.Y. 2013-14. E. Ground No. 4 : It is allowed. The Assessing Officer is directed to delete the addition. 10. We note that this issue is also covered by the ITAT order in assessee's own case for assessment year 2010-11 & 2011-12. With respect to the same amount given to the Associated Enterprise, which were in shape of share application money, the Assessing Officer has applied interest on the amount advanced treating it as share application money. This was deleted by the learned CIT(A). On cross-appeal by the assessee and Revenue, Tribunal had held that the undisputed position that emerges is the fact that assessee has advanced share application money to one of its Associated Enterprise to acquire further stake in that entity. That the Associated Enterprise has become whollyowned subsidiary of the ass....
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....ed corporate guarantee with bank in the UAE on behalf of the its Associated Enterprises. Since the assessee had not charged any fees in this regard the Assessing Officer proceed to refer to the normal guarantee fees charged by the bankers and adopted rate of 1.5%. 17. Upon assessee's appeal learned CIT(A) for A.Y. 2013-14 deleted the addition holding that no transfer pricing adjustment was required as the assessee has not charged any guarantee fees from its associated enterprises and hence, he held that the corporate guarantee is not bank guarantee. Learned CIT(A) for A.Y. 2014-15 noted that there has been change in legal proposition in this regard. He adopted rate of 0.5% by placing reliance upon the Hon'ble Bombay decision in the case of CIT Vs. Everest Kento Cylinders Ltd. (58 taxmann.com 254). Learned CIT(A) on this issue observed as under :- "On transfer pricing adjustment on corporate guarantee raised in ground 1.3, in earlier AY, I had allowed the ground. However, there are new legal developments. They include: A. In Assistant Commissioner of Income-tax, LTU-2, Mumbai vs Glenmark Pharmaceutical Ltd in IT APPEAL NO. 1654 (MUM.) OF 2016 [AY 2010-11] dated FEBRUARY 1,....
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.... of Hon'ble Bombay High Court for the proposition that Hon'ble Bombay High Court wherein it had upheld rate of 0.20% adopted by the ITAT. 20. Per contra learned Departmental Representative relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. Everest Kento Cylinders Ltd.(supra). 21. Upon careful consideration, we note that the transfer pricing adjustment for corporate guarantee fees is no more an issue which is res integra. Adjustment for corporate guarantee fees has been upheld by Hon'ble Bombay High Court. We find that the view taken by learned CIT(A) is in consonance with the decision of Hon'ble Bombay High Court in the case of Everest Kento Cylinders (supra). The same has been followed by ITAT in several decisions. Hence we direct that guarantee fees should 0.5%. 22. Another common issue in Revenue's appeal relates to disallowance u/s. 43B. 23. Brief facts of the case are that the assessee had deposited employees' contribution to ESIC within the permissible grace period and before the due date of filing of return for the present assessment year. The Assessing Officer held that as the payments were made after the due date the same ....
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.... assessee by the decision of ITAT, Mumbai in the case of M/s. Smita Conductors Ltd. Vs. DCIT (ITA No. 4004 of 2011 vide order dated 17.9.2013). 32. Per contra, learned Departmental Representative submitted that gain on depreciable assets is to be dealt with by the provisions of section 50 of the I.T. Act. He submitted that the said section being special provision for computation of capital gains in case of depreciable assets in the concluding paragraph specifically states that the income received or arising as a result of such transfer shall be deemed to be capital gain arising from short term capital asset. Learned Departmental Representative submitted that the language of the Act is very clear. The Act provides in no cencertain terms that such gains shall be deemed to be capital gain arising from the transfer of the short term capital asset. He submitted that there would have been scope of ambiguity only if the word 'short term' was not used. He submitted that when the Act provides that such gain would be capital gain arising from short term capital asset there is no reason why term 'short term' used there should treated as a superfluous word. He pleaded that where the act clea....
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....me received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets. 35. In this regard we may also refer to the decision of Hon'ble Bombay High Court and Hon'ble Supreme Court decision relied upon in this regard by learned Counsel of the assessee. * CIT Vs. V.S. Dempo Company Ltd. (387 ITR 354) * CIT Vs. M/s. Manali Investment (ITA No. 1658 of 2012). 36. In the case of V.S. Dempo Company Ltd. (supra) the facts were that in the return filed by the respondent/assessee for the Assessment Year 1989-90 the assessee had disclosed that it had sold its loading platform M.V. Priyadarshni for a sum of Rs. 1,37,25,000/- on which it had earned some capital gains. On the said capital gains the assessee had also claimed that it was entitled for exemption under Section 54E of the Income Tax Act. Admittedly, the asset was purchased in the year 1972 and sold sometime in the year 1989. Thus, the asset is almost 17 years old. Going by the definition of long term capital asset contained in Section 2 (29B) of the Income Tax Act, 1995 (hereinafter referred to as 'the Act'), it was admitte....
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....t in the case of State Bank of India vs. D. Hanumantha Rao reported in 1998 (6) SCC 183. In that case, the Service Rules framed by the bank provided for granting extension of service to those appointed prior to 19.07.1969. The respondent therein who had joined the bank on 1.7.1972 claimed extension of service because he was deemed to be appointed in the bank with effect from 26.10.1965 for the purpose of seniority, pay and pension on account of his past service in the army as Short Service Commissioned Officer. In that context, the Apex Court has held that the legal fiction created for the limited purpose of seniority, pay and pension cannot be extended for other purposes. Applying the ratio of the said judgment, we are of the opinion, that the fiction created under Section 50 is confined to the computation of capital gains only and cannot be extended beyond that. Thirdly, Section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under Section 54E cannot be denied by referring to the fiction created under Section 50. Section 54E specifically provides that where capital gain arisin....