TaxTMI 
TaxTMI 
2021 (1) TMI 74
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.... Rs. 25 lacs as disallowance under Section 14A being operating and administrative expenses, which could be considered 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 i....
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....s. In view of above the following decision is taken :- A. Ground No. 1.1 : It is partly allowed with addition upheld in principle but interest is 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 a....
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....ssed. 15. Another common issue raised relates to transfer pricing adjustment on commission on corporate guarantee. 16. The Assessing Officer in this case has noted that the assessee has extended 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. Howeve....
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.... is in appeal before us. 19. We have heard both the counsel and perused the records. Learned Counsel of the assessee started with the plea that this is outside the ambit of transfer pricing adjustment. But he also referred to the decision 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 assess....
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....rate applicable on the capital gain on sale of buildings. The assessee's plea is that the same should be taxed @ 21.63%u/s. 112 of the I.T. Act instead of 32.45% as the said buildings were held for more than three years. The assessee's plea is that this issue stands covered in favour of the 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 o....
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....ll the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income 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 cla....
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.... explicitly clear that the deemed fiction created in sub-section (1) & (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Section 48 and 49. Secondly, it is well established in law that a fiction created by the legislature has to be confined to the purpose for which it is created. In this connection, we may refer to the decision of the Apex Court 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 t....