TaxTMI 
TaxTMI 
2022 (4) TMI 543
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..... 4. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee had invested as share application money in two A.Es namely Strides Pharma Asia Pte. Ltd., Singapore, and Strides Pharma International Ltd., Cyprus. The share application money was remitted to its A.Es from time-to-time during the relevant assessment year. In addition to this, during the earlier years, the assessee had invested the share application money in following A.Es which was outstanding as on 31.03.2014. Sr. no. Name of A.E. Amount outstanding as on 31st March 2014 1. Strides Pharma Asia Pte. Ltd., Singapore Rs. 144,48,94,320 2. Aglia Specialties Ltd., Cyprus Rs. 141,35,85,582 3. Strides Arolab International Ltd. U.K. Rs. 14,55,61,515 5. The Assessing Officer made a reference to the Transfer Pricing Officer ("TPO") for determination of arm's length price of international transactions entered into by the assessee. During the proceedings before the TPO, the assessee was asked to show cause as to why there should not be any interest imputation on the share application money. In reply, the asse....
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....passed by the TPO following its directions issued in preceding assessment years and accordingly rejected the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us. 7. During the course of hearing, Shri Nishit Gandhi, learned Authorised Representative for the assessee ("learned A.R.") submitted that similar issue has been decided by the Co-ordinate Bench of the Tribunal in assessee's own case. 8. On the other hand, Ms. Vatsalaa Jha, learned Departmental Representative ("learned D.R.") vehemently relied on the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no.7370/Mum./2018, for the assessment year 2014-15, vide order dated 07.02.2020, has decided the issue in favour of the assessee by observing as under:- "14. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below along with case laws cited by the ld. AR for the assessee. At the outset, it needs mention that it has....
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....igh Court in the case of Shell India Markets Pvt. Ltd. vs. ACITAnd others has also held that the provisions of chapter 10 of the Act would apply only when income arises from the international transactions. The relevant portion of the said order is reproduced as under: "9. We shall now consider the above submissions on behalf of the Revenue. So far as the availability of alternative remedy is concerned, the petitioner has at the beginning of today"s hearing itself undertaken to withdraw its objection on the issue of jurisdiction before the Dispute Resolution Panel. This was accepted by us before considering the issue on the merits. Moreover, this petition was filed on April 24, 2013, challenging the impugned orders dated January 30, 2013, of the Transfer Pricing Officer and the draft assessment order dated March 28, 2014, of the Assessing Officer, on the issue of jurisdiction. This issue has been decided in Vodafone IV and would be binding on all authorities within the State till the apex court takes a different view on it. Therefore, in view of the fact that the Revenue does not dispute that the issue on the merits stands covered by the decision ofVodafone IV it would serv....
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.... Explanation to section 92B of the Act. In terms of the above provision an international transaction would include a transaction of restructuring entered into by an enterprise with an associated enterprise. Mr. Pardiwala, learned counsel appearing for the petitioner, points out that there has been no restructuring of the organization but there has been a mere change in the shareholding of different shareholders of the petitioner. However, in the present facts we need not examine this for the reason that even if it is assumed that it is an international transaction, the jurisdictional requirement for Chapter X of the Act to be applicable is that income must arise. In this case, admittedly following Vodafone IV no income has arisen. Thus, the jurisdictional requirement for application of Chapter X of the Act is not satisfied. 12. As held in Vodafone IV, the jurisdiction to apply Chapter X of the Act would occasion only when income arises out of international transaction and such income is chargeable to tax under the Act. The issues raised in the present petition are identical to the issues which arose for consideration before this court in Vodafone IV. Therefore, following t....
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....ling within a statutory exception cannot be brought to tax. Even income arising from international Transaction between AE must satisfy the test of income under the Act and must find its home in one of the above heads i.e. charging provisions. There is no charging section in chapter X of the act. Only if there is income which is chargeable to tax under the normal provisions of the act, then alone Chapter X of the act could be invoked. Further, since there is no income arising from the transaction of issue of shares, the provisions of chapter X would not apply. The Hon"ble Bombay High Court in the said case has quashed and set aside as Being without jurisdiction, null and void, the reference made by the TPO, and the order of the TPO making a transfer pricing adjustment on issue of shares. Respectfully following the decision of the jurisdictional Bombay High Court, the adjustment proposed by the" TPO on account of issue of shares is deleted. Accordingly, ground of objection number 16 of the assessee is allowed." 20. We, therefore, respectfully following the ratio laid down by the Hon"ble Bombay High Court, reverse the direction of DRP and direct the AO to delete the addition ....
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.... the directions issued by the DRP), the TPO made an adjustment of Rs. 31,26,172, towards interest on advances recoverable from its A.Es. The Assessing Officer passed the draft assessment order dated 20.12.2018, inter-alia, on the basis of adjustment proposed by the TPO. 13. The DRP vide directions dated 30.09.2019, following the directions issued in the assessment year 2014-15 rejected the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us. 14. During the course of hearing, the learned A.R. submitted that similar issue has been decided by the Co-ordinate Bench of the Tribunal in assessee's own case for the earlier assessment year. 15. The learned D.R. vehemently relied on the orders passed by the lower authorities. 16. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no.7370/Mum./2018, for the assessment year 2014-15, vide order dated 07.02.2020, has decided the issue by holding that the interest on advances recoverable from the A.Es to be calculated by applying LIBOR plus 300 ....
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....ip or the provision of use of rights regarding land use, copyrights, patents, trademarks, licenses, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; (d) provision of services, including provision of market research, market development, ITA No.8614/Mum/2011 marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service; (e) a transaction of business restructuring or reorganization, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date; 40. On a plain reading of clause (c) of Expl....
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....he same has to be determined. Having held so, it is necessary to quantify the rate of interest of such transaction. It is observed, the Transfer Pricing Officer has applied the average interest rate of domestic credit facility availed by the assessee. However, it is seen from the material on ITA No . 8614/Mum/2011 record, the entire expenditure incurred by the assessee on behalf of the overseas subsidiary are on foreign currency (dollar), therefore, domestic PLR rate in terms of Indian rupee cannot be applied. It has been brought to our notice through the working submitted before the Departmental Authorities that the average cost of borrowings to the assessee is 4.84%. The learned Authorised Representative has also submitted a working showing the average LIBOR rate of financial year 2002-03 at 1.698%. In a number of decisions, different benches of the Tribunal have consistently held that in such type of international transaction, domestic PLR rate cannot be applied and the rate of interest has to be quantified either with reference to LIBOR or EURIBOR depending upon the country and currency in which the transaction has taken place. Considering the facts of the present case, we are ....
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....n extent of Rs. 46,77,100, while computing its income. During the course of assessment proceedings, the assessee was asked to explain as to why expenditure attributable to earning of exempt income should not be disallowed under section 14A of the Act r/w rule 8D of the Rules. In reply, the assessee submitted that it has made investment in domestic companies and mutual funds out of the cash generated from its business operations and not from loan funds. The assessee further submitted that it has not incurred any interest or any other expenditure for making the aforesaid investment. The assessee also submitted that it has not earned any exempt income from its equity investments during the year. The assessee further submitted that the disallowance under section 14A of the Act should not exceed the actual expenditure incurred by the assessee (and debited to Profit & Loss Account) for earning the exempt income. The assessee on without prejudice basis has suo-motu disallowed an amount of Rs. 46,77,100, which was computed on a rational basis and was offered as disallowance under section 14A of the Act. The Assessing Officer vide draft assessment order dated 20.12.2018, rejected the conten....
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....und to be accepted by the AO or the DRP. Further, the facts with regard to total investments and investments which yield exempt income is not readily available before us. We, therefore, are of the considered view that ends of justice would be met if the disallowance is made after re-computing average value of investment by considering only those investments which yield exempt income. Hence, the matter is restored to the AO to re-work the disallowance in line of our discussions given hereinabove." 26. In view of the above, we deem ITAppropriate to restore this issue to the file of the Assessing Officer for denovo adjudication in accordance with the directions of the Co-ordinate Bench of the Tribunal in the order cited supra and the law applicable after consideration of the submissions of the assessee. Needless to mention that before passing the order on this issue, adequate opportunity of hearing shall be provided to the assessee. Accordingly, ground no.4, raised in assessee's appeal is allowed for statistical purpose. 27. The issue arising in ground no.5, raised in assessee's appeal is with regard to disallowance under section 40(a)(ia) of the Act. 28. During the course of....
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....here it was held that computation contemplated under clause (f) of explanation (1) to section 115JB is to be made without resorting to computation as contemplated u/s 14A r.w.r 8D of the Income Tax Rules, 1962. A similar ratio is laid down by special Bench of ITAT, Delhi in the case of DCIT vs. Vireet Investments Pvt Ltd(Supra). We, therefore, respectfully following the ratio laid down by High Courts and Tribunal, direct the AO to delete addition made to book profit computed u/s 115JB, towards disallowances computed u/s 14A of the Income Tax Act, 1961." 35. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co-ordinate Bench of the Tribunal in assessee's own case cited supra, we direct the Assessing Officer to delete the addition of disallowance under section 14A while computing book profit under section 115JB of the Act. Accordingly, ground no.6, raised in assessee's appeal is allowed. 36. The issue arising in ground no.7, raised in assessee's appeal with regard to non-grant of foreign tax credited amounting to Rs. 2....
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....sue in favour of the assessee. 41. The learned D.R. vehemently relied on the order of the authorities below. 42. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no.7370/Mum./2018, for the assessment year 2014-15, vide order dated 07.02.2020, directed the Assessing Officer to allow foreign tax credit in respect of dividend income received from Cyprus subsidiary in terms of Article-25(4) of the Indo-Cyprus DTAA by observing as under:- "56. .......... In the present case, facts are more or less similar to the case laws cited by the ld. DR. The assessee has received dividend income from Cyprus subsidiary and such dividend income was exempt from tax under Cypriot Tax Laws. The assessee has claimed deemed tax credit in respect of dividend income from Cyprus subsidiary @ 10% as per Article 25(4) of the India -Cyprus tax treaty. Since, dividend is taxable in Cyprus tax laws, but exemption has been provided to non-residents, the assessee case falls under Article 25(4) of treaty and as per which tax payable in a contra....
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....al is allowed for statistical purpose. 48. Ground no.10, raised in assessee's appeal relates to levy of interest under section 234B of the Act. 49. During the course of hearing, the learned A.R. submitted that the ground is consequential in nature. Thus, the Assessing Officer is directed to compute the interest under section 234B of the Act, if leviable, in accordance with law. Accordingly, ground no.10, raised by the assessee is allowed for statistical purpose. 50. The issue arising in ground no.11, raised in assessee's appeal is with regard to levy of interest under section 234C of the Act. 51. The brief facts of the case pertaining to this issue as emanating from the record are: The Assessing Officer vide final assessment order dated 31.10.2019, levied interest amounting to Rs. 10,03,50,402, under section 234C of the Act. 52. During the course of hearing, the learned A.R. submitted that the interest under section 234C of the Act only be charged on the basis of tax due on the "returned income". However, the Assessing Officer has charged interest under section 234C of the Act on the basis of tax computed on the "assessed income" instead of "returned income". 53. ....