TaxTMI 
TaxTMI 
2021 (12) TMI 1428
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....fit of Rs.261,11,26,258/- by filing revised return of income on 31.03.2016. The case was selected for scrutiny and notice u/s 143(2) & 142(1) of the Act was issued and served on the assessee. AO noticed that during the year under consideration, assessee had entered into international transactions with its Associate Enterprises (AEs) and the aggregate value of such transactions exceeded Rs.15 crore. He therefore, after taking approval of the component authorities, made reference to TPO for determination of Arm's Length Price (ALP) of international transactions. TPO vide order passed u/s 92CA(3) of the Act on 31.10.2017 suggested enhancement of the income of the assessee by Rs.216,468,063/- on account of Transfer Pricing Adjustment. AO thereafter passed draft assessment order u/s 143(3) r.w.s 144C(1) of the Act vide order dated 27.12.2017 whereby he computed the total income at Rs.82,07,64,487/- and book profit at Rs.2,61,38,57,201/-. Aggrieved by the draft assessment order passed by AO, assessee carried the matter before the DRP. DRP vide direction passed u/s 144C(5) of the Act dated 13.07.2018 directed the AO to incorporate its finding in respect of various objections in the final ....
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....ts AEs [wholly owned subsidiaries] is not an international transaction and, therefore, not amendable to any adjustment under Chapter X of the Income Tax Act. 6.2 In the alternative and without prejudice to the above, the Hon'ble ITAT may be pleased to hold that no adjustment is required as 0.25% charged by the appellant as corporate guarantee fee from its AEs [wholly owned subsidiaries] is at arm's length and thus upward adjustment of Rs.2,28,67,811/- be directed to be deleted. 6.3 That the corporate guarantee fee benchmarked by the appellant under other method based on specific quotations obtained from HDFC Bank and ICICI Bank be held at arm's length. Interest on foreign currency loans - Rs.12,98,917/- 7. The Ld. DRP/TPO and consequently Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant's case in proposing an upward adjustment of Rs.12,98,917/- (using LIBOR + 250 basis points i.e. 4.024%(1.524% + 2.5%) as ALP) on the ground that interest charged by the appellant on foreign currency loan granted to its AE @6M LIBOR + 225 basis points does not meet the arm's length principle. 8. The Ld. DRP/TPO and consequently Ld AO have grossly ....
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..... DRP/AO have erred in law and in facts and in the circumstances of the appellant by not granting the allowance of depreciation of Rs.25,53,577/- on goodwill arising on account of excess payment by the appellant for purchase of business units from SRF Polymers. 18. The Hon'ble ITAT may be pleased to grant the allowance of depreciation on Goodwill of Rs.25,57,577/-. Computation of Book Profit under MAT 19. The Ld. AO has grossly erred in inadvertently taking the amount of book profit as per P&L Account at Rs.2,61,11,26,258/- as against the correct amount of Rs.2,16,54,54,365/- which was although correctly reflected in the draft assessment order dated 27th December, 2017. The Ld. AO has therefore, inadvertently enhanced the book profit u/s 115JB of the Act by Rs.44,56,71,893/- [Rs.2,61,11,26,258/- (-) Rs.2,16,54,54,365/-]. 20. making an addition of Rs.54,31,53,772/- on account of current tax /MAT/deferred tax while computing the book profits u/s 115JB of the Act, ignoring the fact that book profits as computed by the assessee is based on profits before tax. Therefore, Ld. AO has erred in making an addition on account of current tax/MAT/deffered tax which has resulted in d....
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.... admission of additional ground, he relied upon the decision of Hon'ble Apex Court in the case of National Thermal Power Company Ltd vs CIT reported in (1998) 229 ITR 383. 6. Ld DR however objected to the application for admission of additional ground stating that the claim was never made before the lower authorities. 7. On the issue of admission of additional grounds, we have heard the rival submissions and perused the material on record. We find force in the argument of the Ld. AR that the ground raised is legal in nature. Hon'ble Apex Court in the case of National Thermal Power Company Ltd (supra) has held that the purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. It has further held that if as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. In view of the aforesaid, we adm....
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....terest saved to be at 1.44%. He thereafter worked out the total guarantee fee that should have been charged by using the interest saved rate of 1.44% at Rs.172,00,08,122/-. He noted that since the assessee has already received Rs 22,854,407/-recommended the enhancement of income by AO to the extent of Rs 14,91,53,715/-. AO thereafter in the draft assessment order enhanced the income as suggested by the TPO. Aggrieved by the order of TPO, assessee carried the matter before the DRP. DRP noted that various jurisdictional decisions have held the guarantee fee rate to be near about 0.5% and TPO had not given any reason for applying a higher rate of 1.3% based on SBI general Bank guarantee fee. DRP also noted that in assessee's own case for A.Y. 2011-12, 2012-13 & 2013-14, DRP has held that the guarantee fee of 0.5% to be fair and just. It further noted that since the facts of the case in the year under consideration being similar to that of A.Y. 2013-14, it accordingly held the guarantee fee to be at 0.5% and accordingly directed AO/TPO to re-compute the adjustment accordingly. AO thereafter made adjustment of Rs 2,28,67,811/-. 11. Aggrieved by the order of DRP, assessee is now before ....
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....ates and not specific to the assessee. Therefore, the approach of TPO itself is contradictory, when on the one hand he rejects the assessee's specific quotation saying the same as offers while on the other hand he himself uses the general bank guarantee rates which are again the offers and that too far from being comparable to the case. 14. Further the issue of using bank guarantee rates for benchmarking corporate guarantee transaction has been put to rest by the Hon'ble Supreme Court in case of Glenmark Pharmaceuticals Ltd. [2019] 107 taxmann.com 445 (SC), where in the judgment of Hon'ble Bombay High Court was upheld. Further, DRP in assessee's own case in subsequent years rejected the TPO's approach of using India band guarantee rates for benchmarking corporate guarantee. Therefore, bank guarantee rates as applied by the TPO is not an appropriate comparable while benchmarking the said transaction and hence approach of TPO is rejected. 15. In the instant case, the AEs to whom corporate guarantees have been extended are wholly owned subsidiaries of the assessee. The existence of special relationship between holding and its subsidiary cannot be ignored. The assessee being a pa....
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....submitted that assessee was not into the business of lending, but while lending foreign currency money to its AEs it had charged interest @ LIBOR + 224 BPS which are higher than its borrowing costs. It was further submitted that the comparable determined on the basis of TP documentation is LIBOR + 218 BPS as against the interest charged by the assessee @ LIBOR + 224 BPS which are therefore as Arm's Length and no further adjustment is therefore required. The submissions of the assessee were not found acceptable to TPO. TPO thereafter bench marked the interest receipt from the AE @ 7.33% (by considering the average 6 months LIBOR rate @ 1.524% + 581%) and accordingly worked out the adjustment at Rs.24,340,908/-. 18. Aggrieved by the order of TPO, assessee carried the matter before the DRP. DRP noted that in A.Y. 2012-13 and 2013-14 in assessee's own case, the DRP had upheld the interest rate @ LIBOR + 250 basis points and the facts being similar to that of A.Y. 2013-14 had held that the interest rate on the amount advanced by the assessee the interest should be charged @ LIBOR + 250 basis points. The AO thereafter in the final assessment order worked out the adjustment of Rs.12,98,9....
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....iled loan in its home country rate of which is also denominated in LIBOR. In our view LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AE. Well the assessee has charged 250 basis points over an above such benchmark viz. LIBOR. Therefore, no addition is justified and the entire addition of Rs.2,18,98,274/- is hereby deleted." 22. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-ordinate Bench of Tribunal in assessee's own case for A.Y. 2010-11 has been stayed/ set aside/ overruled by higher judicial forum. In view of the aforesaid facts and relying on the decision of the Co-ordinate Bench of Tribunal for A.Y. 2010-11 and for similar reasons, we hold that no adjustment is called for. Thus the ground of assessee is allowed. 23. Ground No.12 to 15 are with respect to adjustment on account of reimbursement received by the assessee from its AEs amounting to Rs.45,39,571/-. 24. TPO on perusing the TP documentati....
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....gainst which the nature of reimbursement received and paid from and to the AEs are Rs.3.86 crore which is normal considering the volume of business transactions entered into with the AEs. He further submitted that no adjustment is required when it is reimbursement of expenses. He further submitted that transactions were undertaken from commercial expediency point of view and were not intended for the exploitation of return. He thereafter submitted that Co-ordinate Bench of Tribunal in the case of Vedanta Ltd. vs. ACIT in ITA No.12/Del/2010 order dated 21.09.2020 for A.Y. 2014-15 has held that no mark up was warranted on the reimbursement of primary third party expenses for which no value addition was done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. He pointed to the relevant findings of the Tribunal order placed at Page 236 of the paper book. He therefore submitted no addition is called for. 27. Learned DR on the other hand pointed to the observations made by DRP. She also placed reliance on the decision rendered by Hon'ble Delhi High Court in case of CIT vs. Cushman And Wakefield (India) Pvt. Ltd. reported in 367 ITR 730 and decision re....
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....ht forward business loss of Rs.24,84,48,618/- of A.Y. 2013-14 against the business income of Rs 60,15,52,573/- for A.Y. 2014-15. The claim of the assessee was disallowed by the AO for the reason that the brought forward loss was primarily because of receipt from transfer Carbon Emission Reduction (CER) which was claimed as exempt income and since the claim of exempt income has not been accepted by the AO in the order passed for A.Y. 2013-14 therefore the loss has been converted into income and therefore no carry forward business loss for A.Y. 2013-14 was available for set off in A.Y. 2014-15. Aggrieved by the order of AO, Assessee carried the matter before DRP. DRP directed the AO to verify the claim and allow the same as per law. Aggrieved by the order of AO, assessee is now before us. 32. Before us, Learned A.R. submitted that the claim of assessee of set off of brought forward business loss arises on account of receipt of Carbon Emission Reduction (CER's) certificates treated as revenue receipt. He submitted that the aforesaid issue has been decided in assessee's favour by the Hon'ble Tribunal in assessee's own case for A.Y. 2012-13, 2010-11, 2008-09 & 2006- 07. He submitted th....
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....balancing figure and was not Goodwill for which assessee had paid in excess of its valuation to its group companies. He was of the view that since the assets and liabilities has not been valued; no Goodwill can be purchased by the assessee. He accordingly disallowed the claim of depreciation on Goodwill amounting to Rs.25,53,577/-. 37. When the matter was carried before the DRP, DRP noted that in assessee's own case in earlier year, DRP vide order dated 13.07.2018 had upheld the action of AO with respect of disallowance. DRP therefore, following the order of its predecessor, upheld the action of AO. Pursuant to the action of DRP, AO in the final assessment order disallowed the claim of depreciation. Aggrieved by the order of AO, assessee is now before us. 38. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that the issue of depreciation on goodwill is covered in favour of the assessee by the decision of Hon'ble Apex Court in the case of CIT vs. Smifs Securities Ltd. [2012] 24 taxmann.com 222 (SC) wherein the Hon'ble Apex Court has held that goodwill amounts to intangible assets which are eligible for depreciation. He furthe....
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....of Section 115JB(2) of the Act. Aggrieved by the consequential order passed by AO, assessee is now before us. 43. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that as per Explanation to Section 115JB, only amount of depreciation which is debited to the P & L account attributable to revaluation of assets is to be added back and not the normal depreciation on goodwill. He further submitted that depreciation which has been added back is as per the book of account and not as per the I.T. Act. He thereafter submitted the claim of depreciation on goodwill has been held to be allowable in A.Y. 2012-13 and following the same decision, if it is held to be allowable then the same cannot be added to the book profits. He therefore submitted that addition made to book profit to be deleted. 44. Learned DR on the other hand supported the order of lower authorities. 45. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the computation of book profit under MAT wherein the addition of Rs.25,53,577/- on account of depreciation on goodwill has been added ba....
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....mitted that identical issue of additional claim which was made during the course of assessment proceedings but was not allowed came from consideration before the Coordinate Bench of Tribunal in assessee's own case for A.Y. 2010- 11 in ITA No.356/Del/2015 and the Co-ordinate Bench of Tribunal vide order dated 24.02.2020 vide para 40 of the order has inter alia observed that the Revenue authorities cannot simply turn down the genuine and bonafide claims of the assessee on some technicalities and that instead of rejecting the additional claims of the assessee outrightly, authorities should endeavor to examine the bonafide claims of the assessee on its merit which would also avoid further litigation at higher forums. He therefore submitted that the issue may be set aside for examination by the AO and allow it on merits. He submitted that identical issue arose in assessee's own case in A.Y. 2006-07, 2007-08, 2008-09, 2010-11 & 2012-13 and in all those years Hon'ble ITAT admitted the additional claim made by the assessee and remitted back the issues to the file of AO. To support his aforesaid contention, he pointed to the copy of the aforesaid orders which are placed in the paper book. B....
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....rmation and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such documents, explanations and submissions as deemed fit in respect of its claim. Thus the ground of assessee is allowed for statistical purposes. 52. Ground No.22.2 is with respect to claim of additional depreciation u/s 32(1)(iia) of the Act. 53. Before us, Learned AR submitted that assessee had not claimed 50% additional depreciation amounting to Rs.58,14,99,012/- u/s 32(1)(iia) of the Act inadvertently on the assets put to use for less than 180 days in the immediately preceding assessment year while filing the return of income but same was claimed as an additional claim during the course of assessment proceedings. He submitted that additional claim of depreciation was not discussed by the AO in the order. When the matter was carried before the DRP, DRP relying on the decision rendered in the case of Goetze (India) Ltd. (supra) upheld the order of AO. Aggrieved by the order of DRP, assessee is now before us. 54. Before us, Learned AR reiterated the submissions....
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....ommissioner of Income Tax (2019-TIOL-907-ITAT-MUM) * CIT vs. Kalpataru Power Transmission Ltd. [2019-TIOL- 1424-ITAT-AHD] The coordinate Bench in case of CIT vs. Cosmo Films Ltd. (supra) while holding that remaining additional depreciation shall be allowed in the subsequent year observed as under : "This additional benefit in the form of additional allowance under section 32(1)(iia) is onetime benefit to encourage the industrialization and in view of the decision of Supreme Court in the case of Bajaj Tempo Ltd. vs. CIT [1992] 196 ITR 188/62 Taxman 480, the provision related to it have to be constructed reasonably, liberally and purposively to make the provision meaningful while granting the additional allowance." Similarly in case of TCPL Packaging Ltd. (supra), the Mumbai Bench has held that remaining additional depreciation claimed can be allowed in immediately succeeding year which could not be allowed in the year of acquisition on the ground that new plant and machinery has been put to use for less than 180 days. 46. The Finance Act, 2015, has amended the law by inserting third proviso to section 32(1)(iia) - applicable w.e.f. 1st April 2016 to allow the claim of....
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....f Goetze (India) Ltd. (supra) upheld the order of AO. Aggrieved by the direction of DRP, assessee is now before us. 60. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that the claim of the assessee is bonafide and based on documentary evidences furnished before the AO. He submitted that the necessary evidences were furnished before the AO but the same was not examined and considered. He therefore submitted that the matter may be remitted back to the AO for verification and allow the claim on merits. 61. Learned DR on the other hand supported the order of lower authorities. 62. We have heard the rival submissions and perused the material available on record. Before us, assessee is seeking the credit for TDS amounting to Rs.2,70,000/- deducted on sale of immovable property and the claim of self assessment amounting to Rs.47,61,334/- which was inadvertently claimed as TDS. Assessee has furnished the copy of the self assessment tax challan in the paper book and the copy of Form 26QB evidencing the deduction of TDS amounting to Rs.2,70,000/-. We find merit in the prayer of Ld AR. We therefore considering the submissions of the....