TaxTMI 
TaxTMI 
2022 (11) TMI 1355
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act at the book profits of INR 1,05,29,82,190/-. The case of the Assessee was selected for scrutiny. During the assessment proceeding, the Assessing Officer noted that the Assessee had entered into International Transactions with its Associated Enterprises (AEs) and therefore, a reference under Section 92CA(3) of the Act was made to the Transfer Pricing Officer (TPO) for determination of Arms Length Price (ALP) of the International Transactions. The TPO, vide order dated 30.01.2015, passed under Section 92CA(3) of the Act proposed aggregate transfer pricing adjustments of INR 179,61,83,140/- which was incorporated by the Assessing Officer in the Draft Assessment Order, dated 31.03.2015 passed under Section 143(3) read with Section 144C of the Act. The Assessing Officer also proposed (a) disallowance of INR 8,55,98,057/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules‟) in addition to suo-moto disallowance of INR 4,22,01,943/- offered by the Assessee, (b) a disallowance of INR 32,73,14,212/- under Section 36(1)(iii) of the Act, (c) a disallowance of credit card commission expenses of INR 4,22,19,634/- cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is no change in facts and circumstances, and the most of the issues stood covered by the decisions of the aforesaid decision of the Tribunal. However, he submitted that he would like to make additional submission in relation to some of the issues raised in the present appeal. ITA No. 2308/Mum/2016 (Appeal by Assessee) 5. The Assessee has raised 12 grounds of appeal. Ground No. 1 is general in nature. Ground No. 2 to 7 are directed against the transfer pricing adjustments whereas Ground No. 8 to 10 are directed against the corporate tax additions/disallowances. Ground No. 11 pertains to short grant of credit of tax deducted at source and tax collected at source amounting to INR 2,06,85,052/-. Ground No. 12 pertains to short grant interest under Section 244A of the Act. In addition to the above, vide letter, dated 06.06.2022, the Assessee has also raised the following additional grounds of appeal: "Additional Ground No. 1: On the facts and in the circumstances of the case and in law, the order dated 30 January 2015 passed by the Learned Transfer Pricing Officer (Ld. TPO) under section 92CA of the Act is beyond the time limit prescribed under section 92CA(3A) r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed on 07.09.2020 in Writ Petition No. 32699 of 2019 confirmed by the Division Bench of the Hon‟ble Madras High Court in WA No. 1120 of 2021 & ors. (dated 31.03.2022). He submitted that the limitation for passing order by the TPO under Section 92CA(3A) of the Act expired on 29.01.2015 whereas the order has been passed by the TPO on 30.01.2015. He further submitted that the judgment of the Hon‟ble Madras High Court has been followed by the Tribunal in the case of (a) ECL Finance Ltd. vs. ACIT: ITA No. 899/M/2018, dated 22.09.2021, and (b) M/s Emerson Electric (Company) India Pvt. Ltd. vs. DCIT: ITA No. 933/M/2021, dated 18.05.2022. The Ld. Authorised Representative for the Assessee submitted that as per the aforesaid judicial precedents 31.03.2015 is to be excluded and therefore, the period of 60 days is to be computed by taking 30 days of March, 28 days of February and 2 days of January (i.e. 30th and 31st day of January) since TPO was under obligation to pass order under Section 92CA(3) of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Section 153/153B for making the order of assessment/reassessment expires. Acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch period of limitation referred to in section 153 of the Act expires. 14. Now the question arises as to how the period of 60 days prior to the date of transfer pricing order i.e. 01.11.2019 is to be computed. Hon'ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. (supra) while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Operative part of the judgment is extracted for ready perusal as under : "30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after time expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 am on 01.01.2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m it not necessary to go into grounds raised by the assessee on merit. Consequently, appeal filed by the assessee is allowed. Ground No. 2 is allowed." (Emphasis Supplied) 8. Respectfully following the above decision of the Co-ordinate Bench of the Tribunal, we hold that the order passed by the Transfer Pricing Officer on 30.01.2014 is barred by limitation and therefore, the transfer pricing adjustments made in the Final Assessment Order, dated 26.02.2015 are deleted. Additional Ground No. 1 raised by the Assessee is allowed and Ground No 2 to 7 pertaining to the transfer pricing issues raised in the appeal are disposed of as being infructuous." (Emphasis Supplied) 10. Both the sides agreed that there is no change in the facts and circumstances of the case. Therefore, respectfully following the above decision of the Tribunal [ITA No. 2348/Mum/2015, dated 26.09.2022] preferred by the assessee for the Assessment Year 2011-12, in the case of the Appellant, Additional Ground No. 1 raised by the Assessee in the present appeal is allowed. Ground No 2 to 7 pertaining to the transfer pricing issues are disposed of as being infructuous. Ground No. 8 11. "8. On the facts an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Principal Commissioner of Income-Tax (Central) -2 Vs. M/s Era Infrastructure India Ltd: [ITA No. 204 of 2022, decided on 20.07.2022] the contention of the Revenue that amendments to Section 14A of the Act introduced by the Finance Act, 2022 shall have retrospective effect has been rejected. 15. We have considered the rival submissions and in view of the judgment of the Hon‟ble Delhi High Court we are not inclined to accept the contention raised by the Revenue. We note that the Mumbai Bench of the Tribunal has, in the case of Assistant Commissioner of Income Tax- Circle 3(1)(1) Vs Bajaj Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai - Trib.)[29-06-2022] held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment Year 2022-23. 16. We note that this issue stands decided in favour of the Assessee in ITA No. 2348/Mum/2015 preferred by the Assessee for the Assessment Year 2011-11. The relevant extract of the judgment read as under: "12. Having considered the rival submission, we find merit in the submission advanced on behalf of the Assessee that the benefit of decision of the Special Bench of the Tribunal in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Assessee while assessing income for the Assessment Year 2011-12. 21. Learned Authorised Representative for Assessee, however, submitted that the CIT(A) in appeal by the Assessee for the Assessment Years 1998-99 to 2002-03 had overturned the decision of the assessing officer by holding that exchange gains on revaluation of Shareholders Deposits were capital in nature and therefore, not taxable. The decision of the CIT(A) was confirmed by the Tribunal vide order, dated 23.11.2012. Learned Authorised Representative for Assessee further submitted that the Appeal filed by the Revenue against the aforesaid order of the Tribunal was not admitted by the Hon‟ble Bombay High Court and therefore, the issue is settled. 22. In view of the above submission advanced by the Learned Authorised Representative for Assessee, Ground No. 10 raised by the Assessee is dismissed since, admittedly, the very basis on which the Assessee had set up this alternative/without prejudice claim does not survive. Further, in our view the two pleas set up by the Assessee are not alternative but mutually destructive. While preparing return of income the Assessee has treated the exchange loss on revaluatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and TCS in terms of directions issued in paragraph 25 above. Additional Ground No. 2&3 28. Additional Ground No. 2&3 are disposed off as not pressed as no arguments were advanced on the same during the course of hearing. ITA No.3022/Mum/2015 (Department's Appeal) 29. The Revenue has raised 7 grounds of appeal which are taken up in seriatim hereinafter. Ground No. 1 to 5 30. "1. The order of the DRP is opposed to law and facts of the case. 2. On the facts and circumstances of the case and in law, the Hon. DRP has erred in directing the AO to adopt a rate of 1.5% to arrive at Arm‟s Length Price on account of guarantee fees to be charged by the assessee to the Associated Enterprises for letter of comfort issued, without appreciating that in the A.Y. 2007-08 & 2008-09, adjustment at the rate of 3% had been upheld by the Hon. DRP. 3. On the facts and circumstances of the case and in law, the Hon. DRP in directing the AO to adopt a rate of 1.5% to arrive at Arm‟s Length Price on account of guarantee fees in respect of the guarantee issued by the assessee for the borrowing made by its Associated Enterprises without appreciating that in the AYrs 2007....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of interest and therefore, no such addition was made in the Final Assessment Order. Being aggrieved, the Revenue is now in appeal before us. We note that identical ground raised by the Revenue in appeal for the Assessment Year 2010-11 was dismissed by the Tribunal vide order, dated 26.09.2022 passed in ITA 2408/Mum/2015. The relevant extract of the aforesaid decision read as under: 37. During the relevant previous year, the Assessee had claimed deduction for interest on borrowed funds amounting to INR 152.90 Crores. The Assessing Officer noticed that the Assessee had made investments in overseas entities of INR 1790.49 Crores consisting of investment of INR 1600.26 Crores International Hotels Management Services Inc. (IHMS) and investment of INR 190.23 Crores in Taj International Hotels HK Ltd. (TIHK). According to the Assessing Officer, the Assessee had utilized interest bearing funds to make aforesaid investments and therefore, the Assessing Officer proposed disallowance of proportionate interest amounting to INR 42.38 Crores in the Draft Assessment Order invoking provision of Section 36(1)(iii) of the Act. The Assessee filed objections before DRP against the proposed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Assessing Officer under Section 36(1)(iii) of the Act was correctly deleted by the DRP. In this regard, the Ld. Authorised Representative placed reliance on the following judgments/decisions: - S.A. Builders Ltd. vs. CIT(Appeals) : [2007] 288 ITR 1 - CIT vs. Tulip Star Hotels Ltd. [2011] 338 ITR 482 (Delhi) - CIT Mumbai-2 vs. The Indian Hotels Co. Ltd : order dated 27.03.2015 passed in ITA No. 1325/1334/1335/1656/1657/1658 of 2013 - DCIT vs. The Indian Hotels Co. Ltd: 92 ITD 97 (Mum)(TM) - DCIT, Circle 2(2) vs. The Indian Hotels Co. Ltd: common order of the Mumbai Bench of the Tribunal dated 23.11.2012 passed in appeals for Assessment Year 1994- 95, 1998-99 to 2002-03. 41. Further, placing reliance upon the judgment of the Hon‟ble Bombay High Court in the case of CIT-7 Vs. Reliance Communication Infrastructure Ltd.: [2013] 260 CTR 159 (Bombay), the Ld. Authorised Representative for the Assessee submitted that the fact that borrowed funds were utilzised for making the investments would not disentitled the Assessee from claiming deduction for interest so long as the investment has been made on account of business expedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich would suit his interests. In the case of CIT v. Dalmia Cement (Bharat) Ltd. [2002] 254 ITR 377. Their Lordships noted the facts of the case as under: "So far as the disallowance of part of inerest is concerned it was submitted that when funds were available, the assessee without any reason permitted it to be continued with the CDL and paid interest to the financial institutions without charging anything from the CDL. The Tribunal did not accept the stand and held that the conclusions of the Commissioner of Income-tax (Appeals) were in order. On being moved for reference, the questions as set out above have been referred for the opinion of this court." Their Lordships observed as under: "An expenditure to which one cannot apply an empirical or subjective standard is to be judged from the point of view of a businessman and it is relevant to consider how the businessman himself treats a particular item of expenditure. The term "commercial expediency" is not a term of art. It means everything that serves to promote commerce and includes every means suitable to that end. In applying the test of commercial expediency, for determining whether the expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts relevant thereto are similar to that of the earlier years, we respectfully follow the decision rendered by the Tribunal in assessee‟s own case for the earlier years and uphold the impugned order of the learned CIT(Appeals) deleting the disallowance made by the AO on this issue. The relevant grounds of the Revenue‟s appeal for all the six years under consideration are accordingly dismissed." 47. While the Ld. Departmental Representative submitted that the Revenue is in appeal before the Hon‟ble Bombay High Court against the above decision of the Tribunal for the Assessment Years 1994-95, 1998-99 to 2002-03, the Assessee has placed on record order, dated 27.05.2012, passed by the Hon‟ble Bombay High Court the case of the Assessee in appeal filed by the Revenue before the Hon‟ble Bombay High Court for Years 1998- 99 to 2002-03 [ITA No. 1325,1334,1335,1656,1657 & 1658 of 2013] wherein the Hon‟ble High Court has declined to admit the appeals filed by the Assessee on the issue of disallowance of proportionate interest under Section 36(1)(iii) of the Act holding as under: "3. With the assistance of Mr. Suresh Kumar, we have perused ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n appeal before us. We note that identical ground raised by the Revenue in appeal for the Assessment Year 2010-11 was dismissed by the Tribunal vide order, dated 26.09.2022 passed in ITA 2408/Mum/2015 the relevant extract of which read as under: 48. We note that the issue raised by the Revenue stands decided favour of the Assessee by the decision of the Tribunal in ITO (TDS) (OSD)-3(4) vs. The Indian Hotels Company Ltd.: ITA No. 5419 and 5420/Mum/2014 pertaining to Assessment Year 2011-12 placed on record by the Ld. Authorised Representative for the Assessee. In Assessee‟s own case while examining the liability of the Assessee to withhold tax under Section 194H of the Act from payment of credit card collection charges to the banks, the Tribunal has held as under: "5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decision of the Tribunal and also the relevant material placed before us. On perusal of the said decision of the Tribunal (supra) dated 1.5.2015, we find, on identical issue, the Tribunal dismissed the Revenue‟s appeal and upheld the decision of the CIT (A) vide para 2.1 of its order. Cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f JDS Apparels (P) Ltd (supra) and find the same is relevant for the proposition that "Commission to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act‟. Considering the above settled nature of the issue and respectfully following the judgment of the Hon‟ble Delhi High Court (supra) and the decision of the Tribunal (supra) for the AY 2009-2011, we are of the opinion, the decision taken by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed. 7. Since, the issues raised in other appeal ITA No.5420/M/2014 (AY 2011-2012) are identical, therefore, our decision given in appeal ITA No.5419/M/2014, in the above paragraphs of this order, squarely applies to the present appeal too. Considering the same, we upheld the decision of the CIT (A) and the grounds raised by the Revenue are dismissed." (Emphasis Supplied) 49. Further, Notification No. 56 of 2012, dated 31.12.2012, issued by the Central Board of Direct Taxes clearly provides that no deduction of tax shall be made on the payments made to a b....