TaxTMI 
TaxTMI 
2023 (9) TMI 209
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....has raised the following grounds:- "The grounds stated here under are independent of, and without prejudice to one another. Ground No. 1: On the facts and circumstances of the case and in law, the learned Assessing officer (AO) under directions issued by the Hon'ble Dispute Resolution Panel (DRP), erred in making addition of interest expenditure amounting to Rs. 12,923,055/- by reducing Arms Length Price rate from 15% p.a. to 13.83% paid/payable by Assessee to its associate enterprise, as initiated by the learned Transfer Pricing officer ("TPO") Ground No. 2: On the facts and circumstances of the case and in law, the learned TPO/AO erred and the Hon'ble DRP further erred in upholding/ confirming the action of the learned TPO/AO in not allowing the risk adjustments and yield adjustments, done by the Appellant on account of difference in economic condition and rating of the adjustments. Ground No. 3: On the facts and circumstances of the case, the learned TPO/AO erred and the Hon'ble DRP further erred in completely ignoring the Appellant's evidence/comparable of 15.55% being rate arrived by reputed agency ....
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....crutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. The Assessing Officer ("AO") passed the draft assessment order dated 08/11/2013, under section 143(3) read with section 144C(1) of the Act proposing the total assessed income of the assessee of Rs. 8,56,50,380, after incorporating the adjustment of Rs. 1,29,23,055, proposed by the Transfer Pricing Officer ("TPO") vide order passed under section 92CA(3) of the Act and addition on account of interest income of Rs. 6,82,61,252. The assessee filed detailed objections before the learned DRP against the addition/adjustment proposed by the TPO/AO. While deciding the objections filed by the assessee, the learned DRP observed that the assessee has claimed exempt dividend income of Rs. 3,54,39,742, on which no disallowance under section 14A of the Act has been offered by the assessee nor any disallowance under the aforesaid section has been proposed by the AO vide draft assessment order. Accordingly, the learned DRP asked the assessee to show cause as to why the disallowance under section 14A of the Act be not made and the assessment be not enhanced on this count. I....
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....ent. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the Assessing Officer." Further, Hon'ble Supreme Court in Godrej & Boyce Manufacturing Company Ltd. Vs DCIT: [2017] 394 ITR 449 (SC), observed as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to g....
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....e Revenue, in its appeal, is against the allowance of interest expenditure under section 57(iii) of the Act. 13. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings upon perusal of the schedule of the balance sheet, it was observed that the closing balance of the work in progress has been arrived at after reducing an amount of Rs. 6,82,61,252, which the assessee has also claimed as expenses relating to earning of interest (to the extent of interest earned i.e. Rs. 6,82,61,252). The AO, vide draft assessment order, observed that during the year under consideration, the assessee had surplus funds at its disposal and the same were advanced as interest-bearing loans to the sister concerns. Such advancement of loan to the sister concerns has fetched interest income of Rs. 6,82,61,252. The AO further observed that the interest income of Rs. 6,82,61,252, has been offered to tax under the head "income from other sources" and the said amount has been reduced by the interest expenditure incurred for earning the interest income under section 57(iii) of the Act. In response to the show cause notice, the assessee submitte....
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.... have considered the submissions of both sides and perused the material available on record. As evident from the record, the assessee borrowed Rs. 121.05 crore and incurred interest cost amounting to Rs. 16,61,53,562, on the said borrowings. It is undisputed that the assessee, during the year under consideration, utilised the said borrowed funds for giving loans to sister concerns and earned interest income therefrom amounting to Rs. 6,82,61,252. In the act of lending borrowed funds to the sister concerns, the assessee incurred interest cost amounting to Rs. 10,25,58,218, which was claimed to have been wholly and exclusively for the purpose of earning such income, i.e. interest income of Rs. 6,82,61,252. In its return, the assessee duly offered the interest income of Rs. 6,82,61,252 to tax under the head "income from other sources" and restricted the claim of deduction under section 57(iii) of the Act to the extent of income offered. On the other hand, as per the AO, the funds were borrowed for the purpose of real estate projects of the assessee and the interest cost incurred thereon has no connection with the interest income earned by the assessee. Before proceeding further, it is....
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....ppeal, the assessee has raised the following grounds:- "The grounds stated here under are independent of, and without prejudice to one another. Ground No. 1: On the facts and circumstances of the case and in law, the learned Assessing officer (AO) under directions issued by the Hon'ble Dispute Resolution Panel ('DRP'), erred in making addition of interest expenditure amounting to Rs. 14,162,850/- by reducing Arms Length Price rate from 15% p.a. to 13.83% paid/payable by Assessee to its associate enterprise, as initiated by the learned Transfer Pricing officer (TPO') Ground No. 2: On the facts and circumstances of the case and in law, the learned TPO/AO erred and the Hon'ble DRP further erred in upholding/ confirming the action of the learned TPO/AO in not allowing the risk adjustments and yield adjustments, done by the Appellant on account of difference in economic condition and rating of the adjustments. Ground No. 3: On the facts and circumstances of the case, the learned TPO/AO erred and the Hon'ble DRP further erred in completely ignoring the Appellant's evidence/comparable of 15.55% bein....
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....s not pressed. 20. The issue arising in ground No. 5, raised in assessee's appeal, is pertaining to non-compliance of the directions of the learned DRP under section 144C(5) of the Act. 21. We have considered the submissions of both sides and perused the material available on record. We find that the learned DRP vide its directions dated 31/10/2014, issued under section 144C(5) of the Act directed the AO to allow deduction of interest expenditure of Rs. 6,99,42,651, under section 57(iii) of the Act against the interest income of Rs. 4,23,07,499, offered under the head "income from other sources". The learned DRP further directed the AO to reduce the inventory valuation in schedule 4 of the books of account by the interest expenditure claimed by the assessee. The relevant findings of the learned DRP are reproduced as under:- "4.2 Since the facts are same as in last year, respectfully following the same, the AO is cted as under: I. On the facts of the case, since there is a direct nexus between the borrowed funds and the amount advanced, the amount of interest expenditure of Rs. 6,99,42,651/-( as per submissions dated 14.10.2014) is allowable as deduction unde....
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....e in compliance of the directions issued by the learned DRP. Accordingly, ground No.5, raised in assessee's appeal is allowed for statistical purposes. 24. The issue arising in ground No.6 and 7, raised in assessee's appeal is pertaining to disallowance under section 14A read with Rule 8D of the Rules. 25. At the outset, from the perusal of the directions issued by the DRP in para 5.1, we find that the assessee did not press its objections against the disallowance of Rs. 1,84,268, made by the AO under section 14A read with Rule 8D of the Rules. Accordingly, the AO vide impugned final assessment order made the addition on the aforesaid count. Since the disallowance under section 14A read with Rule 8D has been admitted by the assessee before the learned DRP and no material has been brought on record to show that the aforesaid directions of the learned DRP were subsequently modified in this regard, we find no merits in the grounds raised by the assessee before us challenging its admitted liability. Accordingly, the impugned final assessment order on this issue is upheld and grounds no.6 and 7, raised in assessee's appeal are dismissed. 26. In the result, the appeal by the ass....