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TaxTMI 
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2022 (9) TMI 1594
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....nternational transaction of the Appellant and making an adjustment of Rs. 1,307,427,111/- u/s 92CA of the Income Tax Act with respect to: * Manufacturing of pharmaceutical products, * Corporate guarantees provided; and * Investment made in subsidiaries. 2. The learned AO and TPO ought to have accepted the arm's length price as determined by the Appellant. 3. That on the facts and circumstances of the case, the learned AO and the learned TPO erred in rejecting the Transfer Pricing ("TP") documentation without appreciating the contentions, arguments, and evidentiary data put forward by the Appellant during the course of the proceedings before them, and in doing so have grossly erred: 3.1. in rejecting Cost Plus Method adopted in the TP documentation and conducting a fresh comparability analysis (using external comparable companies) for determining the arm's length price by the learned TPO. 3.2 in adopting the Transactional Net Margin Method ("TNMM") as the most appropriate method and considering entity level margins by taking recourse to an independent benchmarking study. 3.3 in failing to distinguish between the three primary segments of the business ....
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.... 4.2 in assuming that various risks in the form of country risk, currency risk, and administration costs in respect of the guarantees provided are borne by the Appellant. 4.3. in finding out corporate guarantee fees charged by banks in Mumbai / India when the right approach is to find out the guarantee fees charged in the countries where the subsidiary is located. 4.4. In assuming that the risk on account of granting a corporate guarantee is extremely high for the Assessee purely based on the fact that the details regarding the entity whose assets are subjected to mortgage has not been specified. 4.5 in considering arbitrary numbers for arriving at various basis points during the course of computing the transfer pricing adjustment. 4.6 in considering that providing bank guarantee is an "international transaction" for the Assessment Year under reference. 4.7 in ignoring the bank guarantee commission payable in the respective countries in the ordinary course. 4.8 It was decided in the case of M/s Everest Kanto Cylinder Ltd. Vs DCIT (LTU), Mumbai that "one has to see the economic and business interest also because such kind of corporate comfort given by the assess....
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....imed under section 108: 6.1. That on the facts and circumstances of the case, the Honorable Dispute Resolution Panel ("DRP") and the Learned AO has erred in disallowing the deduction of Rs. 96,094,021/- claimed u/s 108 in respect of profits of 'Strides Technology & Research Division' ("STAR"). 6.2. The Honorable DRP and the Ld. AO has erred in not considering the activity of producing the 'Dossier as manufacture or production of an article or thing. Instead the Honorable DRP and the Ld. AO have held that the deliverables under the contracts is granting of the license and not the preparation of the dossiers. 6.3 The Honorable DRP and the Ld. AQ erred in concluding that the agreements are titled "License and Supply Agreement", "Co-operation and Supply Agreement", "Development, Licensing and Supply Agreement" without appreciating the fact that the Dossiers are prepared under "Sale of Dossier. Agreement" with respect to specific customers. 6.4 Further the Honourable DRP and the Ld. AO ought to have appreciated the fact that the assessee has claimed deduction only on income from sale of dossier agreements with specific customers. For the rest of the contracts, no....
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....ware. 7. Reworking of deduction claimed under section 108 on account of allocation of R & D expenditure: 7.1. The Honorable DRP and the Ld. AO have failed to appreciate the fact that only Rs. 430,503,695/- being the revenue expenses has been debited to profit and loss account of 'STAR' unit and the balance Rs. 21,979,554/- and Rs. Rs. 746,050/- being the Capital expenditure for Plant and Machinery and Buildings respectively have been capitalized in the books of accounts. The Honorable DRP and the Ld. AO has further erred in allocating the R & D expenditure to the manufacturing units in the ratio of turnover of each unit. 7.2 The Honorable DRP and the Ld. AO ought to have appreciated the fact that the extent of R & D undertaken has no bearing on the respective turnover of the other units. 8. Disallowance of weighted deduction under section 35(2AB): 8.1. The Honorable DRP and the Ld. AO have erred in disallowing the claim made for weighted deduction under section 35(2AB) amounting to Rs. 677,605,798/- in respect of scientific expenditure holding that, the Appellant has failed to submit Form 3CM and 3CL without appreciating the fact that the Appellants applicati....
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....rty without providing the basis on arriving at the same. Further, the locational and logistical advantages and the terms of the rental agreements have not been considered. 9.4. Notwithstanding the above, the learned AO while determining the amount to be disallowed has adopted Rs. 39,607,940/-, being the amount of rent including service tax as disclosed in the tax audit report in Form No.3CD instead of Rs. 35,509,280/, being the actual expenditure debited to the P& L Account. The Ld. AO and Honourable DRP failed to observe that only the actual expenditure debited to the P & L Account alone can be disallowed and the service tax component of Rs. 4,098,660/- (Rs. 39,607,940/- less Rs. 35,509,280/-), which was not debited to P & L Account in the first place. 9.5 Without prejudice to the above, the Ld. AO, have disallowed the entire amount of rent considered as unreasonable only from non 108 unit instead of disallowing the same from 10B as well as non 10B unit on the basis of actual rent paid. 10. Disallowance of FCCB premium expenses: 10.1. The Honorable DRP and the Ld. AO erred in considering the premium on redemption of FCCB Bonds amounting Rs. 128,023,824/- as notional in....
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....897,774/-, being 1/5th of total issue expenses on FCCB. 11.2. The Honorable DRP and the Ld. AO have erred in not appreciating the fact that 1/5th of total issue expenses was allowed as a deduction in AY 2006-07. 12. Disallowance under section 14A: 12.1. The Honorable DRP and the Ld. AO have erred in law and on facts by invoking Rule 8D read with section 14A of the Act in determining expenditure in relation to earning exempt income viz. dividend income of Rs. 22,996,317/-. 12.2. The Honorable DRP and the Ld. AO have erred in not appreciating the fact that out of Rs. 5,719,707,238/-, an amount of Rs. 3,971,499,575/- relates to foreign investments and the dividend income from which is taxable in India. Hence, the application of section 14A in respect of these investments is incorrect. 12.3. The Honorable DRP and the Ld. AO have erred in not appreciating that the provisions of section 14A(1) of the Act disallow deduction of expenditure only if the same is actually incurred in relation to exempt income. In the case of the Appellant, no such expenditure was incurred in relation to earning dividend income i.e. exempt income and there is no separate administrative set up for....
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....r the purpose of disallowances under section 144 is not correct in law. 13. Forex losses on Forward Contracts: 13.1. The Ld. AO has erred in making adjustment for forex loss of Rs. 373,342,488/- instead of Rs. 244,845,926/-, which is the actual amount of Forex Loss. 14. Adjustment to Book Profit u/s 115JB: 14.1. The Ld. AO has grossly erred in making adjustment to book profits u/s 115JB on account of provision for leave encashment amounting Rs. 21,693,226/- treating the same as liabilities of unascertainable nature. 14.2. The Ld. AO has failed to verify the adjustments sought to be made in the computation of book profits as directed by the Honorable DRP. The Ld. AD ought to have appreciated the fact that the Appellant is mandated to follow the Accounting Standards in the preparation of financial statements. 14.3. The Appellant has made provision for leave encashment in line with the Accounting Standard 15 on "Employee Benefits" and the calculation of leave encashment is an ascertained liability made as per the actuarial valuation prescribed under the said Accounting Standard. 14.4. The incurring of leave encashment expenditure has accrued during the year agains....
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....ial number particulars amount of international transaction Assessee's benchmarking methodology Manufacturing activity 1 purchase of raw material and consumables Rs. 4,952,783 CPM adopting internal benchmarking 2 sale of formulations 113,76,90,442 CPM - internal Trading activity 3 sale of raw material 3,01,74,804 TNMM 4 sale of spares 20,50,892 TNMM 5 sale of equipments 29,17,767 cup 6 sale of artwork 3,85,336 TNMM 7 sale of strains along with the manufacturing process 9,44,49,063 TNMM Research and development activities 8 recognition of revenue based on R&D services rendered 18,65,28,721 CPM - internal and additional support of TNMM Purchase of intangible property 9 fees paid for use of brand 99,79,194 TNMM 10 interest on loan given in US dollars 3,80,81,368 cup 11 repayment of loan to UK entity 20 lakhs Euro no method 12 reimbursement of cost received 2,76,19,158 no method 05. The learned transfer-pricing officer found that assessee is engaged in manufacture of formulations for export to non-AE. The assessee has produced profit and....
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....er further found that the investment made by the assessee in various subsidiaries as well as in joint ventures is in the form of loan, whereas the claim of the assessee is that it is share application money. The learned transfer-pricing officer rejected the same and computed interest at the rate of 8.16% as per cost of capital of the assessee is 6.16% and adding 2% markup thereon. Therefore, the ALP was determined at computing interest rate at the rate of 8.16% and adjustment of Rs. 524,043,116/- of interest receivable was determined. 09. The learned transfer-pricing officer further found that assessee has given corporate guarantee amounting to Rs. 189.42 crores and out of which Rs. 151.02 crores are given to its associated enterprises where assessee has not charged any consideration for the same. The learned assessing officer in order to arrive at arm's-length price issued notices u/s 133 (6) of the act to various banks in Mumbai. He found that LIBOR +200 is the arm's-length price and made an addition thereto for contrary risk, currency risk and entity risk as well as administrative cost and computed the ALP of loan at 253 BPS and computed the arm's-length price of guarantee comm....
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....ical adjustment was also made to the book profit u/s 115JB. viii. On examination of the book profit AO found that assessee has debited provision for leave encashment expenses and provision for doubtful debts, which are not allowable. He made an adjustment of provision for leave encashment of Rs. 2,16,93,226/- and provision for doubtful debts of Rs. 2,371,404/-. 012. Accordingly draft assessment order was passed on 31/12/2011 wherein the total income of the assessee was computed at Rs 1269854590/-and book profit was computed at Rs Nil against the book profit shown by the assessee at a loss. 013. Aggrieved with the draft assessment order, the Assessee filed objections before the Ld DRP. The Ld DRP vide its directions dated 07.09.2012 partly allowed the objections raised by the Assessee and confirmed other additions / disallowances made by the AO. Thereafter, following the directions of the DRP, the AO passed final assessment order dated 30.10.2012, according to which the total income of the assessee is computed at Rs 1191934388/- and book profit at Rs Nil. This assessment order is under challenge in the present appeal. 014. Subsequently, the AO based on the rectification applica....
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.... vis-à-vis earlier assessment years. Considering the above, there was no justification for the AO / TPO to make any exception /deviation for AY 2008- 09 by disputing CPM as MAM. For this proposition, the learned authorised representative placed reliance on:- i. CIT v/s Cargill Foods India Ltd. (SLP (C) No. 19007/2016 dated 28 November 2016. ii. PCIT v/s Vishay Components India Ltd (P) Ltd., (2019) 103 taxmann.com 421 ( Bombay) iii. Elkem South Asia Pvt. Ltd. v/s DCIT (2019) 105 taxmann 258 ( Mumbai) 017. Therefore, it was submitted that when there has been no dispute in the preceding and succeeding years relating to the methodology adopted by the assessee, the learned transfer-pricing officer could not have disregarded the method or the study conducted by the assessee. 018. Ld AR Further submitted that i. Working for computation of operating margin of the three segments, namely, Formulation, R & D and Trading, and further bifurcation between AE and non-AE transactions for each of the three segments was filed with the TPO vide letter dated 08 August 2011 (refer page Nos. 186 to 188 of the compilation) which remains unassailed on facts. ii. The Appellant vide lette....
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.... in law for maintaining separate books, stock registers, etc. for AE and Non AE Segments. v. Further, the computation of gross margins and actual margins earned on sales to AES and non-AES (as appearing in Gross margins workings) substantiates the fact that the allocation of costs is appropriate. vi. Appellant's Annual Report does not mention any such segmentation in accounts and quantitative analysis attached with the notes to accounts does not mention any such bifurcation: vii. In the absence of any statutory requirement, segmentation quantitative or value details were not furnished in the audited financials of the Appellant. viii. Reliance in this regard is placed on the following decisions: 3I Infotech Ltd. vs. ITO - (2013) 35 txmann.com 582 (Chennai); Honeywell Electrical Devices & Systems India Ltd. vs. ACIT (2014) 29 ITR (T) 347 (Chennai - Trib.); and Lummus Technology Heat Transfer BV (ITA No.6227/Del/2012) However, the transactions with related parties were reported in the related party schedule of the audited financials for statutory purposes under the provisions of Companies Act, which has not been challenged by the TPO. ix. Allocation of such expense....
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.... formulations to AES was 27.44%. xviii. There are apparent errors in the computation of margin of the 65 comparable companies taken by the TPO. The DRP vide its Directions dated 07 September 2012 directed the TPO to exclude three comparable companies (including two comparables challenged by the Appellant & 1 comparable was suo-moto excluded by the DRP). xix. The Appellant further requested to exclude 3 more companies on account of abnormally high margins (refer letter dated 15 December 2011 - page Nos. 248 to 314 of the compilation) xx. A summary of the operating margin of the comparable companies and the methodology used by the Appellant for the computation of the margins is submitted vide letter dated 15 December 2011 (refer page Nos. 248 to 314 of the compilation). xxi. Principles of natural justice have not been followed, as the TPO did not provide the basis / workings of the computation for margin of 65 comparable companies. (Refer page No. 333 of the compilation. Further, the search process adopted/ the filters adopted, etc. by the TPO were not shared with the Company (refer page No. 189 of the compilation). xxii. The TPO has also erred in deducting exchange fluctuati....
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....is transfer pricing adjustment deserves to be deleted. 020. The Ld. DR relied upon TP order and DRP Directions. It was submitted that the learned transfer-pricing officer has given a detailed reasons for not accepting the cost plus method adopted by the assessee has a most appropriate method, which has been endorsed by the LD DRP Correctly. 021. We have heard both the sides on this ground regarding sustainability of TP adjustment by disregarding the Cost Plus Method adopted by the Assessee for determining the arm's length price for the year under consideration. We have also noted that the Revenue has not disputed the CPM adopted by the Assessee in the earlier assessment year i.e. AY 2007-08 and AY 2009-10 as well and also that the business profile of the Assessee has not changed in AY 2008-09 and AY 2009-10 vis-à-vis earlier assessment years. The learned dispute resolution panel without giving any specific findings of its own has agreed with the findings of the learned transfer-pricing officer. The learned dispute resolution panel also did not hold that there is any difference between the facts and circumstances of the case compared to assessment year 2007 - 08. The learne....
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....djudicated in favour of the Assessee. 022. Ground number 4 is with respect to the guarantee commission on account of corporate guarantees provided by the assessee to its associated enterprises. Facts shows that Assessee has provided corporate guarantees aggregating Rs. 151.02 Crores to the following AE's during the year :- SR No AE Amount of Corporate Guarantee 1 Solara mexico 132780000 2 Cellofarm Brazil 199170000 3 Strides ACrolab Polska 599961436 4 Strides ACrolab international DHA 578354400 023. Assessee contended that providing corporate guarantee the associated enterprise cannot be an international transaction and further the same has been provided for the furtherance of the business of the assessee and therefore the non charging of any guarantee commission is a business decision. The learned TPO rejected the argument of the assessee and stated that the AO would not have been in a position to independently obtained loan is from the banks without the cover of the corporate guarantees submitted by the assessee. Further normal business circumstances, no company would grant to 3rd party support in the form of corporate guarantees without charging a consideration.....
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....decision of the Manugraph India Ltd. v/s. DCIT (ITA No. 4761/Mum/2013) (Mumbai ITAT). 028. The Ld. DR vehemently disagreed with the contention of the Assessee and submitted that providing corporate guarantees to overseas AE's is indeed an international transaction. The Ld. DR also distinguished the decision of Asian Paints Ltd. v/s. ACIT (ITA No. 7801/Mum/2010) vis - a vis that of the Assessee for the year under consideration based on facts. The DR further stated that she was relying on the TP Order, Assessment Order and the direction of DRP in support of her submission. 029. We have carefully considered rival submission and orders of lower authorities. We find that scope of Section 92B has further been expanded by addition of explanation by the finance act 2012 with retrospective effect from 1/4/2002 which specifically provides that international transaction includes the guarantee. Therefore, it cannot be said that corporate guarantee issued to associated enterprise is not an international transaction. Therefore, We are inclined to agree with the submission of the Ld. DR that providing corporate guarantees to overseas AE's is an international transaction. 030. Now the issue is ....
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....ty 1,62,12,564 5 Strides Arcolab International Ltd, UK Equity 21-Dec-05 Incorporated Entity 63,95,781 6 Strides Arcolab International Ltd., UK Equity 21-Dec-05 Incorporated Entity 21,02,85,622 (Share application money) 7 Strides Latina, Uruguay Equity 5-Feb-05 Acquired Nil 8 Strides SA Pharmaceutical Pty. Ltd., SA Equity 16-Sep-03 Acquired 3,83,033 9 Strides Inc, USA Equity 30-Aug-99 Acquired 5,01,21,175 10 Strides Inc, USA Redeemable e Pref - 6% 30-Aug-99 Acquired 1,50,04,197 B Investment in Joint Venture 11 Akorn Strides LLC, USA Equity 1-Dec-04 Incorporated Entity Nil Sub-total 52,40,43,116 032. The Assessing Officer referred 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 interest computation on the investments. In reply, the as....
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....ts directions dated September 7, 2012, issued under section 144C (5) of the Act, confirmed the order passed by the TPO following its directions issued in the preceding assessment years, namely AY 2011-12, AY 2012-13 and AY 2013-14 and rejected the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us. 034. The Ld. AR reiterated the submissions made before the DRP and sought relief in the Appeal under consideration: a. The TPO, DRP and the AO erred in imputing interest on the share application money pending allotment with the subsidiaries by recharacterizing share application money as loan given to group companies. Thereby, the TPO, DRP and the AO failed to understand the business rationale behind the share application money transaction and make a distinction between a loan and an investment transaction. The funds were remitted by the Assessee to the AE's as share application money was for the sole purpose of obtaining the shares and it was never intended to be a loan. In support of his submission, the Assessee submitted the following documents: (i) Annual Performance Reports alongwith the Accounts for the year ending 31.12.2007 and 31.12.2008 o....
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....see in the form of shares are to be excluded and restricted only to share application money for the purpose of calculating interest (ii) that interest should be calculated on average balance (opening and closing balances) during the year or on actuals for the period which the amount was lying as share application money (iii) that interest should not be computed for the share application money for the initial period of 180 days since the time of 180 days has been provided/allowed by the Reserve Bank of India for the allotment of shares in terms of FAQ No. 26 to the „Master Direction on Direct Investment by Residents in Joint Venture (JV) / Wholly owned subsidiary (WOS) abroad. (iv) the impairment losses provided in the audited financials of FY 2007-08 should be excluded while considering the closing balance of investments as on March 31,2008 (v)the interest rate should be calculated with reference to LIBOR rate instead of calculating on "cost of capital". h. The Ld. Counsel for the assessee further submitted that similar issue has been decided by the Co-ordinate Bench of the Tribunal in the assessee's own case in (a) Strides Pharma Science Ltd. v/s DCIT 15(3) (2) in ITA no. ....
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....uld not be followed. Secondly, the remittance of the said share application money was approved and supervised by the RBI and the purpose of remittance as approved was investment in share capital. As such, there is no dispute to the fact that the amounts paid were on account of investment in share capital of the associates or subsidiaries. We further note that even otherwise the transaction of issue of shares is a capital account transaction and not a revenue account transaction and therefore could not be said to result in any income per se. We further notice that the co-ordinate benches of the Tribunal have also taken a view that no imputation of interest could be made on a transaction of share application money paid to subsidiaries. The coordinate bench of Mumbai Tribunal in the case of Aries Agro Ltd. v/s DCIT - ITA No. 1452 / Mum/17 = 2019-TII-174-ITAT-MUM-TP (supra) has been held as follows: "18. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee has advanced money as share application money to Golden Harvest a foreign AE to set up a plant in free trade zone in Sharjah. It is also undisputed ....
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....that Form 3CEB in respect of the transaction of issue of shares to its associated enterprises, is not disclosed as an international transaction. This the petitioner was obliged to do as the transaction is an international transaction. This was in fact done by the petitioners in Vodafone IV. This stand by the Revenue is a little curious as in Vodafone IV the Revenue contended that as the petitioners therein had filed Form 3CEB in respect of issue of shares to its associated enterprise, they had submitted to the jurisdiction of Chapter X of the Act and cannot now contend that the proceeding to tax such shortfall on capital account is without jurisdiction. In this case, an exactly opposite stand is being taken by the State. The State is expected to be consistent and not change its stand from case to case. Be that as it may, the petitioner herein had not disclosed the transaction in Form 3CEB as, according to the petitioner, it was not an international transaction for the reason that it did not give no rise to any income. The fact that the petitioner chose not to declare issue of shares to its non-resident associated enterprises in Form 3CEB as in its understanding it fell outside the ....
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....tent it seeks to bring to tax the arm's length price of the share issued by the petitioner to its nonresident associated enterprises and also deemed interest which is sought to be brought to tax on the ground of non- receipt of the consideration equivalent to the arm's length price by the petitioner on issue of equity shares. It is further clarified that the petitioner's objection before the Dispute Resolution Panel filed on April 25, 2013, on all issues save and except the issue covered by this order would be considered by the Dispute Resolution Panel on its own merits." 19. The Hon'ble Bombay High Court further in the case of Equinox Business Parks (P.) Ltd. vs. Union of India has held as under: "This has been accepted by the Revenue and is evident from the order of DRP dated 30 October 2014 in Petitioner's case for A.Y. 2010-11. In the A.Y. 2010-11 also the Petitioner had issued CCDs and equity-shares and the basis was identical to the present Petition. The Revenue sought to tax the Petitioner in terms of Chapter X of the Act. However, the Petitioner objected to the Draft Assessment order before DRP. On 30 October 2014, DRP issued directions under Secti....
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....ed 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 / TPO to delete the adjustment towards notional interest on share application money for delayed allotment of shares. Accordingly, ground no.2, raised in assessee's appeal is allowed." 037. The learned DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law were alleged in the assessment year under consideration. Thus, respectfully following the Orders passed by the Coordinate Bench in assessee's own case supra, we direct the Assessing Officer / TPO to delete the adjustment made towards notional interest on Shares and share application money for delayed allotment of shares. Accordingly, ground no. 5 raised in assessee's appeal is allowed. 038. The issue arising in ground no.6, raised in assessee's appeal is with regard to disallowance of the deduction under section 10B of the Act on export profit earned by its unit. Brief facts ....
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....ee by the Co-ordinate Bench of the Tribunal in assessee's own case for the preceding assessment year ie. AY 2007- 08. 040. The learned D.R. vehemently relied on the orders passed by the lower authorities. 041. 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 ACIT, in ITA no.8614/Mum./2011, for the assessment year 2007-08, vide order dated 08.06.2018, allowed the deduction claimed by the assessee under Section 10B of the Act by observing as under:- "12. From the facts of the present case, it is clear that the fundamental requirement in all the agreement is creation of dossier, which is compilation of the relevant technical education to enable manufacture of product. Dossier has all the attributes of product being an article or thing and it is creation specifies the requirement of a production. In fact, creation of dossier entails the actual production of the formulation initially in the laboratory and therefore upto a batch size. In similar circumstances Hon'ble Supreme Court in the case of scientific Engineering House Pvt Limited vs ....
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....ction 35(2AB) of the Act. It was stated that the delay in issuing Form No. 3CM and report in Form No. 3CL by the DSIR was due to their administrative reasons. The Learned AR also submitted that these forms were submitted with the AO and the DRP after the DRP order but before passing the final assessment order dated 30.10.2012. The learned AR also submitted that this Tribunal in assessee's own case in AY 2002-03 in ITA No. 1727/Mum/2006 vide order dated 16.12.2015 and in AY 2003-04 in ITA No. 641/Mum/2007 and in AY 2004-05 in ITA No. 4063/Mum/2010 order dated 29.04.2016 and ITA No 8614/Mum/2011, for the assessment year 2007-08, vide order dated 08.06.2018, allowed the deduction claimed by the assessee under Section 35(2AB) of the Act. 046. The learned D.R. vehemently relied on the orders passed by the lower authorities. However, 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 cases cited supra where same deductions were allowed exactly on identical facts, respectfu....
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.... upon were at the then prevailing rates in that locality and since the locality where the property is situated were not so developed at that point in time the rentals fixed were considerably low. Thus the owner had no option but to change only such amount of rent as per the terms of the Agreement. Whereas, the rental agreements with related party were entered into during August 2004 in case of one property and June 2006 in case of two other properties. 33. We find from the facts of the case that the lower authorities failed to appreciate the facts that the significant portion of the property belonging to the related party are used for R&D and corporate office which houses the Corporate office Finance, HR, R&D, SCM, Planning departments. This it is be rented out to any third party without any modification. This can as it is to be rented out to any third party without any modification this had a central superior quality construction and utilization for corporate for corporate office structure of related party building compared to outside party building which is used for manufacturing plant. The rental agreements with outside party were entered into in May 2001 and the rents were f....
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....amount. Further, these bonds are convertible into shares by bond holders on or after May 18, 2005 and only at the option of bond holders. The total issue expense relating to the issue of FCCB is USD $ 10,77,926 claimed in equal instalments over a period of 5 years. Further, we find that these bonds may be redeemed only in full at any time on or after 18th April 2008 but before 19th April 2010 with a redemption premium of 6.8% p.a. As on 31 December 2005 the additional amount (including exchange fluctuation) which is payable on redemption was provided for under Debenture Redemption Reserve with a corresponding adjustment to Securities Premium Account . Further, none of the bonds were offered for conversion as on 31st March 2007. Further, the FCCB issue expenses have been allowed as a deduction in the Company's own case for the AY 2006-07. Based on GAAP principles and the relevant Accounting Standards , the premium needs to be accrued; consequently the liability has been accrued in the books in the year of receipt of FCCB funds. Premium on redemption amounting to USO 16 Million has been accrued in the financials for the year ending 31 December 2005 based on the office circular. T....
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....ssion, 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 had suo-motu offered for disallowance of an amount of Rs. 23,76,000/-. The Assessing Officer vide assessment order dated 31.10.2012, rejected the contentions of the assessee and made disallowance of Rs.13,37,28,752/-, under section 14A of the Act r/w rule 8D of the Rules. The DRP, inter-alia, rejected the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us. 058. During the course of hearing, the learned A.R. submitted that Co- ordinate Bench of the Tribunal in assessee's own case for preceding years has restored the issue to the file of the Assessing Officer. 059. On the other hand, the learned D.R. vehemently relied on the orders of the authorities below. 060. We have considered the rival submissions and perused the material available on record. We find that the assessee during the course of assessment proceedings, has raised the following submissions:- i) The assessee has made inve....
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....2018, for the assessment year 2014-15, vide order dated 07.02.2020 and 7992/Mum/2019, for the assessment year 2015-16, vide order dated 06.04.2022 has deleted the addition made to book profit computed under section 115JB of the Act by observing as under:- "34. We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with case laws cited by the ld. AR for the assessee. After considering the facts of the case and the various judgements cited supra, we are of the opinion that no addition to book profits u/s 115JB could be made on the basis of disallowance u/s 14A read with Rule 8D of the Income Tax Rules, 1962. This legal proposition is supported by the decision of Hon'ble Bombay High Court in case of CIT v/s Bengal Finance and Investments - (ITXA No. 337 of 2013 Bombay High Court), where 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, the....
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....d liability and accordingly, direct the AO to delete the same for determining the book profits. Further, the amount of forex losses on forward contracts appears to be an oversight since it was rectified by the AO himself only in the normal computation and not from the MAT computation. Accordingly, we direct the AO to give the same treatment and delete the same from the MAT computation as well. Accordingly, ground no.13, raised in assessee's appeal is allowed in the favour of the assessee. 069. The next ground 15 and 16 is for levy of interest under section 234B and 234D of the Act , These are consequential in nature hence dismissed. 070. The next ground 17 and 18 is for non-grant of tax credit on the distributed profits u/s 115O/115P of the Act and short grant of TDS Credit. As per the Ld AR, proper credit for DDT and TDS has not been granted by the AO. In view of the above, we direct the Assessing Officer to verify the tax credit and allow it as per the records. Accordingly, ground no. 17 and 18, raised in assessee's appeal is allowed for statistical purpose. 071. Ground raised in assessee's appeal with regard to initiation of penalty under section 271(1)(c) of the Act is pre- ....