TaxTMI 
TaxTMI 
2023 (6) TMI 1388
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....Pricing Officer and Dispute Resolution Panel grossly erred in making adjustment u/s. 92CA of the Act aggregating to Rs. 17,36,13,067/- with respect to imputing interest on share application money pending allotment. 2:0 Re: Imputing additional interest on the share application money paid the subsidiaries by the Appellant - Rs. 17,36,13,067/-: 2:1 The Assessing Officer / Transfer Pricing Officer / Dispute Resolution Panel have erred in imputing additional interest on the share application money paid to the subsidiaries by the Appellant. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the Assessing Officer/Transfer Pricing Officer/ Dispute Resolution Panel erred in recharacterizing share application money as loan given to group companies and thereby imputing interest on hypothetical income at an ad-hoc average rate of 8% which is unwanted, unjustified, misconceived, erroneous, incorrect and illegal. 2:3 Without prejudice to aforesaid, the Assessing Officer / Transfer Pricing Officer/ Dispute Resolution Panel ought to have computed interest based on the LIBOR rate prevalent dur....
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....essing Officer and the Dispute Resolution Panel have erred in disallowing expenditure in relation to earning exempt income by invoking Rule 8D read with section 14A of the Act. 6:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no disallowance u/s. 14A is called for and the Assessing Officer and the Dispute Resolution Panel ought to have held as such. 6:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance u/s. 14A of the Act and to re-compute its tax liability accordingly. 7:0 Re.: Disallowance u/s. 14A while computing 'book profits' u/s. 11538 of the Income-tax Act, 1961: 7:1 The Assessing Officer and the Dispute Resolution Panel have erred in increasing the 'book profits' for the purpose of section 1153B of the Income-tax Act, 1961 (the Act") by an amount of Rs. 3,62,07,231/- being the disallowance u/s. 14A of the Act read with Rule 8D of the Income-tax Rules, 1962.. 7:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, no disallowance u/s. 14A of ....
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.... of the Act and to re-compute its tax liability accordingly. 12:0 Re: Initiation of penalty proceedings u/s. 271(1)(c) of the Income tax Act, 1961: 12:1 The Assessing Officer has erred in initiating penalty proceedings u/s. 274 r.w.s. 271(1)(c) of the Income-tax Act, 1961. 13:0 Re: Rectification of mistakes apparent on record; 13:1 The Assessing Officer has made certain mistakes apparent on record particularly with regard to the computation of total income and tax thereon. 13:2 The Appellant submits that the Assessing Officer be directed to rectify the aforesaid mistakes and correctly compute its total income and tax thereon. 14:0 Re.: General 14:1 The Appellant craves leave to add, alter, amend, and/or substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal." 2. The assessee by moving application dated 14.12.2022 and 19.06.2023 sought to raise additional grounds, on the ground that these are the legal grounds and necessary for complete adjudication of the issues at hand, which are as under: "III. Additional grounds of appeal rais....
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....ppeal at or before the hearing of the appeal." 3. Keeping in view the settled principle of law that the additional grounds, which are legal one, can be raised by the parties to the litigation at any stage of the proceedings the same are allowed to be entertained without entering into the merits of the same. 4. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is into the business of manufacturing and marketing of pharmaceutical products. During the year under consideration Transfer Pricing Officer (TPO) noticed that the assessee had invested an amount of Rs. 498.85 crores and Rs. 641.96 crores in its overseas Associated Enterprises (AEs) as share application money in M/s. Strides Acrolab International, UK(SAIL) and M/s. Starsmore Ltd. respectively but the shares were not allotted and the amount was shown as share application money pending allotment. The Ld. TPO thereby treated the said transaction as loan transaction and charged interest @8% per annum on transaction and thereby proposed the TP adjustment of Rs. 17,36,13,067/-. The AO during assessment proceedings noticed that the assessee company has shown investment of....
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....23 in ITA No. 1903/M/2015 in A.Y. 2010-11, in ITA No. 124/M/2013 vide order dated 02.09.2022 in A.Y.2008-09, in ITA No. 7370/M/2018 vide order dated 07.02.2022 in A.Y. 2014-15 & in ITA No. 7992/M/2019 vide order dated 06.04.2022 in A.Y. 2015-16 in assessee's own cases available at page 1 to 248 of the case law paper book. 10. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 2010-11, wherein the identical issue as to making investment by the assessee in its overseas AEs but share had not been allotted during the year under consideration, which has been decided in favour of the assessee by returning following findings: "9.2.5 We heard the parties and perused the materials on record. We notice that the co-ordinate bench bench of the Tibunal in assessee‟s own case for A.Y. 2014- 15 has considered a similar issue and held that- 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 Id. AR for the assesses. At the outset, it needs mention that it has been held by the Hon'ble Bombay High Court in the c....
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.... 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 serve no useful purpose by directing the petitioner to prosecute ....
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....ms 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 the aforesaid decision we set aside the order d....
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....falling 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, f^g 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 dele....
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.... as under: "052. The issue arising in ground No. 10 and 11, raised in assessee‟s appeal is with regard to disallowance of FCCB premium and expenses. The brief facts of the case pertaining to this issue as emanating from the record are that the AO and DRP has considered that the sum of Rs. 12,80,23,824/-being 1/5th of total redemption premium and 1/5th of the FCCB issue expenses amounting to 98,97,774/- as deduction has been claimed by assessee u/s 37(1) of the Act. According to AO, the premium of redemption is neither due nor incurred during the year and it is just a provision for liability arising in future. Accordingly, the AO disallowed the claim of deduction and the assessee carried the matter to DRP, who also confirmed by holding that the FCCB premium of redemption is just a provision for liability arising in future and therefore agreed that the AO i.e. premium of redemption cannot be allowed as deduction because the expenditure is neither fructified or ascertained. Further, as for the issue expenses it partakes the nature of capital expenditure. Aggrieved by the Order, the assessee is in appeal before the Tribunal. 053. We have heard the rival contenti....
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....owances." 17. Following the order passed by the co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 2008-09, we are of the considered view that the assessee is entitled for claim of issue expenses of FCCB. Hence, disallowance made by the AO/DRP/TPO is ordered to be deleted. So ground No. 5 is determined in favour of the assessee. Ground Nos.6 & 7 and additional ground No. 1 raised vide application dated 19.06.2023 18. The AO by invoking the provisions contained under section 14A read with rule 8D made a disallowance of Rs. 3,03,54,117/- (Rs.3,62,07,231/- - Rs. 58,53,114/- suo-moto disallowance) and the same disallowance is added to the book profit as per clause (f) of section 115JB of the Act by declining the contentions raised by the assessee that no expenses have been incurred in relation to the exempt income during the year under consideration. The Ld. DRP upheld the disallowance made by the AO. 19. The Ld. A.R. for the assessee by raising additional ground challenged the impugned order passed by the AO/DRP that when the assessee has not received any exempt income during the year under consideration no disallowance under section 14A required to be made ....
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....ision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt Ltd., reported in 349 ITR 336 (Bom). Respectfully following the said decision of the Hon'ble Jurisdictional High Court, we hold that the lower authorities ought to have entertained the claim of the assessee. We also find that the ld. CIT(A) in para 4.14 had categorically agreed to the legal proposition that no disallowance u/s.14A of the Act could be made when there is no exempt income. Having said so, he ought to have entertained the plea of the assessee and directed the ld. AO to reduce even the suomoto disallowance of Rs. 33,62,493/- made by the assessee. To this extent, we are inclined to modify the order of the ld. CIT(A) and direct the ld. AO to delete Rs. 33,62,493/- being the suomoto disallowance made by the assessee. 3.3. We are conscious of the fact that this deletion of suomoto disallowance would result in assessed income going below the returned income. In this regard, we find that the Hon'ble Gujarat High Court in the case of Gujarat Gas Company Ltd., vs. JCIT reported in 245 ITR 84 and also in later decision in the case of Milton Laminates Ltd., vs CIT r....