TaxTMI 
TaxTMI 
2023 (6) TMI 1388
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....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 during the year. 2:4 The Appellant submits that Assessing Officer / Transfer Pricing Office....
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....nt 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 the Act is called for and the Assessing Officer and the Dispute Resolution Panel ought to have held as such. 7:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance made u/s. 14A made to the ....
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.... 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 raised vide letter dated 14.12.2022: 1:0 Re: Not setting off brought forward long term capital loss of earlier years against the income from long term capital gains of the captioned year: 1:1 The Assessing Officer has erred in not allowing a set-off of the brought forward long term capital loss of earlier years against the income from long term capital gains of the captioned year. 1:2 The Appe....
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....f 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 Rs. 178,87,07,760/- and Rs. 257,23,59,394/- as on 31.03.2010 and 31.03.2011 respectively and suo-moto disallowed an amount or Rs. 58,53,114/- only. The AO by invoking the provisions contained under section 14A read with rule 8D further disallowed an amount of Rs. 3,03,54,117/-. The AO also made similar disallowance by adding the same to the book profit as per clause (f) of section 115JB of the Act. 5. The assessee carried the matter before the Ld. DRP by way of filing obj....
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....t 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 case of DIT v/s Besix Kier Dabhoi -(2012) 210 Taxman 151 (Bombay) that the Revenue has no power to re-characterize a transaction entered into by the Assessee. Therefore admittedly, the AO or the TPO are not empowered to convert and re-characterize a transaction of share application into a loan transaction. This aspect of the matter and this judgment has been overlooked by the DRP in its order for earlier year. As such, it could not be followed. Secondly, the remittance of the said share application mon....
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....his 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 its objections before the Dispute Resolution Panel and the Dispute Resolution Panel disposing of the same in accordance with Vodafone IV. Thus, in the present facts the distinction sought to be made on the ground of alternative remedy is not such as to warrant not entertaining the petition. 10. The second distinguishing feature from that of Vodafone IV, as canvassed by the Revenue, is that Form 3CEB in respect of the transaction of issue of shares to its associated enterprises, is not disclosed as an internationa....
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....nal 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 dated January 30, 2013, of the Transfer Pricing Officer to the extent it holds that the arm's length price of issue of equity shares is Rs. 183.44 per share as against Rs. 10 per share as declared by the petitioner and consequent deemed interest brought to tax on the amount not received when benchmarked to the arm's length price. Accordingly, we set aside the draft assessment order dated March 30, 2013, to the extent it seeks to bring to tax the arm's length price of the share issued by the petitioner to its nonresident associated ....
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....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 delete the addition on account f notional interest of Rs. 2,44,20,173/-. 15. Similar view is also taken in other judgments relied on by the Ld. AR. Since, no contrary judgments have been brought to our notice, relying on the above stated judgments, we direct the AO to delete the impugned adjustment made by the TPO as affirmed by the DRP towards notional interest on share application money for belated allotment of equity shares." 9.2.6 We also notice that similar view has been held by the Tribunal in assessee‟s own case for A.Ys 2008-09 & 2015-16. Considering the f....
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....y 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 contentions and gone through the facts and circumstances of the case. The learned Counsel for the assessee explained the facts that the assessee company has issued FCCB (listed in Singapore Stock Exchange) to the extent of US$ 40 million. These bonds carry an interest rate of 0.5% p.a. and are redeemable on April 19, 2010 at 136.78 percent of the principal 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. F....
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.... 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 and further contended that even suo-moto disallowance of Rs. 58,53,114/- made under section 14A while computing the total income is required to be deleted and relied upon the order passed by the co-ordinate Bench of the Tribunal in case of Orix Auto Infrastructure Services Ltd. (ITA No. 5408/M/2019) & Sajjan India Ltd. vs. ACIT (2018) 18 taxmann.com 21 (Mumbai). The Ld. A.R. for the assessee further contended that even in assessee's own case identical issue has been decided for A.Y. 2008-09 & 2010-11 vide orders dated 02.09.2022 & 23.05.2023. 20. Undisputedly during the year under consideration the assessee has not earned any exem....
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....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 reported in 37 Taxmann.com 249 had categorically held that the assessed income could go below the returned income if assessee had disclosed certain income which is not supposed to be disclosed as per law. Respectfully following the said decision, we direct the ld. AO to delete the voluntary disallowance of Rs. 33,62,493/- made by the assessee u/s.14A of the Act even if ultimately the assessed income goes below the returned income." 21. So following the decision rendered by co-ordinate Bench of the Tribunal which is based upon the decision rendered by the Hon'ble jurisdictional Bombay High Court in case of CIT vs. Prithvi Brokers and Shareholders Pvt. Ltd....