TaxTMI 
TaxTMI 
2024 (12) TMI 904
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....purpose behind the transaction. 4. Both lower authorities erred in ignoring the Appellant company's submissions as regards application of "other method" through savings in interest costs, due to prompt and timely payments by TCIPL, which has ultimately resulted in a higher profit on the transaction. 5. Both lower authorities erred in disallowing a further amount of Rs. 1,83,46,780/- u/s.14A read with Rule 8D(2). 6. The Appellant submits that the Assessing Officer recorded no "objective satisfaction" while making an addition to the disallowance u/s 14A already made by the Appellant in its Return of Income. 7. Without prejudice to ground nos. 5 & 6, the Appellant submits that disallowance of expenditure u/s. 14A be restricted to 2% of the dividend income earned by the Appellant, following appellate orders in the assessee's own case in earlier years. 8. Without prejudice to ground nos. 5 & 6, the Applicant submits that the disallowance is highly excessive and arbitrary. 9. Without prejudice to ground nos. 5, 6, 7 & 8, the appellant submits that no disallowance is called for u/s.14A read with Rule 8D in respect of those investments on which no dividend income has be....
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....under the India Companies Act. The assessee is a group entity of Tata Enterprise and is in the agriculture inputs industry. It has four production facilities of which two are located in Gujarat and two in Maharashtra. 6. A reference u/s 92CA(1) of the Act was made to DC/ACIT, TP 3(3)(1), Mumbai, for computation of ALP in relation to the international transactions. During the year the assessee has sold goods to its AE, Tata Chemicals International Pte Ltd. Singapore (TCIPL). These goods are sold on "Bill To Ship To Model" basis i.e., the billing is done to TCIPL and the goods are sold directly to third party i.e., Adama Agan Ltd. The international transactions relating to sale of goods was to the tune of Rs. 1,77,65,21,572/- and the assessee adopted other method as the most appropriate method. 7. The peculiar facts are that from April to 29th August, the assessee sold directly to Adama Agan Ltd. (AAL), but post 29th August, the assessee sold goods through its AE i.e., TCIPL. When the goods were sold directly by the assessee, the credit period allowed to AAL was 150- 180 days for the pesticides Metribuzin (Metri) and Pendimenthalin (Pendi) whereas the credit period allowed to TCIPL....
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....nt furnished by the assessee. The ld. Counsel for the assessee, vehemently stated that both the TPO & DRP have completely ignored the risk factor as explained by the assessee. The ld. Counsel, reiterated that earlier when it was selling directly to AAL, the credit period ranged from 150 to 180 days thereby permitting the assessee to discount the bills at a cost. When the goods were sold through AE, TCIPL, the assessee received payments within 8 to 10 days as explained in the chart thereby showing that there was substantial savings in the interest minimizing the credit risk arising from non-payment of dues by customers. The TPO and the DRP also ignored the market risk as now the AE is responsible for carrying out all the sales and marketing related activities for the products. Thus, the assessee does not bear the market risks. The ld. Counsel for the assessee concluded by saying that the TP adjustment made by the AO is unwarranted and uncalled for in the peculiar facts and circumstances of the case. 8.1. Per contra, the ld. D/R strongly supported the findings of the TPO. 9. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that....
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....The assessee has challenged the impugned disallowance on the ground that the AO has nowhere recorded any satisfaction for making the impugned disallowance nor the AO has discussed anywhere the suo moto disallowance made by the assessee. It was explained that the only tax-free receipt is the dividend income for which no amount of expenditure has been incurred by the assessee towards earning of dividend income. It was explained that the dividend are directly credited to the assessee's bank account through ECS. It was further explained that by way of abundant caution, the assessee has suo moto disallowed Rs. 18,61,000/- which represents 1/10th salary of the CFO, Treasury head and Manager Treasure. 11. Before us, the ld. Counsel for the assessee placed strong reliance on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Godrej & Boyce Mfg Co. Ltd. reported in (1029 of 2018) (Bom HC) and PCIT vs. Tata Capital Ltd. (1081 of 2018) (Bom HC). Both these decisions are by the Hon'ble Jurisdictional High Court of Bombay and further relied upon the decision of the Hon'ble Supreme Court in the case of South Indian bank vs. CIT (438 ITR 1)(SC). 12. Per contra, the ld. D/R su....
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....eleted the addition made on account of interest expenditure as the assessee had sufficient interest free surplus fund to make the investment and the ITAT has rightly deleted the disallowance made by the AO us 14A r.w Rule 8D. Consequently we hold that, the interest expenditure cannot be disallowed u/s14A r.w. Rule 8D(2)(ii) under any circumstances." 13.1. Similar view was taken by the Hon'ble High Court of Bombay in the case of Tata Capital Ltd. (supra). The relevant findings read as under:- "7. We agree with the finding of the CIT(A) and the ITAT that though the AO has stated that Assessee's explanation is not acceptable, he has not given reasons why it was not acceptable to him. Subsection (2) of Section 14A and Rule 8D provides that if the Assessing Officer is not satisfied with the correctness of the claim in respect of expenditure made by Assessee in relation to income which does not form part of the total income under the Act, he shall determine the amount of expenditure in relation to such income in accordance with the provisions prescribed. The most fundamental requirement, therefore, is the Assessing Officer should record his dissatisfaction with the correctness of ....
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.... Hon'ble High Court of Gujarat in the case of CIT vs. Sun Pharmaceutical Industries Ltd. (250 Taxman 270) (Guj. HC). The relevant findings read as under:- "....One of the main grounds which appealed to the Commissioner was that the prescribed authority had not sent the intimation in Form 3CL to the Revenue, in absence of which, according to the Commissioner, claim could not have been accepted. 4. The assessee approached the Tribunal. The Tribunal by the impugned judgment allowed the appeal inter-alia holding that the prescribed authority shall submit its report in relation to the approval of the in-house research and development in Form 3CL to the Director General of Income Tax (Exemption) within 60 days of its granting approval. In the opinion of the Tribunal, same was merely in form of intimation to be sent by the prescribed authority to the department. In case of the assessee, the research and development activity having already been approved in Form 3CM, the assessee thereafter, had no further role to play in the interdepartmental correspondence. The Tribunal therefore, held that the assessee was entitled to deduction on the capital and revenue expenses incurred on in-house....