TaxTMI 
TaxTMI 
2025 (5) TMI 1302
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..... The case was selected for complete scrutiny under CASS. The AO referred the case to TPO for determining the Arm length price of international transactions. Thereafter, the draft assessment order under Section 143(3) r.w.s. 144C(1) was issued and served upon on 30.12.2016. When the assessee informed the AO that it will file appeal before CIT(A) challenging the additions / disallowances proposed, the AO passed the final assessment order u/s 143(3) r.w. Section 144(C)(3)(b) of the Act on 22.02.2017, where the total income of the assessee was assessed Rs. 171,40,04,530/- by making various additions and disallowances, which includes the TPO adjustment of Rs. 5,16,73,139/- towards interest on outstanding receivables from AE, disallowance u/s 14A at Rs. 78,420/- and disallowance u/s 40(a)(ia) at Rs. 30,60,074/- for non- deduction of tax at source on bank guarantee commission. 3. Aggrieved by the assessment order, assessee preferred appeal before the ld. CIT(A) which stood partly allowed in terms of the impugned order dt. 28.02.2018 passed by CIT(A) 44, New Delhi. Against such order the revenue is in appeal before the Tribunal. In form 36 assessee has taken grounds which were later re....
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....he fact that the said notification had come into force w.e.f. 1st January, 2013? 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of its earlier order in the assessee's own case despite the fact that principal of res-judicata is not applicable to Income Tax proceedings as each assessment year is a separate year? 7. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal." 4. Grounds of appeal Nos. 1 & 2 are in relation to the deletion of the addition made on account of transfer price adjustment made towards interest on outstanding receivable from AE at Rs. 5,16,73,139/- thus they are taken together for consideration. 5. The TPO re-characterised the delay in receipt of receivables as interest free unsecured loans advanced to the AE and treated the receivables from AE as international transaction in the nature of capital funding. Accordingly, the TPO has made adjustment on notional interest computed @ 12.86% (SBI PLR of 9.86 Plus 300 basis points) and....
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....'international transaction' as follows: Explanation.-For the removal of doubts, it is hereby clarified that- (i) the expression "international transaction" shall include- (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short- term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; 9. The above explanation clarifies and also justifies the adjustment made by....
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....account impact of outstanding receivables and no further adjustment required if the margin of the assessee is higher than working capital adjusted margin of comparable. The coordinate bench of Delhi Tribunal in case of Ameriprise India (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 237 considered the decision of coordinate bench in the case of Kusum Healthcare and held that, the allowing working capital adjustment in the international transaction of rendering services can have no impact on the determination of ALP of the international transaction of interest on receivables from AEs. 14. The Hon'ble Delhi High Court, while dismissing the appeal of the revenue against the order of Tribunal in the case of Pr. CIT v. Kusum Healthcare(P.) Ltd. 2017] 398 ITR 66, held as under: (i) The inclusion in the Explanation to Section 92B of the Act of the expression "receivables" does not mean that de hors the context every item of "receivables" appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterized as an international transaction, and (ii) With the Assessee having already factored in the impact of the receivabl....
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....further submits that in assessee's own case Hon'ble Delhi High Court in AY 2007- 08 and AY 2008-09 reported in 436 ITR 546 has held that the onus is on the revenue to ascertain the correctness of the suo-motto disallowance made by the assessee. He thus requested for the confirmation of the order of ld. CIT(A) in this regard. 21. We have considered the rival submissions and perused the material available on record. Admittedly, in the instant case it was decided in earlier years that the assessee had made investments out of its own interest free funds thus the AO has made the disallowance of only administrative and management expenses. The assessee after identifying the direct and indirect expenses allocable to investments having exempt income, made disallowance @ 20% of the said expenditures for purpose of section 14A of the Act. This view was fully supported by the judgements of Hon'ble Jurisdictional High Court in assessee's own case, wherein it is held that burden is on the revenue to ascertain the correctness of the su-motto disallowance made by the assessee. 22. However, from AY 2009-10, Rule 8D was inserted which provides the method of determining the amount of expenditu....
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....ection 40(a)(ia) by observing that assessee has paid bank guarantee commission without making deduction of tax at source. The ld. CIT (A) deleted the same by holding that there is no principal agent relationship, and the Guarantee Commission is not in the nature of Commission so as to attract the provision Section 194H of the Act. Against such deletion, the Revenue is in appeal before us. 26. Before us, ld. CIT DR reiterated the same facts as were observed by the AO in para 6 of the order and requested for the restoration of the disallowance made by AO. 27. Per contra, ld. AR of the assessee also relied upon the judgement of ld. CIT(A) and further submitted that hon'ble jurisdictional high court in the case of CIT Vs. JDC Apparels Pvt. Ltd. reported in 370 ITR 454 has held that the amount charged by bank as a fee for rendering banking services to its clients could not be treated as a commission or brokerage u/s 194H and requested for the confirmation of the order of ld. CIT(A). 28. We have perused the material available and the arguments advanced by both the parties. The ld., CIT(A) while deleting the disallowance has held as under: "6.10 Ground No 11 pertains to ....
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....eaning of the expression 'commission', thus, does not extend to a payment which is in the nature of fees for a product or service; it must remain restricted to a payment in the nature of reward for effecting sales or business transactions, etc. The inclusive definition of the expression 'commission or brokerage 'Explanation to section 194H is quite in harmony with this approach as it only provides that "any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities" is includible in the scope of meaning of 'commission or brokerage. Therefore, what the inclusive definition really contains is nothing but normal meaning of the expression 'commission or brokerage'. When inclusive definition contains ordinary normal connotations of an expression, even an inclusive definition has to be treated as exhaustive. That is the situation in the instant case as well. Even as definition of expression '....