TaxTMI 
TaxTMI 
2025 (7) TMI 174
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....grounds of appeal as under: ITA No. 454/Kol/2022 (AY 2017-18) "1. The Learned Dispute Resolution Panel (DRP) erred on facts and in the circumstances of the case and in law affirming the order of the Assessing Officer on the following ground and the appeal is being preferred against the same. 2. The computation made and the pricing methodology adopted by the Learned Assessing Officer to determine the arms-length price and the purported transfer pricing adjustment of Rs. 2,01,97,394/- made in respect of Corporate Guarantees provided by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 3. The computation made and the pricing methodology adopted by the Learned Assessing Officer to determine the arms-length price and the purported transfer pricing adjustment of Rs. 2,98,142/- made on account of the purchase of goods by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 4. For that the Assessing Officer erred in law and on facts in making disallowance of Rs. 30,85,965/- u/s 36(1)(va) read with section 2(24)(x) of the IT Act for employees' contribution towards th....
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.... 1,40,38,728/- made in respect of Corporate Guarantees provided by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 3. For that the Assessing Officer erred in law and on facts in mechanically making further disallowance u/s 14A of Rs 5,17,964/- by invoking Rule 8D(2) and without establishing any approximate cause between such expenditure incurred and earning of tax-free income. 4. For that without prejudice to anything said herein above, the Assessing Officer erred in law and on facts and not appreciating that total disallowance u/s 14A as assessed by AO of Rs. 23,52,885/- cannot exceed exempt income of Rs. 16,96,336/- 5. For that the Assessing Officer erred in law and in facts in adding the disallowance made u/s 14A read with Rule 8D to the book profit computed u/s 115JB of the Act. 6. For that the Assessing Officer erred in law and on facts in making disallowance of Rs. 61,99,971/- u/s 36(1)(va) read with section 2(24)(x) of the I.T. Act for employees' contribution towards the provident fund beyond the due date prescribed in the Act, but paid before the due date of filing of return u/s 139(1) of t....
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....nst the fee of Rs. 61,84,092/- determined by the TPO. The Id. 1st Appellate Authority has followed the orders of the ITAT Coordinate Benches for holding that fee is to be charged at 0.50% for providing corporate guarantee. This finding is discernible from paragraph no. 7 of the ld. CIT(Appeals)'s order extracted supra. After taking note of this finding, we do not wish to interfere in this finding because it is based on the decisions of the Coordinate Benches." 4.1 The Ld. DR relied on the orders of Ld. AO and Ld. DRP. 4.2 We have considered the rival submissions and we find that this issue is covered in favour of the assessee due to the finding given for AY 2014-15 by the ITAT (supra). Considering the order for AY 2014-15, we hold that the Corporate Guarantee has to be assessed @ 0.5% and not 1.82%. Consequently, the assessee succeeds on this ground of appeal. Ground No. 3 5. Ground No. 3 pertains to the downward adjustment of purchase of goods at Rs. 2,98,142/-. On this issue, the Ld. AR pointed out that in para 3.2 at page 5 of the Ld. DRP's order, it has been clearly mentioned that no claim u/s 80IE of the Act was presented in the computation of income. The Ld. A....
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....er out of the claimed amount of Rs. 84,01,820/-, he found that only an amount of Rs. 15,20,675/- was found to be in the assessee's name. It was only after this exercise that he disallowed Rs. 68,81,145/- u/s 37 of the Act. 7.2 We have considered the rival submissions and have also gone through the orders of Ld. AO and Ld. DRP in this regard. We find that the Ld. DRP has given the following directions: "The AO is accordingly directed to allow the said expenditure after due verification that the membership of the club is in the name of the company. The ground is disposed of as above" We find no fault in principle with these directions and consequently direct the Ld. AO to verify the expenses and allow all expenses which are billed to the assessee company. The assessee would do well to present the requisite details before the Ld. AO in this regard. Accordingly, this ground is allowed for statistical purposes. Ground No. 6 8. Ground No. 6 pertains to disallowance of excess remuneration of Rs. 2,66,40,000/- paid to Managing Director. In this respect, the Ld. AR read out from the written submissions which deserve to be extracted for reference as under: "5.6 ....
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....ssessee" in spite of the direction of the Hon'ble DRP in Para 5 at Page 11 of the order that violation of order of the Department of Corporate Affairs is not relevant in determining the taxation of the relevant amount under the IT Act. It is prayed that in view of the submissions made above the addition be deleted in full." 8.1 The Ld. DR relied on the order of Ld. AO. 8.2 We have carefully considered the submissions (as per extract supra) and also gone through the order of Ld. AO at pages 10-11 of his order. We find that the Ld. DRP's directions have been mis-construed by the Ld. AO as he was to simply confine himself to the language of the said directions (para 6.5 at page 11 of the DRP's order). Thus, we direct that the Ld. AO would confine himself to the claim of the assessee with respect to the treatment meted out to the impugned amount in the computation of income and the audited accounts. In case, the claim of the assessee is verified from these then there can be no addition on this account. In result, this ground of the assessee is allowed for statistical purposes. Ground No. 7 9. Ground No. 7 pertains to double taxation of excess remuneration of Rs. 3,75,18....
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....of Section 114C of the Act, the DRP can only confirm, reduce or enhance the variation proposed in the draft order. It cannot set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. The DRP does not have the power to give any direction on matters such as non-recording of satisfaction and consequent annulment/quashing of the variation proposed. It is also noted that at Para 5.7.3 of the draft assessment order, the AO has discussed the reasons for invoking Rule 8D. In view of the above, the objections of the assessee in this regard are rejected. 7.4 The Hon'ble DRP observed that CBDT Circular No. 5/2014 dated 11.02.2014 provides that for disallowance u/s 14A all expenditures relatable to exempt income, regardless of the intention with which the investments have been made or whether any such exempt income has been declared by the assessee in its relevant year. In the present case, the assessee has made investments which are capable of generating dividend income which is not includible (even if not included in the current year) in the total income, thus attracting the provisions of section 14A of....
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....ct any disallowance u/s 14A of the Act cannot be more than the actual exempt income earned. Thus, following the case of TV Today Network Ltd. (supra) and other decisions mentioned in the submissions extracted (supra), we hold that the disallowance u/s 14A, read with Rule 8D, cannot be more than Rs. 33,59,625/-. Also, this disallowance would take into consideration, the amount that has already been disallowed by the assessee amounting to Rs. 20,28,109/-. We direct the Ld. AO to compute the disallowance accordingly. In light of this discussion, these grounds of the assessee are partly allowed. Ground No. 10 11. Ground No. 10 pertains to an addition of disallowance u/s 14A of the Act at Rs. 44,07,000/- to the amount considered for computing the book profit u/s 115JB of the Act. Right at the outset, the Ld. AR pointed out that there were several cases in favour of the assessee, wherein disallowance u/s 14A of the Act cannot be considered for working out books profits u/s 115JB of the Act. She relied on the case of Monsoon Star Securities reported in TMI 667 of the Hon'ble Delhi High Court and some others. 11.1 The Ld. DR relied on the finding given by the Ld. DRP on pages 1....
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....om 415 (Delhi-Trib-SB). In this case it has been held that the computation u/s 115JB of the Act is to be made without resorting to computation as contemplated under Section 14A read with Rule 8D of the Rules. Furthermore, a review of literature on this issue reveals that the Hon'ble Karnataka High Court in the case of PCIT Vs. J.J. Glastronics Pvt. Ltd. reported in 446 ITR 712 (Kar) has specifically directed that the amount disallowed under Section 14A could not be added to net profit while computing book profit under Section 115JB of the Act. Similarly, the Hon'ble Delhi High Court in the case of PCIT (Central)-1, Vs. Moon Star Securities Trade and Finance Co. (P) Ltd. reported in 161 taxmann.com 158 as also directed that disallowance made under Section 14A of the Act could not be considered while computing MAT under Section 115JB of the Act. These authorities are merely cited as illustrations since there are other judicial pronouncements also on the subject, including an unreported judgement of the Hon'ble Calcutta High Court: CIT vs Jayshree Tea Limited [ITAT 47 of 2014 and GA 1501 of 2014, order dated 19.11.2014]. Respectfully following these judgements, and differing f....
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....921/-. She also pointed out that the total exempt income was only to the tune of Rs. 16,96,336/-. Since on this issue also a finding has been given in para 10 to 10.2 (supra) through which it has been held that the disallowance u/s 14A read with Rule 8D cannot exceed the quantum of exempt income. We find that in this case, the exempt income is Rs. 16,96,336/- and the assessee has already made a suo-moto disallowance of Rs. 18,34,921/- hence, we direct that the disallowance u/s 14A read with Rule 8D of the IT Rules should be restricted to the amount disallowed by the assessee on its own, being Rs. 18,34,921/-. In result, the assessee succeeds with respect to these two grounds. 15. Ground No. 5 challenges the additions of disallowance u/s 14A of the Act of Rs. 5,17,964/- to the book profit u/s 115JB of the Act. On this issue also we have already given a finding in paras 11 to 11.2 (supra) that any addition u/s 14A of the Act would not be used for working out the book profit u/s 115JB of the Act. Following the finding in paras 11 to 11.2 (supra), we direct that the disallowance u/s 14A of the Act will not be used to compute book profit u/s 115B of the Act. Accordingly, the assessee....
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....India is higher, the assessee had claimed tax relief u/s 90, however in the intimation u/s 143(1), without giving any reason, no deduction for taxes paid abroad was allowed to the Appellant. The DRP dismissed the objection of the appellant by observing that a conjoint reading sub-section 2 of Section 144C and sub Section (5) of the provisions shows that the DRP can issue direction only in respect of a variation the Assessing Officer has proposed to make in the draft assessment order. The adjustments made u/s 143(1) involves adjustments made by the Centralised Processing Cell while processing the return under the scheme for Centralised processing of returns. Such adjustment do not constitute variation within the meaning and scope of Sec. 144C of the Act as they have not been made by the Assessing Officer u/s 1343(3) of the Act by way of assessment. For this the assessee can file an application u/s 154 for amendment of the intimation u/s 143(1) of the Act and dismissed the grounds of the appellant. The appellant submits that the observation of the DRP are not sustainable in law. The proceedings u/s 143(3) as well as u/s 144 before the DRP are continuation of assessm....