AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1502
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....tee for issuance of Stand by Letter of Credit (SBLC) for Associated Enterprise (AE). 4. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of design, manufacturing, export of wide range of garments for men, women and children to cater the needs of several leading industrial fashion brands and also in the business of generation of power. The return of income for AY 2017-18 was filed by the assessee company on 29.11.2017 declaring total income of Rs.7,66,88,350/- which stood revised on 30.01.2019 declaring total income of Rs.7,20,43,270/-. The assessee incurred a sum of Rs.1,99,41,653/- on account of freight, professional fees, salary, SBLC charges, telephone charges for services, travelling expenses and other miscellaneous expenses on behalf of Indo Jordan Clothing Company (AE). Same have been reimbursed by the AE on cost to cost basis to the assessee without any mark-up. Out of this expenditure, a sum of Rs.99,10,228/- was incurred towards SBLC charges for SBLC provided on behalf of the AE. This sum was also reimbursed by the AE on cost to cost basis without any markup. The said transaction was benchmarked by....
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....grant of SBLC to Citibank on behalf of its AE by the assessee as corporate guarantee. Hence, adoption of bank guarantee commission charges for the purpose of benchmarking the international transaction of SBLC/Corporate Guarantee itself is wrong. In our considered opinion, the issuance of SBLC/corporate guarantee cannot be compared with the commission charged by the bank while issuing the bank guarantee, for the purpose of arriving at the ALP with reference to corporate guarantee. In fact, it is only on that basis, the assessee had relied on safe harbour rule on without prejudice basis vide Ground No. 2.5 as per which the corporate guarantee commission was prescribed at the rate of 1%. In the instant case, the assessee had not opted for Safe Harbour Rules. Further, we find the Hon'ble Bombay High Court in the case of CIT Vs. Glenmark Pharmaceuticals Limited reported in 398 ITR 439 (Bom) had held that for computing ALP of guarantee commission, comparison cannot be made between the guarantees issued by Commercial Banks for the purpose of benchmarking the transaction of corporate guarantee issued by a holding company for benefit of its AE. It also held that the considerations which app....
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....al assessment order passed pursuant to the directions of ld DRP. It is pertinent to note that rate adopted by the assessee is on the basis of Jordan Central Bank rate. The evidences in this regard are enclosed at page 184 to 186 of the Paper Book. The main justification for adoption of 400 basis points to the LIBOR rate by the ld TPO was that the credit rating details of the lendee were not given. Either way, when the assessee had adopted CUP method by comparing Jordan Central Bank rate for loan extended in Jordan to the Jordan based companies, there need not be any other better rate of comparison that could be adopted. In the instant case, had the AE not chosen to avail loan from the assessee, the said AE could have got the loan from Jordan Central Bank at the rate of 3.5% only. Hence, the adoption of rate of @5.23% by the ld TPO pursuant to the directions of the ld DRP cannot be accepted at all in the facts and circumstances of the instant case. Hence, we have no hesitation to hold that the interest charged by the assessee from its AE on the loan advanced @ 3.55 % is to be accepted to be at ALP. Accordingly, the Ground Nos. 2.6 to 2.13 raised by the assessee are allowed. 10. G....
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....e assessee at 47/18, Old Rajinder Nagar, New Delhi wherein he met with the employee of the lender. It was also submitted by the ld AR that the assessee company is equipped with CCTV cameras and the presence of the Inspector in the assessee company premises was duly captured in the CCTV camera. Further, the affidavit of Ms Rajini Tanwar employee of the lender company had affirmed that the Inspector indeed visited the administrative office and met her with the intention of serving a notice on the Director, however, since, the Director was working from home due to Covid-19 pandemic, he could not do so. Accordingly, it was pleaded that the Inspector's report is factually incorrect and addition made based on such incorrect facts need to be deleted. 13. In the instant case, the assessee has availed loan from NBFC which is duly registered with RBI. The said NBFC is engaged in regular course of lending activity. The assessee has furnished all the requisite documents to prove the creditworthiness of the lender, genuineness of the transaction and identity of the lender. Notice u/s 133(6) of the Act stood issued by the ld AO to the lender which stood directly complied with by the lender du....
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.... be buttressed by the ld AR by stating that assessee had duly furnished its reply to the notice dated 15.04.2021 by providing break up of total expenditure incurred and claimed towards R&D activities. In addition thereto, the assessee also provided the following details:- a. list of capital assets purchased during FY 2016-17 utilized in R&D activities ; b. details of capital expenditure approved by Department of Scientific and Industrial Research (DSIR) for FY 2015-16; c. copy of invoices depicting purchase of capital assets during FY 2016-17. It was submitted before the ld AO that DSIR, which is a statutory authority, visited the premises of the assessee company for inspection and after duly considering the project documents and details of expenses submitted including capital expenditure, duly approved the R&D facilities of the assessee company. It was also submitted that DSIR had issued a certification in this regard approving R&D activities together with the figure for expenditure incurred towards R&D activities. On perusal of the Form 3CL enclosed in pages 292 to 293 of the paper book, we find that the DSIR had certified the R&D expenditure eligibl....
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.... audit of accounts maintained for that facility. Said authority is required to examine the application and if satisfied that conditions provided under Section 35(2AB) are satisfied would pass an order in writing in Form No. 3CM. In the event of such application of assessee is being rejected by the prescribed authority, an opportunity of being heard would be extended by the prescribed authority to the assessee. As per sub-section (4) of Section 35(2AB) the prescribed authority would in turn submit its report to the approval of the said facility to the Director General (Income tax Exemptions) in Form No. 3CL. within 60 days as per Rule 7(A)(b) of the Rules. Approval of such expenditure incurred by a coction 35(2AB) would be subject to conditions stipulated in clauses (a) to (d) of Rule 7A of the Rules. This would clearly indicate that the prescribed authority after receiving the application under Rule 3CR would examine the said application in the background of the definition found in sub-section (4) of Section 43 and on being satisfied that such application satisfies the criteria prescribed under the Act, then alone it would issue the certificate by granting its approval to the expen....
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....thority. The decision of the prescribed authority would be final as could be seen from clause (b) of sub-section (3) of Section 35. Thus, it would emerge from above analysis that neither the assessing officer nor the Board is competent to take any decision on any such controversy relating to report and approval granted by "Prescribed Authority" as it involves expert view or opinion. The controversy arising out of certificate issued by the prescribed authority if any, has to be referred to the prescribed authority by the Board on such doubt being raised by Assessing Officer and also on his request. It is the prescribed authority along which would be competent to take a decision with regard to correctness or otherwise of its order of approval granted in Form No. 3CL as prescribed under Section 35(2AB) of the Act read with Rule 7A of the Rules." (emphasis supplied by us) 17. In the event of ld AO not agreeing with the certificate of DSIR, then the ld AO should follow the procedure provided in Section 35(3) of the Act. In the instant case, no such process/procedure was followed by the ld AO. Hence, he would be left with no other option but to accept the figure certified by ....
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....ssee for AY 2020-21 are identical to Ground Nos. 3.8 to 3.11 raised by the assessee for AY 2017-18. Hence, the decision rendered by us hereinabove for AY 2017-18 shall apply mutatus mutandis for AY 2020-21 also except with variance in figures. 28. Ground Nos. 8 to 11 raised by the assessee are challenging the confirmation of disallowance of brokerage claimed on the sale of property. 29. We have heard the rival submissions and perused the material available on record. The assessee acquired a leasehold industrial land from SIPCOT in earlier years. This lease hold industrial land was acquired as most of cotton textile mills are based in Tamil Nadu, the assessee thought it as good investment for future expansion in manufacturing cotton garments. However, due to other constraints, the business plan did not materialize. The assessee company got an offer through the local brokers from Hyundai Engineering Ltd, Chennai who wanted to acquire the said industrial plot. The process of transferring leasehold industrial plot by the assessee was a long drawn process. It had to be put up to SIPCOT for its approval. The documents once submitted to SIPCOT would need constant follow-up to get th....
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....yment of commission on transfer of immovable property would not exceed 2%. In the instant case, the said normal practice could not be adopted as the nature of services rendered by the brokers also involved constant and frequent coordination with SIPCOT officials for obtaining the NOC for transfer of industrial land by the assessee to the buyer. The fact that those brokers coordinating with the SIPCOT in this regard is not disputed by the revenue. Hence, in our considered opinion, the entire sum of Rs. 40.32 lakhs paid by the assessee towards commission and brokerage shall be allowed as transfer expenses while computing the long term capital gains. Accordingly, Ground Nos. 8 to 10 raised by the assessee are hereby allowed. 32. Ground Nos. 11 to 14 raised by the assessee are challenging the confirmation of disallowance made u/s 14A of the Act in the sum of Rs. 6,15,435/-. 33. We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee earned dividend income of Rs. 1.50 crores and claimed the same as exempt. The assessee had not made any disallowance of expenses u/s 14A of the Act for the purpose of earning such exempt....