TaxTMI 
TaxTMI 
2026 (6) TMI 663
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....f Rs. 1,95,60,970/-. The case was selected for scrutiny under CASS. The notice u/s. 143(2) of the Act dated 08.08.2013 was issued. The assessee revised the return of income on 10.09.2013 declaring the same returned income. Due to change of Ld. AO, notice u/s. 143(2) along with a questionnaire u/s. 142(1) of the Act dated 22.02.2016 were issued to the assessee. Shri Shishir Tekriwal, CA/AR for company furnished details called for. 2.1 From perusal of note -13 to the balance sheet, it is noticed that the assessee company had made investment in shares. The investment of Rs. 116,31,00,000/- was made as on 31.03.2012 whereas the investment as on 31.03.2011 was for Rs. 86,77,00,000/-. These investments are made in exempted assets. Vide letter dated 22.02.2016, the assessee company was required to file working of disallowance u/s. 14A read with Rule 8D of the Income-tax Rules. The assessee vide letter dated 07.03.2016 stated that it had earned dividend income on which there was no separate expenses incurred by the company as the amount invested is out of surplus money earned by the company. It is further submitted that disallowance u/s. 14A has already been made in the computation. ....
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.... notional addition of Rs. 37,88,000/- on account of alleged interest received on advances given. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining the action of Ld. AO/TPO in making addition of Rs. 11,02,24,932/- on account of interest on loans advanced to subsidiaries by directing to AO/TPO to apply Libor rate plus 300 bps to determine the arm's length price of loan given to associate enterprises and that too without appreciating the methods adopted by the assessee and in violation of principles of natural justice. 5. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the addition of Rs. 11,02,24,932/- on account of interest on loans advanced to subsidiaries is bad in law and against the facts and circumstances of the case. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO/TPO in making addition of Rs. 2,68,68,000/- on account of sales made to AEs and directed to AO/TPO to apply TNMM Method and that too without appreciating the methods adopted by the assess....
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.... appeal." 5. Ld. Authorized Representative for appellant/assessee submitted that Ground of appeal Nos. 1 and 2 of appeal by the assessee relate to the action of Ld. CIT(A) in not deleting the disallowance of Rs. 53,33,917/- fully made by ld. AO u/s. 14A r.w.r. 8D of the Rule and further erred in sustaining the same to the extent of Rs. 12,62,166/- without any satisfaction. Ld. AO failed to record satisfaction as mandated u/s. 14A(2) of the Act before invoking the Rule 8D of the Rule. No evidence was cited by the AO to establish any actual expenditure related to dividend income page no. 216 to 219 of paper book. Reliance was placed on: (i) Maxopp Investment Ltd. vs. CIT, ITA No. 687/2009 (Del HC) (ii) JK Investors (Bombay) Ltd., ITA No. 7851/Mum/2011 (iii) Godrej & Boyce, Eicher Ltd., Taikisha Engineering, Hero Cycles etc. 6. Ld. Departmental Representative by referring to ground of appeal No. 3 filed by the Revenue submitted that Ld. CIT(A) erred in restricting addition to Rs. 12,62,166/- as against Rs. 53,33,917/- on account of disallowance u/s. 14A r.w.r. 8D of the Rule by the Ld. AO. 7. From the examination of the record in light of aforesaid ....
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....e amount of disallowance by considering the value of only those investment which has yielded exempt income. Accordingly, Ground of appeal Nos. 6 & 7 raised by the assessee are partly allowed for statistical purposes." 8. In view of the above material facts, by respectfully following the judicial precedents, it is considered expedient to set aside the orders of Ld. Departmental Authorities and direct the ld. AO to re-compute the amount of allowance by considering only the value of investments which have yielded exempt income. Accordingly, Ground Nos. 1 and 2 raised by the assessee and Ground No. 3 of Revenue are partly allowed for statistical purposes. 9. Ld. Authorized Representative for appellant/assessee submitted that Ground No. 3 of the Assessee is regarding action of ld. CIT(A) in confirming notional addition of Rs. 37,88,000/- on account of alleged interest received on advances given. The advances were not loans but reimbursement-type of advances i.e. SBLC renewals, salaries & other expenses page No. 91 of paper book. Notional income is not taxable without actual accrual/receipt. Reliance was placed on Highways Construction Co., B & A Plantations. 10. Ld. Departmenta....
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....of all the loans given to its AEs from time to time according to which all of them were given in US$ and during the year, no fresh loan was given and all are the opening balances. Ld.AR for the assessee further submits that terms of loans were subsequently revised and also filed the modified agreements wherein in terms of terms and conditions of the modified agreements also, all the loans are receivable in US$ equivalent currency and therefore, he submits that LIBOR rate should be applied as has been applied by the assessee. For this Reliance is placed on the judgement of Hon'ble Jurisdictional High Court in the case of CIT-I vs Cotton Naturals (I) (P.) Ltd. reported in [2015] 55 5axmann.com 523 (Delhi) and further in the case of Hon'ble Rajasthan High Court in the case of CIT vs Vaibhav Gems Ltd. reported in [2017] 88 taxmann.com 12 (Raj.). Ld. AR prayed accordingly. 8. On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that Ld. CIT(A) dealt with this issue in detail wherein Ld. CIT(A) has discussed all the terms of the agreements as well as of the modified agreements therefore, he was of the view that repaym....
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.... AO is directed to charge interest on loan at LIBOR rate as all the loans are to be repaid in US Dollar and the same is further increased by the factor of 5.5% as applicable at the relevant point of time. Accordingly, Ground of appeal Nos. 4 and 5 are allowed in above terms. 16. Ld. Authorized Representative for appellant/assessee regarding ground No. 6 and 7 submitted that Ld. CIT(A) erred in confirming addition of Rs. 2,68,68,000/- on account of sale made to AE and directed AO/TPO to apply TNMM method. Ld. CIT(A) upheld TNMM method as the most appropriate method. Ld. CIT(A) found AE and non-AE segments in sufficient comparable for Cost-Plus Method i.e. CPM. 17. Ld. Departmental Representative submitted that application of TNMM method using the external comparable due to product/segment mismatch is reasonable. 18. From examination of the record in the light of aforesaid rival contention, it is crystal clear that the Ld. CIT(A) confirmed the addition made of Rs. 2,68,68,000/- on account of sale made to AE's and directed to AO to apply TNMM method. The assessee had submitted Cost-Plus Method i.e. CPM with internal comparable segmental data for AE vs. Non-AE sales page No. 1....
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.... power systems. • Engaged in government contracts, infrastructure deployment and public sector turnkey project • • Why Not Comparable: • Operates in infrastructure and public transportation sector -a different product and service domain. • Involvement in capital-intensive, project-based revenues unlike regular product sales of the appellant. • Engages in custom-built contracts, which carry different risk/reward profiles. • • Legal Precedents: • Turnkey infra companies have been excluded for being asset-intensive and contract-specific, e.g.: • Birlasoft India Ltd. v. DCIT (ITAT Delhi) • Nokia Siemens Networks India Pvt. Ltd. v. ACIT 3. M/s Azure Power India Pvt. Ltd. • • Nature of Business: • Independent Power Producer (IPP) in solar energy generation. • Revenue generated from long-term power purchase agreements with dissimilar risk profiles and pricing mechanisms. • Why Not Comparable: • Business model is based on regulated tariffs, capital investment, and....
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....ld. Ground of appeal No. 1 of the Revenue is rejected. 23. Ground of appeal No. 2 of Revenue relates to action of Ld. CIT(A) in directing Ld. TPO to delete the adjustment towards interest on receivables. Ld. Departmental Representative made following submission: "An amendment has been brought in the section 92B of the IT Act by Finance Act 2012 with retrospective effect from 01.04.2002. Vide this amendment, an explanation (i)(c) to section 928 has been inserted, which gives meaning to the expression "International transaction". For ready reference, sub clause (c) of clause (i) of this explanation is reproduced as under :- (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; securities The Hon'ble ITAT in the case of Ameriprise India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-1 (1), New Delhi [2015] 62 taxmann.com 237 (Delhi Trib.) has clarified the meaning of the above noted amendment and held that interest on outstanding receivables is....
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....omputed of sales including sales goods to AEs and non-AEs Paper available at paper book page 90 submitted before the TPO vide letter dated 30.12.2014 according to which the margin on sales to non-AEs was 23.65% as against margin of 47.21% from the sale of goods to its AEs. Ld.AR also placed reliance on the judgement of Hon'ble Delhi High Court in the case of Pr.CIT vs Kusum Healthcare (P.) Ltd. [2018] 99 taxmann.com 431 (Delhi) wherein Hon'ble Delhi High Corut has held that when assessee has factored the impact of receivable on working capital, no further adjustment is required on the outstanding receivables. 14. On the other hand, Ld. CIT. DR supported the orders of the lower authorities and requested for the confirmation of the same. 15. We have heard the rival submissions and perused the material. By way of Finance Act, 2012 an Explanation to Section 92B has been inserted to the Income Tax Act with retrospective effect from 01.04.2002, which clarifies the expression 'international transaction' as follows : Explanation.-For the removal of doubts, it is hereby clarified that- (i) the expression "international transaction" shall include- ....