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2015 (12) TMI 959 - AT - Income TaxTransfer pricing adjustment - Held that:- When assessee is not able to bring on record anything to show any services to have been rendered by AE to it and there are no documentations to show any services to have been received from AE, in our opinion it will be fair conclusion that no services were in fact rendered by AEs to the assessee. There is no dispute that both the AEs were subsidiaries of the assessee. Therefore, the agreements between such subsidiaries, which have been brought before us as well as lower authorities for justifying the payments could be best considered only as self-effectuating documents. There was considerable onus on the assessee to show that actual services were rendered by its subsidiaries. It is a well settled principle of law that a court has to go into substance and not be satisfied with the and form has to get behind the smoke screen to find the true state of affairs. In our opinion, the assessee was unable to show any services to have been received from sister concerns. When no services were received then lower authorities in our opinion were justified in considering the ALP to be zero. The assessee has not been able to show any services having been rendered by the AE to it. As to the claim of the assessee that natural justice was denied to it, we find that a number of opportunities were given by not only the DRP but also the TPO. Even during the remand proceedings before the TPO the assessee was unable to show any TP documentation with regard to the TP services rendered by AE - Decided against assessee Disallowance u/s.10A - Held that:- The reason why assessee was denied the deduction claimed u/s.10A of the Act on the export benefits received from this unit was that it was formed by splitting up or reconstruction of a business already in existence. By virtue of the agreement mentioned supra, we cannot say that there was a split up or reconstruction of a business already in existence. There is neither any split up or reconstruction of business of the assessee nor SSAPL. Thus we hold that deduction u/s.10A could not have been denied - Decided in favour of assessee Disallowance u/s.14A - Held that:- Interest ordinarily cannot be considered as having nexus with the business of the assessee. Such interest would normally fall under the head ' income from other sources'. No doubt, in assessee's case the Assessing Officer has not considered the interest receipt separately under the head 'income from other sources'. But this will not, in our opinion, change the nature of the transaction or character of the receipts. Rule 8D(2) prescribes application of the formula set out therein on the expenditure incurred by way of interest which is not directly attributable to any particular income or receipt. There is no case for the assessee that the interest expenditure of ₹ 335,169,433/- incurred by it were attributable to any particular income or receipt. There is nothing in the said rule which would allow for netting of interest. Rule 8D(2)(ii) states expenditure by way of interest. If we allow netting of interest income on such expenditure, it would be equivalent to adding something which is not there in the Rule book. Especially so, since interest received was not from any business activity but from FDs. We are, therefore, of the opinion that application of Rule 8D does not allow for netting of any interest income with interest expenditure. - Decided against assessee
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