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2022 (2) TMI 1326 - AT - Income TaxTP Adjustment - interest on loan advanced to its Associated Enterprise - HELD THAT:- After hearing both the parties we are of the opinion that this issue is covered by the order of Tribunal in assessee’s own case - reasoning given by Ld. DRP for rejecting the TPO’s methodology of adopting interest rates applicable to loan transactions between Indian parties, in our view, is justified. We notice that the Ld DRP has determined the ALP of interest rate at 12 months Libor + 500 basis points. There is no dispute with regard to the fact that the loan transaction is with its AE and further the interest rate spread noticed by the Ld DRP was between 3% to 8%. Accordingly we are of the view that the ALP may be determined at 12 months LIBOR plus 300 basis points. We modify the directions given by Ld. DRP and direct the AO to adopt 12 months LIBOR plus 300 basis points for determining the interest income om the loan advanced to the AE and asses the same accordingly. Interest on outstanding balance from the Associated Enterprise Tejas Communications Pte. Ltd., Singapore - After haring both the parties we observe that this issue was covered by the decision given in the case of CIT-9 Vs Indo American Jewellery Ltd. [2013 (1) TMI 804 - BOMBAY HIGH COURT]. In view of the above order, this issue is decided in favour of the assessee. Guarantee Commission with respect to the corporate guarantee provided by the assessee to its Associated Enterprises - This issue is covered by the orders of the Tribunal in Medrich Limited [2021 (4) TMI 1321 - ITAT BANGALORE] in the case of M/s. Manipal Global Education Services Pvt. Ltd. [2019 (5) TMI 1942 - ITAT BANGALORE] and in the case of Xchanging Solutions Ltd. [2016 (10) TMI 1211 - ITAT BANGALORE] wherein it was directed to AO/TPO to make TP adjustments in respect of corporate guarantee at 0.50% for the assessment years under consideration. In view of the above order, we decide these issues in favour of the assessee. Disallowance of deduction under section 35(2AB) - After hearing both the parties it has been observed that this issue is covered by this Tribunal [2015 (3) TMI 535 - ITAT BANGALORE] where in the Tribunal has reversed the findings of the A.O. in his assessment order passed for A.Y. 2008-09 and the appeals were decided in favour of the assessee. Hence, keeping in view of the above order of the Tribunal, these grounds of the assessee are decided in favour of the assessee and hence these grounds of appeal are allowed. Disallowance u/s 14A of the Act read with Rule 8D - HELD THAT:- We inclined to remit the issue in dispute to the file of AO for re-examination to see whether investment which yielded exempt income made out of interest free own funds and decide accordingly. Revenue expenditure for scientific research is allowable expenditure as per section 37(1). Charge interest at the rate of LIBOR + 500 points - The loan has been given by the Indian Entity, therefore, the annualized average yield rating of interest rate of 14.74% is to be applied. Depreciation in respect of capital expenditure on fixed assets since the A.O. disallowed the same on the reason that this expenditure is allowed as revenue expenditure on the direction of the Ld. DRP - The claim of deduction u/s 35(2AB) of the Act has been allowed to the assessee. Now this ground has become infructuous and dismissed accordingly. Revision u/s 263 - As seen from the assessment order, the AO closed his eyes on the issues raised by the Principal CIT for the reasons best known to him and accepted the deduction claimed by the assessee in his return of income. Though AO is required to make necessary enquiries himself regarding the various claims of the assessee, he failed to do so. Therefore, the issues dealt by the Principal CIT were within his powers to invoke the provisions of the section 263 of the Act where such enquiry was prima facie warranted. In view of the above, we are of the opinion that the Ld. Principal CIT was justified in invoking the provisions of section 263. Disallowance made under section 14A read with Rule 8D AND reversal of provision for doubtful debts - As the assessee inadvertently claimed the lower amount of Rs.1,95,17,376/-as against the correct amount to be claimed - In this case, Ld. Principal CIT given a direction to reconsider the above two issues afresh after giving an opportunity of hearing to the assessee. He has not suggested any addition on this count. Being so, we do not find any infirmity in the findings of Ld. Principal CIT. Further we make it clear that the A.O. shall not be influenced by any observations made by Principal CIT in his order. The A.O. should carry out the enquiry independently and pass fresh assessment order after giving opportunity of hearing to the assessee. Hence, the appeal filed by the assessee is dismissed.
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