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2019 (4) TMI 2094 - ITAT MUMBAITP adjustment towards interest of outstanding receivables from its Associated Enterprise - HELD THAT:- Undisputedly, the Transfer Pricing Officer has determined the arm's length price of the interest chargeable on outstanding receivable from the AE by applying the rate of 6.56% as per Bloomberg database. However, it is noticed that before the Transfer Pricing Officer and learned DRP the assessee had submitted that as per LIBOR rate of interest the interest chargeable on such outstanding receivable is LIBOR plus 0.5%. The aforesaid contention of the assessee has not at all been considered by the Transfer Pricing Officer and learned DRP. As held in various judicial precedents, interest on outstanding receivables has to be charged by applying LIBOR rate as applicable in the country of residence of AE. In view of the aforesaid, we direct the Assessing Officer to compute the interest chargeable on outstanding receivables at LIBOR plus 0.5%. This ground is partly allowed. Correct head of income - assessing the interest income under the head income from other sources instead of income from business - HELD THAT:- We direct the AO to assess the interest earned on margin deposit as business income and interest on ICDs and bank deposits as income from other sources. This ground is partly allowed. Disallowance made u/s 14A r/w rule 8D - HELD THAT:- We direct the Assessing Officer to restrict the disallowance under section 14A r/w rule 8D to the exempt income earned by the assessee during the year. Further, while computing book profit under section 115JB of the Act, no adjustment can be made by way of disallowance under section 14A read with Rule 8D. However, Explanation-1(f) of section 115JB of the Act empowers the AO to increase the book profit by disallowing expenditure incurred for earning exempt income. Therefore, the Assessing Officer may look into this aspect. This ground is partly allowed. Disallowance of provision for income tax recoverable from Gujarat State Electricity Board (GSEB) and Essar Steels Ltd. - HELD THAT:- Following the consistent view of the Tribunal, we hold that the income tax recoverable has to be treated as income of the assessee as per the normal provisions of the Act. However, following the aforesaid decisions of the Co–ordinate Bench, we hold that the amount cannot be included while computing book profit u/s 115JB of the Act.
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