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2023 (2) TMI 1270 - AT - Income TaxTP Adjustment - arm’s length adjustment to interest income received on loans advanced to subsidiaries - assessee has charged interest from its subsidiaries using LIBOR/EURIBOR as base rate - contentions of the assessee before AO and the TPO was that banks/financial institutions follow the same practice in line with RBI guidelines - HELD THAT:- We find that addition made in respect of interest on loans advanced to be subsidiaries is identical to the one decided by the Tribunal in assessee’s own case in the immediate preceding assessment year AY 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] wherein AO/TPO is directed to recompute the interest on the basis of rate prevalent in the countries where loan was received. No contrary material has been placed on record by the Revenue. The ground no. 1 of assessee’s appeal is allowed and the ground no. 2 raised in appeal by the Revenue is dismissed. Disallowance of weighted deduction u/s 35(2AB) - HELD THAT:- A perusal of the order of CIT(A) shows that the facts in assessment year under appeal and in A.Y. 2008-09 are similar. AR of the assessee has prayed for deciding the issue instead of restoring it to AO. After examining the assessment order, we find that the AO has rejected the claim of assessee at the outset without verifying the veracity of quantum. In so far as admissibility of assessee’s claim, we hold that in principle the assessee has merit in the claim. For the purpose of examining the expenditure and quantification the issue has to be restored to AO. Thus, following the order of Co-ordinate Bench, for A.Y. 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] the ground raised in appeal by the assessee is allowed for statistical purpose. Disallowance u/s 14A r.w.r 8D - HELD THAT:- It is no more res-integra that disallowance u/s 14A of the Act cannot exceed the exempt income earned during the relevant Financial Year. Hence, the AO is directed to restrict the disallowance u/s 14A i.e. the dividend income earned by assessee during the period relevant to assessment year under appeal. Ground no. 3 of appeal is thus, allowed protanto. Expenditure incurred on alleged freebies u/s 37(1) - HELD THAT:- Assessment year under appeal is 2009-10 relevant FY 2008-09. MCI Regulations were amended w.e.f. 14/12/2009, whereby Regulation 6.8 was inserted prohibiting Medical Practitioners to accept freebies, gifts etc. from pharmaceutical companies. The period in the instant appeal is prior to the amendment. Hon’ble Supreme Court in the case of Apex Laboratories Ltd [2022 (2) TMI 1114 - SUPREME COURT] has held that CBDT Circular 5/2012 being clarificatory would apply retrospectively from the date of amendment to MCI Regulations i.e. w.e.f. 14/12/2009. Thus, from the decision rendered in the case of Apex Laboratories (P) ltd [2019 (5) TMI 110 - MADRAS HIGH COURT] it is unambiguously clear that the amended MCI Regulations would not apply to the AY 2009-10. Hence, for the impugned AY the assessee’s claim of deduction of freebies to the Medical Practitioners would be allowable u/s 37(1) of the Act as amendment to MCI Regulations is a subsequent event, effective from 14/12/2009. Ergo, the assessee succeeds on ground no. 4 of appeal on primary contention. Disallowance u/s 14A r.w.r. 8D made while computing book profit u/s 115 JB - HELD THAT:- Special Bench of Tribunal in the case of Vireet Investment Pvt. Ltd [2017 (6) TMI 1124 - ITAT DELHI] has held that computation u/s 115JB(2), Explanation I (f) has to be made without resorting to computation of disallowance made u/s 14A r.w.r. 8D. The view taken by Special Bench has been approved by the Hon’ble Karnataka High Court in the case of PCIT Vs. Atria Power Corporation ltd [2022 (8) TMI 1322 - SC ORDER] In the result, ground of the appeal is allowed. Corporate guarantee fee - assessee has charged guarantee commission from its overseas AE at the rate of 0.75% based on a letter obtained from HSBC Bank, Mumbai - CIT(A) deleted the adjustment made by the TPO and restricted the guarantee commission to 0.75%. - HELD THAT:- As in the case of Everest Kanto Cylinders ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] has approved 0.5% guarantee commission at arm’s length. In the instant case, the assessee has charged guarantee commission from its AEs at 0.75%. We find no infirmity in the findings of CIT(A) on this issue. Hence, the findings of CIT(A) on this issue are upheld, ground no.1 of appeal by the Revenue is dismissed. Notional interest on infusion of additional funds - CIT(a) deleted addition - HELD THAT:- CIT(A) has only allowed consequential relief in the impugned assessment year. Revenue has not disputed the fact that the relief is already granted to the assessee in earlier assessment year i.e. AY 2008-09 and it is only the consequent relief that has been allowed to the assesssee in the assessment year under appeal. Thus, in facts of the case, the ground no. 3 raised in appeal by Revenue is dismissed. Allocation of R & D expenses for the purpose of section 80IB and 80IC to the qualifying units - HELD THAT:- We find that similar issue had come up before the Tribunal in assessee’s own case in AY 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] wherein CIT(A) granted relief to the assessee by following the order of the Tribunal for various earlier years. TDS u/s 195 - Addition made u/s 40 (a)(i) - payments made to non-residents on account of pilot bio-study, clinical research - HELD THAT:- In AY 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] the Tribunal following the decisions rendered in AY 2006-07 [2019 (10) TMI 73 - ITAT MUMBAI] held that it was payment to non-resident for conducting bio equivalence study are not taxable in India and not subject to withholding tax u/s 195 of the Act. MAT - addition with respect to provision for “marked to market” for calculation of book profits u/s 115JB - HELD THAT:- We find that the Coordinate bench has decided identical issue in AY 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] dismissing the ground raised in appeal by the Revenue as observed that marked to market loss are on account of restatement of trading asset and liability and its ascertainment and computation is not disputed by assessing officer. CIT(A) also held that after the decision in CIT Vs Woodward Governor India (P) Ltd [2009 (4) TMI 4 - SUPREME COURT] marked to market loss is allowable deduction. And it cannot be termed as unascertained liability as has been provided in clause (c) of Explanation-1 to section 115JB(2). Accordingly cannot be added back to the book profit. Decided against revenue. Addition in respect of provision for gratuity for the purpose of calculating book profit u/s 115JB - HELD THAT:- We find that the Tribunal has decided the issue in AY 2008-09 [2020 (4) TMI 30 - ITAT MUMBAI] wherein as observed that provisions of gratuity is based on the actuarial valuation and therefore ascertained liability. The assessing officer has not disputed actuarial valuation and cannot be treated unascertained liability as has been provided in clause (c) of Explanation-1 to section 115JB(2) No contrary fact or law is brought to our notice to arrive on other finding. Decided against revenue.
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