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2020 (1) TMI 203 - AT - Income TaxTP Adjustment - arm’s length price adjustment relating to corporate guarantee involving overseas associated enterprise and @3.75% of the amount of guarantee itself - HELD THAT:- CIT(A) has followed various judicial precedents i.e Tega Industries Ltd. vs. DCIT [2016 (9) TMI 1456 - ITAT KOLKATA] & Bharti Airtel Ltd. vs. Addl. CIT [2014 (3) TMI 496 - ITAT DELHI] that a corporate guarantee does not amount to an international transaction u/s 92B of the Act. Learned coordinate bench(s) have also taken into consideration section 92B Explanation by the Finance Act 2012 w.e.f. 01.04.02. We therefore decline Revenue’s arguments in support of its first substantive ground raised in both the instant appeals. Book profit adjustment u/s 115JB regarding retention money - HELD THAT:- As decided in own case [2017 (3) TMI 207 - ITAT KOLKATA] the admitted factual and legal position in the present case is that retention money is not in the nature of income till such time the contractual obligations are fully performed to the satisfaction of the customer by the Assessee. Therefore the retention money cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. Section 14A r.w.r. 8D disallowance in relation to the exempt income in nature of dividends - Revenue’s former case is that the impugned disallowance also deserves to be added for book profits computation u/s 115JB - HELD THAT:- Hon’ble apex court’s decision in Maxopp Investment Ltd. vs. CIT [2018 (3) TMI 805 - SUPREME COURT] holds that the purpose of making exempt income yielding investments is no more a guiding factor, we therefore decline the assessee’s foregoing argument. The fact also remains that this tribunal’s coordinate bench’s decision in REI Agro Ltd. vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] holds that only exempt income yielding investment have to be considered for computing the impugned disallowance. The same has nowhere been considered in either of the lower proceedings. This tribunal’s yet another decision in Maruti Traders & Investors vs. ACIT [2019 (1) TMI 258 - ITAT KOLKATA] holds that since administrative expenditure is an indirect head, the same has to be disallowed on pro rata basis i.e exempt income vis-a-vis total income. We therefore accept this last limb of section 14A r.w. Rule 8D disallowance in Revenue’s favour for statistical purposes and direct the Assessing Officer to compute impugned administrative expenditure disallowance in terms of foregoing case law in consequential proceedings. Revenue’s further contention that the impugned section 14A r.w. Rule 8D disallowance deserves to be added for book profit adjustment is declined in view of ACIT v. Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] . We therefore partly accept the Revenue’s instant last issue and restore it back to the Assessing Officer for a fresh computation in above terms Leave encashment disallowance u/s 43B(f) - HELD THAT:- Both the learned lower authorities have treated the same as a contingent liability being a mere provision only. It transpires during the course of hearing the hon’ble jurisdictional high court’s decision in the case of Exide Industries Ltd. vs. UOI [2007 (6) TMI 175 - CALCUTTA HIGH COURT] had quashed the very statutory provision itself as ultra vires. Hon’ble apex court stated [2009 (5) TMI 894 - SC ORDER] stated to be pending till date. We therefore direct the Assessing Officer to keep this issue in abeyance for a fresh decision in view of their lordships’ final call in the above stated lis. Education cess disallowance - TDS u/s 40(a)(ii) - HELD THAT:- This issue is also no more res integra. Hon’ble Rajasthan in M/s Chambal Fertilisers & Chemicals Ltd. vs. JCIT [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] considers the CBDT’s old circular at 18.05.67 to conclude the statutory expenses “tax” u/s 40(a)(ii) does not include cess.
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