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2023 (2) TMI 504 - ITAT PUNETP adjustment - ALP adjustment - international transaction of corporate guarantee given in favour of the overseas associate enterprises “AE’s” - HELD THAT:- The issue of a corporate guarantee between AE’s foregoing international transaction is no more res-integra in light of the statutory amendment in section 92B as well as hon’ble madras high court’s decision M/S. REDINGTON (INDIA) LIMITED [2020 (12) TMI 516 - MADRAS HIGH COURT]. The assessee’s argument(s) that such a price could not be super imposed on Nil value declared goes against the very applicability of Chapter-X which has been inserted in the act by the legislature by way of an anti-avoidance provision. The same would not be allowed to be frustrated mainly because an assessee does not adjust any international transaction. This tribunal’s Special Bench’s decision in M/s.Instrumentatirum Corporation [2016 (7) TMI 760 - ITAT KOLKATA] has already settled the instant issue against the assessee and in favour of the department that such an international transaction has to carried at the arm’s length price computed as per the corresponding most appropriate method ‘MAM” as per law. We thus reject all these assessee’s arguments challenging correctness of the learned lower authorities action to this effect and direct the learned TPO at the same time to re-compute the impugned adjustment @0.5% only. These assessee’s substantive ground nos.2 to 2.2 are partly accepted in very terms. Interest on Loan Given to Associated Enterprise - adjustment relating to the international transaction of receipt of interest on loan given by the Appellant to its associated enterprises by determining its arm’s length rate of interest at LIBOR + 5% instead of LIBOR + 0.875% - HELD THAT:- Learned senior counsel took us through the assessee’s paper book wherein the latter had claimed to have availed loans from third parties @4.5 to 5%; which in turn, stood advanced to the AE’s @ 5 to 5.5%. Learned counsel’s case is that these third parties are internal comparables in assessee’s case in the very segment since involving “back to back” element qua loans availed and advances to AEs. The fact however remains this “back to back aspect” has nowhere been considered in detail either in the TPO’s order or in the DRP’s directions as it is evident from perusal of the case file. Faced with this situation, we deem it appropriate to restore the instant second issue back to the TPO for his fresh appropriate adjudication as per law. These assessee’s ground nos.3 to 3.2 are allowed for statistical purposes in very terms. Export of Goods to Associated Enterprise - assessee had inter-alia sold PVC Sheets, different varieties of onions and fruit products and in varying quantities, totaling to 89,08,234 kgs to AEs as against that to non AE’s weighing 116125 kgs only - HELD THAT:- There is no precedent before us which gives any discretion to interfere with the impugned adjustment determined in light of “CUP” method already held as direct most appropriate method “MAM” in nature. We make it clear that this tribunal’s decision Tecnimont ICB Pvt. Ltd. [2013 (9) TMI 595 - ITAT MUMBAI][ has settled the law that the price arrived at between two AE’s themselves could hardly from an uncontrolled price for the purpose of determining ALP since not involving uncontrolled transactions. We follow the very reasoning herein as well to hold that the assessee could not claim its impugned volume based discounts to the AE’s open market trends only since they form an uncontrolled transaction only. The assessee’s last arguments based on UN’s TP manual as well as ICAI guidelines and loss figures to AE’s hardly form any material to reverse the impugned adjustment which has been computed after adopting “CUP” method only in accordance with Chapter-X of the Act which is in the nature of an anti avoidance provision (supra). We further wish to quote sec 92(3) of the Act wherein the legislature has made it clear that these Chapter-X’s provision would not apply in the specified circumstances only whose scope cannot be allowed to be expanded . We thus uphold the impugned adjustment. Disallowance of depreciation of intangible assets claimed @25% which in turn, stand rejected under section 40(a)(i) - HELD THAT:- Revenue could hardly dispute that such a depreciation claim could not be rejected under section 40(a)(i) as held in PCIT Vs. Tally solutions P. Ltd. [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] - This issue is accordingly decided in assessee’s favour and against the department. Nature of receipt - sale of renewable energy certificate - revenue or capital receipt - HELD THAT:- We note that herein as well that the issue is no more res-integra once various judicial precedents i.e. My Home Ltd [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT], Veda Spinning Mills P. Ltd. [2021 (5) TMI 93 - MADRAS HIGH COURT] and L.H.Sugar Factory P. Ltd [2016 (9) TMI 152 - ALLAHABAD HIGH COURT] have settled the issue in assessee’s favour and against the department that such receipts are not taxable under the provision of the Act. The legislature has also inserted sec 115BBG in the Act vide Finance Act 2017 w.e.f 01.04.2018 with prospective effect whereas we are in A.Y. 2013-14 only. Faced with this situation, we reverse the lower authorities action treating the assessee’s receipts in issue as taxable income. Allowed accordingly. Treating its incentive receivables as per the Rajasthan Investment Promotion Scheme 2010 as a revenue receipt - same admittedly found as in the nature of sales tax incentive only - HELD THAT:- We note in this factual backdrop that case law PCIT Vs. Nitin Spinners Ltd. [2021 (9) TMI 430 - SC ORDER] has already upheld honourable Rajasthan high court’s decision treating similar subsidy of sales tax as per the above scheme for the year 2003, as capital receipt in nature only. We thus adopt the very reasoning mutatis-mutandis to accept the assessee’s instant 10th substantive ground. Ordered accordingly. Difference between the stock figures submitted to bank authorities for hypothecation vis-à-vis the actual figures as per the duly audited books of accounts - HELD THAT:- CIT(DR) could hardly dispute that the assessee’s former figures nowhere claimed to have been submitted after physical verification as is the case with its duly audited books of accounts. We thus quote CIT Vs. Apcom Computers (P) Ltd. [2006 (10) TMI 124 - MADRAS HIGH COURT] to delete the impugned addition for this precise reason alone. Ordered accordingly. Adoption of draft assessment’s figure - Section 35(2AB) weighted deduction disallowance - HELD THAT:- We prima-facie find merit in the assessee’s pleadings as it is evident from a perusal of the Assessing Officer’s above stated draft assessment. We thus quote section 144C(3) that such a course of action going against draft assessment is no more available with the Assessing Officer at the time of final assessment which has to be framed as per the DRP’s directions under section 144C(13) of the Act. We thus partly affirm the impugned disallowance only to the extent of the foregoing draft assessment’s figure of Rs.59,32,799/- by adopting stricter interpretation(supra). Necessary computation shall follow as per law.
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