TMI Blog2018 (2) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be excluded from the calculation under rule 8D(2)(iii). Therefore, we are also inclined to remit this issue back to the file of the AO to verify the contention of the assessee. With regard to investment in Moonglow company, which is overseas investment, we direct the AO to include those investments which have generated exempt income and exclude those which have generated taxable income or not generated any income as per the provisions of section 14A, as per which, we have to exclude those expenses which are connected with the generation of exempt income. Therefore, ground raised by the assessee in this regard is allowed for statistical purposes. Set off of previous years losses and unabsorbed depreciation - Held that:- When t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not appreciating that the amendment to section 92B of the Act would not apply to the facts of the case Considering the commission fee charged by SBI as comparable, without appreciating that the guarantee given is a shareholder corporate guarantee as opposed to commercial guarantee CORPORATE TAX MATTERS Ground with disallowance u/s 14A of the Act, read with Rule 8D of the Income-tax Rules, 1962 ( the Rules ) 2. Rejecting the submissions of the Company and invoking the provisions of section 14A of the Income Tax Act, 1961 read with Rule 80 of the Income Tax Rules, 1962. Not appreciating that the investments are made out of accumulated profits and the Company has not incurred any expenditure to earn exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the risks taken and therefore is required to be compensated in the form of fee for providing the bank guarantee and that the assessee ought to have charged the guarantee commission on the corporate guarantee given by it. The TPO, after gathering information from SBI by issue of notice u/s 133(6) which clearly stated that the rates charged by the bank on bank guarantee are in the range of 0.175% pm upto 5 crores and 0.15% pm above 10 crores, worked out the fee that would be chargeable on the amount of loan/corporate guarantee would be 0.15 x 12 months = 1.80%. Accordingly, the TPO held that an amount of 2% per annum on the opening balance or the maximum during the year at an appropriate conversional rate would be the arm s length price. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the assessee is allowed. 8. As regards ground No. 2 relates to disallowance u/s 14A of the Act, the AO noticed from the Note 13 of the Balance sheet that the assessee company has investments to the tune of ₹ 4,16,47,86,500/- as on 31/03/2013. According to the AO, since the assessee has investments, income arising from which is exempt in nature, disallowance u/s 14A is squarely applicable to assessee s case. The AO relying on CBDT Circular No. 5/2014, dated 11 February, 2014, computed the disallowance at ₹ 7,47,500/-. When the assessee objected the same before the DRP, the DRP confirmed the disallowance. 9. Before us, ld. AR submitted that the investment made in Moonglow Company Business Inc. BVI of ₹ 4,01,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e those expenses which are connected with the generation of exempt income. Therefore, ground raised by the assessee in this regard is allowed for statistical purposes. 12. As regards ground No. 3 with regard to set off of previous years losses and unabsorbed depreciation, the AO observed that the assessee had claimed an amount of ₹ 28,44,89,547/- towards set off of carry forward losses. On verification of earlier years, the AO noticed that the assessee was having taxable income and the total income was assessed at ₹ 95,82,89,690/- while passing the order u/s 143(3) r.w.s. 144C(1) r.w.s. 144C(5) of the Act on 29/01/2016. He was, therefore, of the view that the assessee is not having any set off of carry forward losses. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, this ground is allowed for statistical purposes. 18. Ground No. 3 relating to not providing credit of prepaid taxes to the tune of ₹ 4,15,20,730/-, is similar to the ground decided in the case of Rain Cements Ltd., (supra). Therefore, following the decision therein, this ground is rejected. 19. Ground No. 4 regarding taxing income from foreign dividend at normal rates of tax at 30%, as against the specific rate of 15% as per section 115BBD of the Act, was not pressed at the time of hearing before us, therefore, the same is dismissed is not pressed. 20. Ground No. 5 6 regarding levy of interest u/s 234B and 234C is consequential in nature. 21. In the result, both the appeals under consideration are allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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