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2015 (11) TMI 1573 - AT - Income TaxApplicability of EURIBOR rate - T.P. Adjustment on account of notional interest - Held that:- We find force in the contention that EURIBOR rate is that at which banks and other large financial institutions deal with each other, inter se. Retail borrower do not get finance at this rate, because lending bank/institution would add some margin/premium to cover their risks/profits, which ranges to be generally between 1 to 2%. But, keeping in view peculiar facts of this case, and particularly when no contrary evidence has been brought on record by the Revenue, we find it appropriate to accept the submissions of the assessee, and hold that 0.8% should be added upon EURIBOR, and thus total interest to be charged would be 5.17%. We direct accordingly. TP adjustment by way of corporate guarantee extended by the assessee on behalf of its AE - Held that:- Ld. Counsel has also fairly accepted the argument of ld. CIT (DR), to the extent that ALP rate of corporate guarantee can be determined, keeping in view the actual cost incurred by the AE or as it would have been incurred by the AE with respect to a similar transaction between the AE and any other independent party. But, no information in this regard was available. Thus taking into account all the facts and circumstances as well as submissions made by both the parties before us, and in the interest of justice, we find that this case should be sent back to the file of the TPO. Therefore, we send this issue back to the file of the TPO for deciding the rate of commission. He will give opportunity to the assessee to submit all the details and documents as may be considered appropriate by it, and shall decide this issue after taking into consideration all the facts and circumstances of this case, and by exercising his suitable powers under the law to get the required information from the concerned agencies, and thereafter he shall take a judicious view of the matter, taking into account all the judgments available including the judgment of the Tribunal as confirmed by the Hon’ble High Court in the case of Everest Kanto ( 2012 (11) TMI 1099 - ITAT MUMBAI ). Thus, these grounds are allowed for statistical purposes. Disallowance made u/s 14A r.w.s Rule 8D - Held that:- In our considered opinion there has been lot of judicial development with respect to disallowance u/s 14A, and therefore, we find that the arguments made by the ld. counsel carry weight under the law. This cannot be dismissed or brushed aside without examining them on facts. Recently, Hon’ble Delhi High Court has held in the case of CIT vs. Cheminvest Ltd (2015 (9) TMI 238 - DELHI HIGH COURT ) that investment made for strategic reasons cannot be considered for making disallowance u/s 14A, and that those investments on which no dividend income has been received, cannot be considered for making disallowance u/s 14A. There are various other judgments, as has been relied upon by the ld. counsel in the submissions made before us and before the lower authorities, in support of the propositions argued by him. Thus, after analysing the latest position of law, we find it proper to send this issue back to the file of the AO to re-compute the amount of disallowance after taking into account following directions:- (i) All the investments made in joint ventures, subsidiaries and other companies as strategic investment, should be excluded for computing the average amount of investment for the purpose of Rule 8D. (ii) Those investments should be excluded on which no dividend income has been received during the year. (iii) All those investments should be excluded which have been made in the foreign companies whose dividend income would be taxable as per law, as and when received by the assessee-company. (iv) If the assessee is able to demonstrate that a particular amount borrowed by it has been used directly for the purpose of its business and has not been utilized anywhere for earning tax free income, than interest paid on such borrowing should be excluded from the amount of interest paid to be considered for computation of disallowance u/s 14A.
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