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2016 (4) TMI 1163 - AT - Income TaxDeduction under section 80IC - whether the power and transport subsidy received by the assessee for its Assam and Himachal Pradesh units should be reduced from the profit of the business for computing deduction under section 80IC? - Held that:- Coming to a definite conclusion as far as nature of subsidy is concerned, the relevant subsidy schemes have to be examined to find out whether such subsidy are for reimbursement of actual costs incurred by the assessee towards transport and power. As the Departmental Authorities have not examined the nature of subsidy with reference to the relevant industrial policy resolution and subsidy schemes, we are inclined to restore the matter back to the file of the Assessing Officer for deciding afresh. As far as the issue of particular assessment year in which the subsidy deemed to have accrued, we may observe, the Assessing Officer did not raise this issue in course of assessment proceedings. It is only the learned Commissioner (Appeals) who has raised this issue. However, there is nothing in the order of the learned Commissioner (Appeals) to suggest that assessee was given opportunity to explain its stand on the issue. Be that as it may, whether the subsidy has accrued as income in the impugned assessment year has to be decided on the basis of the fact when it was approved / accepted by the concerned authorities. Only when the concerned Government authorities verify the quantum and approve, the subsidy crystallizes as income. The decisions relied upon by the learned Authorised Representative support this view. The Assessing Officer is directed to verify this aspect also. It must be mentioned the Assessing Officer not only should give adequate opportunity of being heard to the assessee but must pass a well reasoned order after considering the submissions of the assessee as well as judicial pronouncements relied upon. Treatment to remission of deferred sales tax loan liability as income of the assessee - Held that:- Respectfully following the decision of the Tribunal in assessee’s own case, we hold that the amount being capital in receipt cannot be treated as income of the assessee. Disallowance of interest expenditure and administrative and other expenses under section 14A r/w rule 8D - Held that:- As before the Assessing Officer itself the assessee has submitted necessary facts which revealed that at the beginning of the year, the assessee had reserves and surplus amounting to Rs. 51122.41 lakh and share capital amounting to Rs. 2569.54 lakh. Thus, own surplus funds available with the company were to the extent of Rs. 53691.95 lakh. As against the aforesaid surplus fund, the investments held by the assessee at the year end aggregated to Rs. 9788.59 lakh which consists mainly of shares in foreign subsidiary amounting to Rs. 7438.59 lakh the dividend income from which is not exempt. Therefore, when enough interest free surplus fund is available with the assessee to take care of the investment, no disallowance under section 14A r/w rule 8D, as far as interest expenditure is concerned, can be made. The Assessing Officer should verify this aspect also before making any disallowance. Disallowance of lease rentals - Held that:- Similar issue arose in assessee’s own case for assessment year 2006–07, 2007–08 and 2008–09 after considering the submissions of both the parties and relying upon the decision in ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT ] allowed assessee’s claim of expenditure on account of lease rental. Disallowance of expenditure incurred on buy–back of shares - Held that:- As could be seen from the assessment order as well as the order of the first appellate authority, assessee’s claim was not considered only for the reason that it was not made through a revised return of income. However, as held by the Hon'ble Supreme Court in Goetz India Ltd. (2006 (3) TMI 75 - SUPREME Court ), restriction imposed therein for not entertaining a claim otherwise by way of revised return of income is only applicable to the Assessing Officer. That being the case, we restore the matter back to the file of the Assessing Officer for considering afresh in the light of the decision relied upon by the assessee. Transfer pricing adjustment made on the corporate guarantee provided by the assessee to its A.E. - whether the arm's length price of corporate guarantee is to be fixed at 0.25% as claimed by the assessee or at 3% as held by the Department - Held that:- On a perusal of the letter of HSBC letter dated 3rd February 2008 it is evident that for financial guarantee, the commission charged by the bank is @ 0.50% per annum. It is further relevant to note, in case of Everest Kento Cylinders Ltd. (2015 (5) TMI 395 - BOMBAY HIGH COURT ), the Hon'ble Jurisdictional High Court while accepting the commission rate of 0.5% on corporate guarantee provided by the assessee to its A.E. observed that corporate guarantee cannot be equated to bank guarantee. Following the aforesaid decision the Tribunal, Mumbai Bench, in Godrej Household Products Ltd. [2014 (4) TMI 520 - ITAT MUMBAI ] held the rate of guarantee commission of 0.5% as the arm's length price of the corporate guarantee provided by the assessee to its A.E. In the present case also, there is no dispute that the internal CUP by way of letter received from HSBC indicates that the commission charged for financial guarantee is 0.5%. Further, it is relevant to note that the Department in assessee’s own case has accepted the arm's length price of corporate guarantee @ 0.5% in the assessment year 2006–07 and 2007–08. Thus, on consideration of overall facts and circumstances in the light of judicial pronouncements referred to above, we are of the considered opinion that the arm's length price of the corporate guarantee should be fixed at 0.5%. The Assessing Officer / Transfer Pricing Officer is directed to make adjustment accordingly.
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