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2014 (9) TMI 311 - AT - Income TaxAdmission of additional evidence Held that:- The documents go to the root of the matter and have to be admitted for arriving at the arms length price for interest on working capital loan - the assessee was prevented by reasonable cause in submitting these documents before the TPO or the DRP, for the reason that he adopted CUP method by taking LIBOR rate for the purpose of bench marking and In that process, these evidences were not required - The DRP has changed the basis of determining the ALP - While doing so it did not ask the assessee to furnish these documents the additional evidences are to be admitted thus, the matter is to be remitted back to the TPO for fresh adjudication Decided in favour of assessee. Determination of Arms length interest rate term loan of working capital loan Held that:- With regard to ALP of interest on term ban sanctioned by the assessee to the AE, the submissions of the assessee is accepted that the DRP has in arbitrary manner determined 2% mark up on 12.7% interest rate charged by the assessee from its AE - There is no basis for arriving at this 2% - relying upon M/s. Four Soft Ltd. Hyderabad Versus DCIT, Circle 1(3) Hyderabad [2011 (1) TMI 651 - ITAT HYDERABAD Ltd.] - for the proposition that LIBOR rate should be the basis of bench marking the interest payments for the purpose of determining the ALP thus, the TPO is directed to determine the ALP de-novo Decided in favour of assessee. Determination of notional interest at 10% - Deemed income on the loans given to wholly owned subsidiary company Held that:- Following the decision in Highway Construction Co. (P.) Ltd. v. CIT [1992 (11) TMI 86 - GAUHATI High Court] - there was no finding of fact to the effect that actually the loan had been granted to the MD or any other person on interest or that interest had actually been collected by the collection of interest was not reflected in the accounts - The finding of the ITO was that the assesses ought to have collected interest - If the assessee had not bargained for interest, or had not collected interest, the Income tax authorities could not fix a notional interest his due, or as collected by the assessee - There was no provision in the IT Act empowering the income tax authorities to include in the income interest which was not due or not collected. The addition of amounts as notional interest was not justified Decided in favour of assessee. Adhoc disallowance of advertising and sales promotion expenses Held that:- Following the decision in Joint Commissioner Of Income-tax, Special Range - 16, Kolkatta. Versus ITC LIMITED [2007 (9) TMI 295 - ITAT CALCUTTA] - The auditors have also not pointed out that any such expenses was not related or incidental to the business needs of the assessee - the action of AO in disallowing 10 per cent of such expenditure without bringing any material evidence on record was not justified and the CIT(A) has rightly deleted the addition - the auditors have not pointed out any Instances which can lead to a conclusion that the expenditure was not related to a business or not incidental to business decided in favour of assessee. Whether the return of the Income in Form No.1 and schedule, which lays down the manner of computing the Total Tax payable by the assessee prevails over the substantial provisions of the Act Held that:- Following the decision in CIT v. Chemplast Sanmar Ltd. [2009 (4) TMI 61 - MADRAS HIGH COURT] - Rule 12 (1) (a) and form 1 cannot go beyond the provisions of the Act - as the Tax has to be computed on the Total income as assessed under the normal provisions in the Income Tax Act and surcharge and education cess has to be added to such Tax, and there after credit of Tax paid u/s 115 JAA has to be granted decided against assessee.
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