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2016 (10) TMI 1264 - AT - Income TaxDisallowance u/s.14A - main contention of the ld.A.R before the DRP is that the assessee company has made strategic equity investment in Tata Tele Services Ltd.,(TTSL), an unregistered telecom company of the Tata Group and that TTSL is a huge loss making company and hence, no dividend was received from it during the year - HELD THAT:- In this case the undisputed facts are that the assessee not able to show that sources of funds were diverted into investment in shares, which has not yielded any interest or dividend income, even if assessee earned dividend income, it is exempted u/s.10(33) of the Act from the tax liability and the same cannot be computed under the head “income from other sources”. The expenditure relating to exempted income is not liable for deduction in view of Sec.14A of the Act. In view of this, the claim of assessee is only untenable and decision relied upon by the ld.A.R before the Ld.CIT(A) have no application to the facts of the case. The jurisdictional High Court in the case of CIT Vs. Seshasayee Paper And Boards Ltd. r [1984 (4) TMI 17 - MADRAS HIGH COURT] wherein held that the borrowing has not been made exclusively and wholly for the purpose of earning interest, in which case alone it should be taken as income, which should be deducted from the interest receipts. Also in the case of Pradeep Kar Vs. ACIT [2009 (6) TMI 331 - KARNATAKA HIGH COURT] wherein held that dividend income being exempt u/s.10(33) and not assessable to tax, assessee was not entitled to deduction for interest in view of Sec.14A of the Act. Accordingly, this ground of the assessee stands dismissed. TP Adjustment - interest received at 6% p.a. from his wholly owned subsidiary India Telecom Holdings Ltd, Mauritius - HELD THAT:- The similar issue came up for consideration before the Mumbai Bench of Tribunal in the case of DCIT (International Taxation) Vs. Development Bank Of Singapore [2013 (8) TMI 175 - ITAT MUMBAI] considering the LIBOR as one comparable uncontrolled interest rate, in our considered opinion is a restricted and narrow approach incapable of acceptance. Since the LIBOR is not a rate in itself at which some bank is willing to borrow or lend, but an average of rates at which various panel banks offer to borrow or lend inter bank offers, the same cannot be characterized as one price determined under the comparable uncontrolled price method. It is required to be considered as arithmetical mean of such prices, thereby making available the option of plus minus 5 percent variation to the assessee. As the present addition made by the AO was the outcome of not allowing plus minus 5 percent cushion, which in our considered opinion is richly due to the assessee, we hold that the learned CIT(A) was justified in deleting this addition - Decided in favour of assessee. Transfer Pricing adjustment in respect of guarantee fee - HELD THAT:- This issue came up for consideration before this Tribunal in the Case of Redington India Ltd. Vs. JCIT [2014 (10) TMI 669 - ITAT CHENNAI] relying on BHARTI AIRTEL LIMITED (BHARTI CRESCENT) VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 2, NEW DELHI [2014 (3) TMI 495 - ITAT DELHI] that providing corporate guarantee does not involve any cost to the assessee and it is not an “international transaction”, even under the definition of the said term as amended by the Finance Act, 2012, as it does not have any bearing on profits, income, losses or assets of the assessee company. - Decided in favour of assessee.
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