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2018 (3) TMI 1766 - AT - Income TaxTP Adjustment - upward adjustment made towards providing corporate guarantee - HELD THAT:- There is a cleavage of opinion, as to the issue whether corporate guarantee to an Associated Enterprise could be considered as international transaction. DR has pointed out to decisions in Mahindra and Mahindra Ltd [2013 (12) TMI 139 - ITAT MUMBAI] and Prolifics Corpn. Ltd [2015 (1) TMI 551 - ITAT HYDERABAD] . However, since in assessee’s own case, [2016 (10) TMI 1264 - ITAT CHENNAI] the Tribunal has already held that providing corporate guarantee to its Associated Enterprise could be considered as an international transaction, which decision was rendered after considering the amendment to clause (c) of Section 92B(2), through Finance Act, 2012, we are inclined to follow this view. Accordingly the upward adjustment made towards providing corporate guarantee stands deleted. Upward adjustment for interest charged on “Optionally and Fully Convertible Debentures’’ (OFCD) - rate of interest charged more than the LIBOR rate - HELD THAT:- Once assessee had charged rate of interest more than the LIBOR rate, there could be no question of any Transfer pricing adjustment. Nevertheless, how the ld. TPO had arrived at the LIBOR rate of 0.95% is not clear. LIBOR rate for assessment year 2006-07 was 4.42% whereas what was considered by the ld. TPO as LIBOR rate for the impugned assessment year is 0.95%. We are therefore of the opinion that ld. Assessing Officer/TPO has to revisit the issue to fix the correct LIBOR rate, before deciding whether any adjustment for Arms Length Pricing is required. We set aside the orders of the lower authorities on the Arms Length Price adjustment, if any, required on interest on OFCD, and remit it back to the file of the ld. Assessing Officer/ld. TPO for consideration afresh in accordance with law. Disallowance u/s.14A - AO clearly expressed his dissatisfaction on the suo-motu disallowance made by the assessee as expenditure incurred for earning exempt income - HELD THAT:- Invocation of Section 14A of the Act r.w.r. 8D of the Rules, in our opinion, cannot be faulted. Nevertheless, none of the lower authorities had verified the claim of the assessee that its investments were all in wholly owned subsidiaries and investments which did not yield any exempt income had to be excluded, for the purpose of computing the disallowance u/s.14A. AO also did not have the benefit of the judgment of Joint Investments Pvt. Ltd [2015 (3) TMI 155 - DELHI HIGH COURT] when he was considering the issue. In the fitness of the things, we are of the opinion that disallowance, if any, required under Section 14A of the Act needs a fresh look by the ld. Assessing Officer. Disallowance u/s.14A while computing its book profits for applying Section 115JB - HELD THAT:- In case of Vireet Investment Pvt. Ltd [2017 (6) TMI 1124 - ITAT DELHI] answered the question referred to us in fvour of assessee by holding that the computation under clause(f) of Explanation 1 to Section 115JB (2) is to be made without resorting to the computation as contemplated u/s.14A read with Rule 8D of the Income Tax Rules, 1962 . Judgment of Cheminvest Ltd. vs. CIT followed [2015 (9) TMI 238 - DELHI HIGH COURT] - Thus we are of the opinion that no disallowance could have been made u/s.14A of the Act, while computing book profit u/s.115JB. Credit for TDS and advance tax denied - HELD THAT:- AO is directed to verify the claim of the assessee on these and if found correct allow credit to extent proved by the assessee. Ordered accordingly.
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