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2017 (11) TMI 1901 - AT - Income TaxTP Adjustment - purchase of shares by the Assessee of its AEs - whether an international transaction and income from such international transaction has to be computed having regard to Arm’s Length Price (ALP) as laid down in Sec.92 - According to the revenue the value at which the shares were purchased by the Assessee was enormous and therefore the price paid to the extent it was in excess of the value of the shares determined on the basis of Net Asset Value (NAV) Method had to be regarded as loan by the Assessee to its AE - HELD THAT:- Identical issue as to whether the transaction of purchase of shares of AE can be subject matter of proceedings u/s.92 of the Act came up for consideration in Assessee’s own case in AY 2010-11 and for AY 2010-11 [2017 (11) TMI 1443 - ITAT KOLKATA] held that the transaction of purchase of shares of AE cannot be regarded as international transaction and cannot be subject matter of investigation u/s.92. Thus we hold that the determination of ALP in the present case cannot be sustained as the transaction in question is on capital account and determination of ALP in respect of such transactions is outside the purview of Chapter X of the Act. Consequently, the addition made by the AO in this regard is directed to be deleted. Whether transaction of providing guarantee by the Assessee in respect of a loan taken by its AE can be said to be an international transaction and if yes whether the determination of ALP in respect of the said international transaction as determined by the DRP is sustainable? - TPO rejected the claim of the Assessee that providing Guarantee to a subsidiary AE was in the nature of a shareholder activity and therefore such transactions are outside the purview of Sec.92 - HELD THAT:- As in Assessee’s own case in AY 2010-11 and for AY 2010-11 [2017 (11) TMI 1443 - ITAT KOLKATA] that the addition made by way of adjustment to ALP in respect of transaction of providing guarantee to AE cannot be sustained and the same is directed to the deleted. Disallowance u/s.14A r.w.r. 8D - HELD THAT:- Dividend from debts funds of mutual funds and dividend from foreign company are taxable. In such circumstances, we are of the view no disallowance u/s.14A of the Act could have been made. The Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT] has held that there can be no disallowance of expenses u/s.14A of the Act, if there is no exempt income during the relevant previous year. In the light of the aforesaid decision, we are of the view that there cannot be any disallowance u/s.14A of the Act. The disallowance is directed to be deleted. Admission of additional grounds - Allowance of foreign tax credit - taxes paid in Japan on the doubly taxed income in accordance with the provisions of section 90 of the Act, read with the India- Japan tax treaty - HELD THAT:- Keeping in mind the ratio of the Hon’ble supreme Court decision in the case of NTPC Vs. CIT [1996 (12) TMI 7 - SUPREME COURT] wherein it was held that legal questions on admitted facts can be permitted to be raised at any stage of the proceedings before Tribunal by way of additional grounds, the additional ground should be admitted for adjudication. As far as the question of giving credit to taxes paid in Japan is concerned, it requires verification by the AO and therefore the AO is directed to consider the plea of the Assessee raised in the additional ground in accordance with law after due verification. The Assessee should be given an opportunity of being heard before any decision is taken on the issue. Disallowance of employees contribution to Provident Fund made by the AO by invoking the provisions of Sec.36(1)(va) - HELD THAT:- Deduction claimed should be allowed as the employees contribution to the provident fund had admittedly been paid on or before the due date for filing return of income u/s.139(1) of the Act. See M/s. Akzo Nobel India Ltd. Vs CIT [2016 (6) TMI 1128 - CALCUTTA HIGH COURT].
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