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2022 (8) TMI 1343 - AT - Income TaxTP Adjustment - understanding of the business model of the assessee and test the arm’s length price - HELD THAT:- As from clauses off the agreements submitted by the assessee it is clear that that TPO/DRP have not understood the business model of the assessee in treating the Assessee as a service provider to all of its AEs is contrary to the facts of the case. It is clear that the TPO/DRP has not appreciated the facts of business model of the assessee properly and proceeded to make the entire TP adjustment on an incorrect premise. We therefore remit the issue back to the TPO for a denovo consideration afresh basis the correct understanding of the business model of the assessee and test the arm’s length price accordingly after giving reasonable opportunity of being heard to the assessee. The assessee is directed to cooperate in the proceedings before the TPO and submit all the relevant details. This ground is allowed for statistical purposes. Disallowance of depreciation - assessee has claimed depreciation @ 60% towards the addition made to the block of assets “Computers” - AO following the earlier years orders, allowed depreciation only @ 15% treating the additions as part of telecom equipment as they relate to functioning of mobile phones - HELD THAT:- Tribunal in assessee’s own case for AY 2008-09 which is confirmed by the jurisdictional High Court [2014 (9) TMI 45 - ITAT BANGALORE] we hold that depreciation is to be allowed @ 60% on the CG/TX cards and switches, etc. This ground is allowed in favour of assessee. Disallowance u/s 14A r.w.r. 8D - Necessity of receording satisfaction - assessee has not maintained separate accounts and the incurring of interest expenditure, especially other administrative and general expenses cannot be ruled out - HELD THAT:- The purpose of application of section 14 r.w.r 8D(2)(iii) the AO has to record reasons as to why he is not satisfied with the correctness of the claim of expenditure by the assessee. We notice that the AO though, under the head reasons for applying Rule 8D has made a detailed analysis of the provisions of section 14A has not brought anything on record to factually state that the computation of disallowance made by the assessee - AO has also not called for any details from the assessee or analysed the workings of the disallowance. No disallowance can be made u/s 14A of the Act read with Rule 8D of the IT Rules, where the A.O. failed to record dissatisfaction of correctness of the claim of the assessee. A similar view has also been taken by the Hon'ble jurisdictional High Court in the case of Essilor India (P.) Ltd. 2022 (2) TMI 286 - KARNATAKA HIGH COURT] - Therefore the disallowance made under section 14A r.w.r 8D(2)(iii) is deleted. Disallowance made under Rule 8D(2)(ii) - As relying on judgment of the Hon'ble Apex Court in the case of Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] we hold that disallowance u/s 14A r.w. Rule 8D(2)(ii) is not warranted in the facts of the instant given case. It is ordered accordingly. Consideration of incorrect amount of income from other sources - HELD THAT:- We direct the AO to consider this issue afresh and decide the same in accordance with law. Disallowance of additional foreign tax credit - AR submitted that the AO erred in restricting the foreign tax credit to the amount claimed in the return of income, without appreciating the assessee’s submission that it would be eligible for additional credit owing to assessed income being greater than returned income - HELD THAT:- We direct the AO to consider this issue afresh and decide the same in accordance with law. Disallowance of TDS credit - Assessee claimed additional credit pursuant to additional certificates being received post filing of the return of income and also it had inadvertently considered duplicate entries of TDS - HELD THAT:- As we direct the AO to consider the revised tax credit afresh and decide the same in accordance with law. Deduction in respect of unclaimed Foreign Tax Credit (FTC) - HELD THAT:- In the case of Reliance Infrastructure Ltd [2016 (12) TMI 1293 - BOMBAY HIGH COURT] has laid down the ratio that to the extent tax paid in foreign country on income which has arisen/accrued in India, has to be considered in the nature of expenditure incurred or arisen to earn income and is to be allowed as a deduction. In the given case it is submitted that out of the foreign taxes paid no credit was claimed . Of the said foreign tax paid how much is attributable to the income accrues / arises in India needs to be verified in order to arrive at the extent of allowability. This issue is raised as additional ground before the Tribunal and the issue is not factually verified by the lower authorities. We therefore remit this issue back to the AO. The AO is directed to verify the amount of foreign tax credit paid that is attributable to the income accruing / arising in India and allow the same accordingly in the light of the decision of the Hon’ble Bombay High Court in the case of Reliance Infrastructure Ltd (supra) after giving reasonable opportunity of being heard. This ground is allowed in favour of the assessee for statistical purposes Disallowance u/s 14A - Suo moto addition made by assessee - HELD THAT:- AO has not recorded any specific reason for the suo motu disallowance made by the assessee not being sufficient and did not bring anything to the contrary on record. Hence placing reliance on the decision of Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] and decision of Essilor India (P.) Ltd [2022 (2) TMI 286 - KARNATAKA HIGH COURT] we hold that the disallowance made under section 14A r.w.r 8D(2)(iii) stands deleted.
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