Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 1514 - AT - Income TaxTP Adjustment - corporate guarantee fees - international transaction - assessee submitted before us that a corporate guarantee does not form an international transactions as it does not result in any quantifiable benefits to the “AEs” being since it is a shareholding activity only than an international transaction falling under section 92B - whether a corporate guarantee amounts to an international transactions or not? - HELD THAT:- As decided in Revenue’s favour and against the assessee in PCIT Vs. Redington (India) Limited. [2020 (12) TMI 516 - MADRAS HIGH COURT] as considered Explanation to Section 92B inserted by the Finance Act, 2012 to with effect from 01.04.2002 to hold that such a corporate guarantee indeed forms an international transaction with retrospective effect. We thus reject the assessee’s legal arguments and express our agreement with a learned lower authorities’ action treating the assessee’s corporate guarantee(s) as an international transaction in principle. Quantification of the impugned corporate guarantee commission adjustments - Both parties have quoted a catena of case law wherein various learned co-ordinate benches have adopted different rates. Faced with this situation, we deem it appropriate in these peculiar facts and circumstances that a lumpsum commission rate of 0.5% qua the extent of amount of assessee’s corporate guarantee(s) actually utilized only in all these four assessment years; would be just and proper. This second substantive ground is partly allowed in very terms. ALP adjustments of interest as trading receivables assessment year-wise - Both the learned representatives reiterated their respective stands regarding the impugned “ALP” adjustment made going by the bank’s short term deposit interest rates. So far as the legal question as to whether such interest on outstanding receivables forms an ‘international transaction’ or not, we note that the same also comes under Section 92B Explanation (I)(c) which has been already as applicable with retrospective effect - We thus uphold the learned lower authorities’ impugned action interest on outstanding receivables as ‘international transactions’ to this limited extent. No merit in the Revenue's instant argument since Chapter -X of the Act is a special provision wherein each and every adjustment could only be made going by the uncontrolled market price of the transactions in the very segment; followed by benchmarking thereof as per the international currency "LIBOR" rates only. We, therefore, reverse the TPO's identical action in all these Assessment Years in view of the foregoing twin reasons regarding non- quantification of the impugned adjustment(s) segment wise and as per the LIBOR rates. We accordingly delete the impugned “ALP” adjustment in very terms. ALP adjustments pertaining to sale and purchase transactions - CIT-DR’s case is that the lower authorities have rightly not considered the corresponding combined audited results as the ALP of the corresponding sales and purchases has to be seen transaction wise than at entity level in light of CIT Vs. Firestone International Pvt. Ltd. [2015 (6) TMI 1123 - BOMBAY HIGH COURT] - HELD THAT:- We find no merit in the Revenue’s instant arguments in principle as once the above stated unit of Vivimid Labs (Althur) Limited had stood merged w.e.f. 01.04.2015 and the assessee had made its sale - purchase transactions covered under section 92B of the Act to its Spain based “AE”, the learned lower authorities ought to have benchmarked the combined book results at segmental level pertaining to both these units only. We therefore direct the learned TPO to go by the assessee’s consolidated book results as per the combined audit report and proceed afresh for the purpose of necessary benchmarking as per law. Depreciation disallowance - HELD THAT:- There is no rebuttal to the fact of the AO having submitted the foregoing remand report as well as the issue regarding closing balance as on 31.03.2013 and the corresponding opening balancing figure as on 01.04.2013 relating to the first assessment year herein i.e. 2014-15. Faced with this situation, we are of the opinion that instant depreciation issue requires afresh adjudication at the Assessing Officer’s level in all these four assessment years so as to enable him to go by the foregoing closing figure(s) which cannot be disbursed as opening balance. We order accordingly. Disallowance u/s 14A r.w.r.8D - HELD THAT:- The Finance Act, 2022 has inserted an Explanation to section 14A(1) that the impugned disallowance provision is applicable in absence of exempt income as well but with prospective effect only from 01.04.2022 onwards. We reiterate that we are in A.Ys. 2014-14 to 201718 only. We thus find no merit in Revenue’s stand and direct the Assessing Officer to delete the impugned disallowance. Disallowing sales, promotions and business marketing expenses - HELD THAT:- We prima facie find merit in the assessee’s claim as DRP’s findings have nowhere made it clear as to in what manner the assessee had offered freebies to the doctors which are covered under the Medical Council of India Act’s guidelines. We also take note of the hon’ble apex court’s recent landmark decision M/s. Apex Laboratories (P.) Ltd [2022 (2) TMI 1114 - SUPREME COURT] upholding disallowance of freebies offered by pharmaceutical companies to doctors’ associations. We next note that there is not even a single observation in the DRP’s directions that the assess had incurred the impugned expenditure for any such freebies to doctors and their associations. We reiterate that it has not even manufactured the final products to be sold in market as well. We accordingly conclude that the impugned disallowance is not sustainable. The same stands deleted. Disallowing section 35(2AB) weighted deduction claim - HELD THAT:- Once Rule 6(7A)(b) of the Income Tax Rules regarding quantification of section 35(2AB) deduction claim stands amended w.e.f. 01.07.2016 only, the assessee’s instant substantive grievance deserves to be accepted in very terms. Ordered accordingly. It is however made clear that the assessing authority shall be very much at liberty to verify the relevant facts in consequential computation(s). Capital gains on slump sales - Assessee ’s first and foremost argument before us is that the corresponding sales in relation to which the impugned outstanding receivables are considered have already been offered to tax in preceding assessment years’ computation - HELD THAT:- Revenue’s stand on the other hand is that the instant issue more requires a reconciliation than any substantive adjudication. Faced with this situation and in order to avoid double addition on the very same issue, we direct the learned Assessing Officer to verify the necessary factual position and ensure that the assessee does not suffer a double addition herein. This 9th substantive ground is accepted for statistical purposes. Denying section 80IC deduction(s) pertaining to its Haridwar Unit - CIT-DR vehemently contended during the course of hearing that a return filed u/s 153A ought not to include a fresh claim of deduction under Chapter VI of the Act in light of section 80IC requiring a return to be filed u/s 139(1) - HELD THAT:- No merit in the Revenue’s stand in principle. We make it clear that the assessee had not claimed the impugned Section 80-IC deduction relief in its original returns filed u/s.139(1) of the Act. There is further no dispute that the department had carried out the search in issue on 09.11.2016 in assessee’s case wherein the time limit for filing Section 139(1) return for including Section 80-IA deduction had very well elapsed. The Assessing Officer thereafter initiated Section 153A proceedings thereby asking for assessee’s returns. Whether the assessee could raise a fresh claim of Section 80-IC deduction in a return filed u/s.153(1)(a)? - We find no merit in the Revenue’s instant technical argument as Section 153A nowhere draws any distinction of an “abated” or “un-abated” assessment so far as an assessee’s eligibility to raise a new deduction claim under Chapter-VI therein is concerned. We thus uphold the CIT(A)’s lower appellate findings in principle. We therefore adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s foregoing legal arguments in principle and direct AO to decide its corresponding section 80IC claim in light of all the statutory conditions as per law after necessary factual verification. Nature of receipt - treatment to subsidy amounts received - as in the nature of industrial promotions assistance, under the West Bengal Incentive Scheme, 2000, as revenue items or capital receipts - HELD THAT:- We find no merit in Revenue’s instant arguments as the tribunal’s latest decision DCIT Vs. M/s. Ankit Metal and Pvt. Ltd. [2021 (11) TMI 49 - ITAT KOLKATA] holds the very incentive scheme as giving rise to a capital receipt not liable to tax. Validity of the impugned assessments for want of incriminating material found or seized during the course of search - HELD THAT:- We find that the tribunal’s order in assesses’s case [2022 (4) TMI 1503 - ITAT HYDERABAD] has quashed the assessment proceedings stating that the instant plea hardly carries any substance since the question framed therein was not regarding lack of incriminating material but the Assessing Officer’s jurisdiction to take all other material into account in a search assessment which is not the issue before us. We thus accept the assessee’s instant legal ground to quash both these assessments thereby rendering all other pleadings on merits to have been become infructuous. Section 43B disallowance - DRP’s corresponding directions deciding its objections had granted substantive relief - HELD THAT:- We direct the learned Assessing Officer to verify the necessary factual position and allow the impugned relief as per law in light of DRP’s directions which are binding on him u/s 144C(13) of the Act. This 12th substantive grievance is accepted subject to the assessing authority’s factual rectification in above terms.
|