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2022 (8) TMI 1452 - AT - Income TaxTP Adjustment - Notional Interest - Outstanding receivables - DRP directed to allow the credit of 60 days resulting which an amount has been added on account of interest on outstanding receivables by taking 6 months LIBOR + 400 basic points - HELD THAT:- As decided in assessee's own case [2021 (10) TMI 1420 - ITAT DELHI] period of 90 days has been allowed and the amounts have been received within the range of 90 to 95 days. In the absence of any fact to prove that the assessee is liable to payment of interest, no adjustment is warranted. There cannot be one straight jacketed formula to allege that the assessee has received interest or the delay was allowed to confer an undue advantage to the other party. See Kusum Health Care Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT] wherein held that the inclusion in the Explanation to Section 92B of the Act of the expression 'receivables' does not mean that de hors the context, every item of ‘receivables' appearing in the accounts of an entity which may have dealings with the foreign AEs, would automatically be characterized as an international transaction. There can be a delay in the collection of monies for the supplies made, even beyond the agreed limit, due to various factors which would be investigated on a case to case basis and also the case of Gillette India Limited [2017 (7) TMI 1188 - RAJASTHAN HIGH COURT] wherein affirmed the order of the Tribunal wherein it was held that the transaction of allowing credit period to the AE for realization of its sale proceeds is not an independent international transaction but is closely linked with the sale transactions of the AE. Decided in favour of assessee. Deduction u/s 43B - assessee being the legal successor claimed deduction to discharge of liabilities taken over by the Appellant from companies as pursuant to their amalgamation with the Appellant - HELD THAT:- From April 1, 2015 onwards, all assets, rights, powers, liabilities and duties of the Amalgamating companies were transferred to the Appellant and the Appellant stepped into the shoes as the legal successor of Convergys Stream and Convergys In fowavz from such date. The Scheme of Amalgamation provided that all debts, liabilities, contingent liabilities, duties, obligations and guarantees of the Amalgamating companies shall be taken over by the Appellant with effect from April 01, 2015. It is a settled law that an order of a High Court approving a scheme of arrangement and amalgamation under Section 391 of the Companies Act does not operate as a mere arrangement, but it becomes a statutory force and thus, becomes statutorily binding on everyone including statutory authorities. We cannot concur with the observation by the ld. DRP. The liabilities that were taken over by the assessee were in the nature of Leave Encashment, Bonus, Gratuity and Professional Tax and thus, fall within the ambit of section 43B of the Act. Accordingly, we hold that the assessee is eligible to claim deduction u/s 43B in respect to discharge of such liabilities taken over by the Appellant pursuant to their amalgamation with the assessee. Credit u/s 115JAA - assessee, being the legal successor, claimed in its return of income, the MAT credit taken over pursuant to the amalgamation while computing its tax liability - AO contended that only the company which paid tax under section 115JB of the Act is entitled to carry forward and set-off the MAT Credit - HELD THAT:- DRP unfortunately concurred with the view of the AO and confirmed that non-allowance MAT credit. When all assets and liabilities, rights and obligation of company transferred to the assessee with effect from April 01, 2015, the MAT credit being an asset of the earlier company would be available to the assessee at its disposal for utilization. There cannot be any dispute on the utilization of the assets of the amalgamated company by the amalgamating company. No doubt MAT credit is one of such assets. Hence, the appeal of the assessee on this ground is allowed. Applicability of Section 56(2)(viia) - face value of the shares taken for the purpose of section 56(2)(viia) - DRP has concurred with the view of the AO and observed that the entire valuation was a make-believe exercise, thus confirmed the addition proposed by the AO - as argued independent chartered accountant arrived at a valuation of INR 242.03 per share on the basis of Net Asset Value (NAV) Method - HELD THAT:- In order to arrive at FMV of such property i.e., unquoted shares, the valuation is to be done in accordance with the method prescribed under Rule 11UA of the Income Tax Rules. It is settled law that where the Act prescribes a rule, it has to be strictly and mandatorily followed and further, if the statute has conferred a power to do an act and has laid down the method in which that power is to be exercised, it necessarily prohibits the doing of the act in any other manner than that has been prescribed. The adoption of the face value at INR 250 by the AO/DRP with respect to the above transaction is not inconformity with Rule 11UA which prescribes that in order to arrive at FMV of the unquoted shares. FMV of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined applying formula (A-L)/(PE) * (PV) - The adoption of the value at Rs.250/- per share by the ld. DRP is not in accordance with prescribed Rule 11UA of the Rules, hence, we hold that the addition made is liable to be deleted. Granting of TDS and Advance Tax Credit - HELD THAT:- As pertaining to ad judication on the issues of Section 43B and MAT credit u/s 115JAA, we hereby direct that the credit for TDS and credit for advance tax pertaining to Convergys Stream and Convergys In fowavz, which were taken over by the assessee pursuant to their amalgamation with the assessee be allowed.
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