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2018 (1) TMI 1730 - AT - Income TaxTP Adjustment - issuance of a corporate guarantee - HELD THAT:- We find that in the case of Everest Kento Cylinder Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] the Hon'ble Bombay High Court has dealt the identical issue and had decided it against the revenue as held that considerations which applied for issuance of a corporate guarantee are distinct and separate from those in a case of bank guarantee and, accordingly, the commission charged could not be called in question, in the manner the Transfer Pricing Officer had done. The comparison was not between like transactions but between guarantees issued by commercial banks as against a corporate guarantee issued by holding company for the benefit of its associated enterprise, a subsidiary company. Therefore, no transfer pricing adjustment could be made in respect of the commission charged. - Decided against revenue. Addition notional interest - Buying back of share at higher rate than the purchase price - TPO had presumed that buy back of shares was not a normal business transaction, that he treated it as advancing of interest free loan by the assessee to the AE, that he charged notional interest not only for the year under consideration but upto the date of remittance - CIT(A) deleted addition - HELD THAT:- Purchasing the share @ 1 pound per share and selling at @ 0.8 pound per share cannot be the basis for presuming that the transaction was not a genuine transaction-especially when the valuation was as per the exchange regulations. Buying back of share at par or at higher or lower rate than the purchase price is one of the very common practice of the business world. Until and unless it is proved that such a transaction was not based on scientific basis or was against the provisions of exchange manual/regulation, it should be accepted. We find that the FAA has given a categorical finding that the TPO had not doubted the valuation. In these circumstances, we hold that there was no justification for the TPO to charge notional interest. As the order of the FAA does not suffer from any legal or factual infirmity, so, confirming the same, we decide ground No. 2 against the AO. Allocation of R & D expense to the 80-IB and 80-IC qualifying units - HELD THAT:- Identical issue was decided by the Tribunal against the AO while adjudicating the appeal for the A.Y. 2005-06 [2012 (4) TMI 743 - ITAT MUMBAI] wherein held no justification to allocate proportionate expenses incurred on R & D and on interest for the purpose of computing deduction U/s. 80IB. The expenditure on R & D is for a specific purpose and there is no dispute in incurring of expenses for the specific purpose i.e., in the field of medical science etc., The expenditure incurred on R & D were not related to business of any existing units of the company or to the products manufactured by any of its unit in which the assessee has claimed deduction U/s. 80IB. The Research and Development Institute is a statutory institute of the assessee company which is situated at Aurangabad which deals with global research. There is no doubt that assessee's units got benefit from the research work done by the research at Aurangabad. Further the contention of the Assessing Officer that some part of the expenditure are liable to be considered in the units in which the deduction U/s. 80IB has been claimed, in our considered view, is not tenable. Nothing has been brought on record that borrowed funds by the Head Office were transferred to the units on which the deduction U/s. 80IB has been claimed by the assessee. The onus lay upon the AO to discharge it by bringing some positive evidence to establish that some part of the expenditure on account of R & D and on account of interest has been incurred on these units because Assessing Officer, who is alleging that some part of expenditure incurred on R & D and interest are related to the units on which deduction U/s. 80IB has been claimed. This onus has not been discharged, therefore, allocation of the proportionate expenses at the end of the Assessing Officer, in our considered view were not justified. Decided against revenue. Claim of weighted deduction made u/s. 35(2AB) - assessee placed reliance on the orders of the FAA for the earlier years, wherein the FAA had directed the AO to delete the disallowance where Form 3CL was issued by the Deptt. of Science and Industrial Research (DSIR) was received by the assessee after completion of the assessment order - DR stated that the Tribunal had decided the issue against the assessee in the earlier year holding that deduction was available for in house trials and RD research only - HELD THAT:- We are of the opinion that matter needs further verification. Therefore, we are remitting back the issue to the file of AO for deciding the issue afresh. He is directed to afford reasonable opportunity of hearing to the assessee and after considering the case laws relied upon by the assessee before us. Ground No. 4 is partly allowed. TDS u/s 195 - Addition u/s. 40(a)(i) - AO found that the assessee was making payment to non residents on account of pilot-bio study and clinical research without deducting TDS - HELD THAT:- We find that the Tribunal vide its order [2012 (4) TMI 743 - ITAT has dealt the issue and decide it in favour of the assessee held assessee paid charges for testing at laboratories of CRO which used their own skills and equipments etc., to prepare the report. The Tribunal came to conclusion that there is no parting of skills or know-how by CRO and hence the service is not technical in nature, but was only a commercial service. Ground of appeal against the AO. Disallowance of weighted deduction u/s. 35(2AB) - Form 3CL was not submitted by the assessee - HELD THAT:- We find that DSRI had not issued the Form 3CL in time, that the assessee could not file the same before the AO during the assessment proceedings, that the Form was submitted before the AO after DSRI issued the same, that AO himself had mentioned in the order deduction would be allowable on production of Form 3CL. In these circumstances, we are of the opinion that he was not justified in rejecting the application filed by assessee u/s. 154 - Decided against revenue.
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