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2017 (5) TMI 719 - AT - Income TaxAddition on account of Arm's Length Price - rejection of TNM Method - selection of MAM - sale of television programmes and film rights to ATL Mauritius - Held that:- Transfer Pricing Officer has not brought out any justifiable reasons to depart from adopting the TNM method, which has otherwise been found to be applicable in the assessments of past as well as subsequent assessment years upto to the assessment year 2012-13, as stated before us by the Ld. Representative for the assessee before us. Therefore, on the principle of consistency also, we are unable to uphold the selection of RPM method as the most appropriate method by the Transfer Pricing Officer in preference to the TNM method selected by the assessee. It would be inappropriate to factually conclude that the Transfer Pricing Officer has not verified the TNM method applied by the assessee company . In fact, in terms of page 108 of the Paper Book, wherein is placed a copy of assessee’s communication to Transfer Pricing Officer dated 07/10/2011, the assessee had submitted a working to demonstrate that even if the concerns which were selected by the Transfer Pricing Officer for assessment year 2007-08 are taken as comparables for the instant year also, the transactions with ATL-Mauritius would still to be at arm's length price. All this goes to show that the Transfer Pricing Officer was fully aware of the manner in which the TNM method was applied by the assessee company and there is no adverse observations in this regard. The material on record, in our view, clearly belies the averment of the Revenue that the matter be restored back to the file of Transfer Pricing Officer for verifying the application of TNM method. Rather, in our view, the fact-situation clearly points to the contrary inasmuch as the assessee had fully explained its position in the course of proceedings before the Transfer Pricing Officer and no justifiable fault has been pointed out by the Transfer Pricing Officer; and, even before us the same position continues on behalf of the Revenue. Under these circumstances, in our view, the plea of the Ld. Departmental Representative is untenable and is hereby rejected. In the final analysis, it is held that the action of the Transfer Pricing Officer in determining the transfer pricing adjustment of ₹ 24,91,59,200/- with regard to the sale of television programmes and film rights to ATL-Mauritius deserves to be set-aside. - Decided in favour of assessee Addition of arm’s length fee for corporate guarantee given by the assessee to the bank on behalf of its associated enterprise, ATL-Mauritius for the loan facility availed by it from the bank - Held that:- We are inclined to uphold the rate of 0.5% for the purposes of determining arm’s length rate of the corporate guarantee commission/fee. Thus, on this aspect, we set-aside the order of CIT(A) and direct the Assessing Officer to recompute the addition as per our aforesaid direction. Thus, on this aspect assessee partly succeeds. Disallowance under section 14A - Held that:- Following the ratio in the case of Reliance Utilities & Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT) it has to be presumed that the investments are out of own interest free funds. The said proposition is also applicable in the context of section 14A of the Act as held by the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. vs. DCIT (2014 (8) TMI 119 - BOMBAY HIGH COURT). Therefore, considering the aforesaid fact-situation, we find no reason to uphold the disallowance made under section 14A of the Act on account of interest expenditure. So far as the disallowance out of overhead expenses Assessing Officer has adequately brought out that during the year assessee has undertaken activities, which involve taking investment decisions and, therefore, some amount of management/administrative costs are liable to be attributed to such activity. Considering the entirety of circumstances, in our view , in so far as the administrative expenses is concerned, the application of Rule 8D(2)(iii) of the Rules to compute disallowance under section 14A of the Act is quite justified. Thus, on this aspect, we hereby affirm the stand of the Revenue. Addition of write off of advance given to the Board of Control for Cricket in India (BCCI) - allowable deduction u/s 37(1) - Held that:- In the assessment year 2007-08 assessee has asserted that part of the amount paid to BCCI has been debited in the Profit and Loss account and there is no dispute on this count. In this background, in our view, the plea of the Assessing Officer to say that the impugned loss was capital in nature is not tenable. At this stage, it may also be relevant to mention that the Assessing Officer has only made a bald assertion and not given reason to justify as to why the acquisition of media rights in terms of the agreement dated 12/04/2006 has to be treated as capital in nature. Therefore, considering the entirety of the facts and circum stances of the case, in our view, the assessee made no mistake in treating the amount forfeited by BCCI as a deduction allowable while computing the income for the year under consideration. Thus, on this aspect assessee succeeds. Structured interest swap loss - treated as a speculation loss as against business loss treated by the assessee - Held that:- In order to treat the impugned interest rate swap arrangement to be ‘speculative’ in terms of section 43(5) of the Act, the Revenue would have to demonstrate that an interest rate swap arrangement was a tradable commodity. This crucial aspect has not been addressed by the lower authorities and infact the assessee has been consistently arguing that instant arrangement do not qualify to be a commodity for the purposes of section 43(5) of the Act. No doubt, before us the Ld. CIT-DR has attempted to show that interest rate swap arrangements are akin to. tradable derivates, but no such aspect is emerging from the respective orders of the lower authorities. Infact, the order of the Assessing Officer is quite inconsistent because at one place he says that “the present transactions are not derivative transactions”, while at other place he says that the “transaction of interest rate swap is a derivative falling within the meaning . . . .”. Thus, in our view, the said issue requires to be revisited by the Assessing Officer to bring out why the impugned transaction falls for consideration as a speculative transaction for the purposes of section 43(5) of the Act so that the assessee can meet the point in an appropriate manner. Therefore, we setaside the order of the CIT(A) on this aspect and restore the issue back to the file of the Assessing Officer for a de novo consideration
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