Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 801 - AT - Income TaxTPA - arms length price adjustment in respect of interest charged on advances to the subsidiaries and corporate guarantee - Held that:- Since as per the facts of the present case as well as in view of the above discussions, we find that the assessee has not charged any interest from subsidiaries and therefore, in the absence of any accrual or arise of income form the lending of the money, there was no jurisdiction for invoking the provision of section 92 of the Act. Therefore, we direct the Assessing Officer to delete this arms length price adjustment of ₹ 4,97,120/- in respect of interest charged on advances to the subsidiaries. Issuance of a corporate guarantee may have an influence on the profit, income, loss and asset of an entity, in whose favour the guarantee is issued, but it has, in our understanding, no impact on the same as long as it is issued without a consideration and as long as the guarantee is not invoked by the beneficiary. To treat this phrase as implying a benefit test, will, in our considered view, stretching the things too far. The benefit test, as we see it, does not find place in the statute as yet. Thus as per the facts of this case, does not constitute a corporate guarantee akin to bank guarantee and, even if it could be treated as a corporate guarantee for benchmarking purposes, the corporate guarantee does not constitute an international transaction under section 92B of the Act. - Decided in favour of assessee. Disallowing expenses u/s 14A by invoking Rule 8D (2) (ii) and (iii) - Held that:- As perused the material placed on record as well as the orders passed by revenue authorities. Since as per the facts of the present case as well as in view of the above discussions, we hold that since the total interest interest free funds available with the assessee in the form of share capital and reserves alone more than the investments of the assessee and the investment of the assessee was at negligible percentage of interest free funds with the assessee and while relying upon the judgment cited above as well as bearing in mind the entirety of the facts, we direct the Assessing Officer to delete the disallowance of ₹ 12,28,142/- made u/s 14A read with Rule 8D '. Accordingly, this ground raised by the assessee is allowed.
|