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2019 (5) TMI 15 - AT - Income TaxDisallowance of expenditure u/s 14A r/w rule 8D - AO on an ad–hoc basis has disallowed 5% out of the exempt income earned towards expenditure attributable to earning such income - HELD THAT:- Identical issue in assessee’s own case for assessment year 2006–07 [2019 (2) TMI 278 - ITAT MUMBAI] thus as relying we direct the Assessing Officer to restrict the disallowance under section 14A to 1% of the exempt income earned during the year. This ground is partly allowed. Disallowance of deduction claimed on account of pro–rata amount of lease hold land - - added back in the computation of income, however, reserved its right to claim it during the assessment proceedings by way of Note - HELD THAT:- Assessee’s claim of deduction should have been examined on merit by learned DRP instead of rejecting it on technical ground. Be that as it may, in view of the ratio laid down by the Hon'ble Jurisdictional High Court in Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] , we restore the issue to the AO for deciding afresh assessee’s claim of deduction. While doing so, the AO should also take note of assessee’s contention that similar deduction claimed by the assessee in preceding assessment year was allowed. AO is also directed to decide the issue on merit keeping in view the decision of the Hon’ble Gujarat High Court in Sun Pharmaceuticals India Ltd. [2009 (3) TMI 587 - GUJARAT HIGH COURT] and Delhi International Airport Pvt. Ltd [2017 (12) TMI 1214 - ITAT DELHI] and any other decision which may be cited by the assessee. With the aforesaid observations, this ground is allowed for statistical purposes. Disallowance of assessee’s claim for excluding write–back of provisions for doubtful debts / advances - HELD THAT:- Claim of the assessee, at least, should have been considered by learned DRP on merit, keeping in view the settled legal principle referred to earlier, rather than rejecting it on technical ground. Since assessee’s claim was not considered on merits either by the AO or by DRP and was rejected on technical ground, we restore the issue back to the AO for examining assessee’s claim on merit. While doing so, the Assessing Officer should also consider assessee’s claim of double addition in respect of the provision for bad debt pertaining to the assessment year 2004–05 and decide the issue on the basis of the decision of the Hon’ble High Court on the said issue. It goes without saying, the AO must afford reasonable opportunity of being heard to the assessee before deciding the issue. This ground is allowed for statistical purposes. Disallowance of professional and legal fees - added back in the computation of income, however, reserved its right to claim it during the assessment proceedings by way of Note - HELD THAT:- Departmental authorities were not justified in rejecting assessee’s claim purely on the technical ground of having not raised such claim in the return of income. Therefore, following the settled legal principle referred to earlier in this order, we restore the issue to the file of the AO for de novo adjudication after considering the submissions of the assessee. While doing so, the AO must decide the issue on merit keeping in view the decisions to be cited by the assessee. Needless to mention, the AO must afford reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purposes. Transfer pricing adjustment made to the interest on loan to the AE - HELD THAT:- Rate of interest applicable to the loan advanced to the AEs. While the DRP has directed the Assessing Officer to compute interest at LIBOR plus 200 basis points, it is the contention of the assessee that as per internal CUP available, interest rate cannot exceed LIBOR plus 50 basis points. In this context, it has been submitted by the assessee that the overseas AE in U.K. has taken a loan from third party in U.K. at LIBOR plus 30 basis points. Similarly, he had submitted that the AE in Spain has taken loan from an unrelated party in the same period at the interest rate of Euribor plus 127.79 basis points. Assessee’s contention regarding availability of internal CUP requires examination. Moreover, while deciding similar issue in assessment year 2006–07, [2019 (2) TMI 278 - ITAT MUMBAI] , we have restored the issue to the Assessing Officer for considering various submissions made by the assessee with regard to the rate of interest. In view of the aforesaid, we restore the issue to the AO / Transfer Pricing Officer for de novo adjudication after considering assessee’s claim of availability of internal CUP. This ground is allowed for statistical purposes. Short TDS credit - HELD THAT:- We direct the Assessing Officer to allow actual credit for TDS after verifying assessee’s claim. Levy of interest under section 234C - HELD THAT:- Interest u/s 234C of the Act has to be charged on the income returned by the assessee and not on the assessed income. Accordingly, we direct the Assessing Officer to compute interest u/s 234C on the income returned by the assessee. This ground is allowed. Validity of the order passed under section 92CA(3) - HELD THAT:- Undisputedly, the assessee has not challenged the validity of the order passed under section 92CA(3) either in the course of Transfer Pricing proceedings or even before DRP. For the first time, the assessee has raised the issue before the Tribunal. Though, the issue raised in the additional ground is a purely jurisdictional issue going to the root of the matter, hence, requires to be admitted, however, following our decision in assessment year 2006–07 (supra), we restore the issue to the Assessing Officer to decide the same after considering assessee’s submissions. These grounds are allowed for statistical purposes. Assessee’s appeal is partly allowed
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