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2019 (10) TMI 292 - AT - Income TaxTP Adjustment - CIT-A directing the TPO to compute the Arm’s Length Price (ALP) by adopting LIBOR rates to benchmark the receipt of interest by the assessee from its Associated Enterprise (AE) - non determining the spread on account of risk adjustment to be applied over and above the LIBOR rate - HELD THAT:- As decided in assessee's own case [2017 (8) TMI 413 - ITAT MUMBAI] in the subsequent AY.(AY 2012-13),the AO himself had made no adjustment on account of interest rate transaction even though the facts and circumstances were identical to the facts to the year under appeal. We also find that in the cases, relied upon by the assessee, the Tribunal has taken a consistent view that LIBOR+ 200bps or 300bps interest rate has to be considered arm's length rate of interest.In the case under consideration after adding 300 bps the rate would come to 5.49 %,whereas the assessee has charged 6%/7.5% interest from its AE thus, there was no justification for the FAA to uphold the order of the TPO/AO who had charged interest @14.39%.Therefore,reversing the order of the FAA,we decide third Ground of appeal in favour of the assessee . Disallowance u/s 14A - Computation of book profits u/s 115JB - HELD THAT:- t is not in dispute that there was no exempt income claimed by the assessee. The law is now very well settled that when there is no exempt income, there cannot be application of disallowance u/s 14A of the Act. Accordingly, we direct the ld AO to delete the disallowance made u/s 14A of the Act both under normal provisions of the Act as well as in the computation of book profits u/s 115JB of the Act. Addition u/s 41(1) - reduction in its liability of buyback during the year of its Foreign Currency Convertible Bonds (FCCB) - HELD THAT:- No dispute that the proceeds of the FCCBs were utilized by the assessee for acquisition of shares of its wholly owned subsidiary in USA. Hence it could be safely concluded that the FCCBs were utilized for capital purposes. We find that the assessee had undertaken the buyback of few FCCBs at a discounted value , which resulted in rebut, or remission of a part of the FCCBs. The assessee claimed the gains earned (reduction in the liability) on the buyback of FCCBs of ₹ 7,57,00,711/- as non taxable in the return of income since this was not a gain but an actual reduction in the liability which occurred due to buyback of FCCBs. We find that the decision in the case of CIT vs Xylon Holdings (P) Ltd . [2012 (9) TMI 449 - BOMBAY HIGH COURT] clearly supports the case of the assessee wherein it was held that cessation / remission of liability to repay a loan taken to purchase a capital asset does not result in revenue receipt chargeable to tax. As relying on MAHINDRA AND MAHINDRA LTD. THRG. M.D. [2018 (5) TMI 358 - SUPREME COURT] we hold that the gains earned on reduction of liability on the buyback of FCCBs at a discounted value in the sum cannot be brought to tax Recomputing the deductions u/s 10A, 10B and 10AA by setting off the losses of non-STP / non-tax holiday units - HELD THAT:- As decided in own case for the Asst Year 2012-13 lower authorities had erred in disallowing part of the assesses claim of deduction under Sec.10AA by wrongly aggregating the income and loss of various units while quantifying its entitlement towards deduction under Sec.10AA of the I.T Act. In terms of our aforesaid observations, we vacate the disallowance under Sec.10AA
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