Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 858 - AT - Income TaxDisallowance of interest u/s 14A - HELD THAT:- Provisions contained u/s 14A of the Act, AO has not recorded his satisfaction as required u/s 14A(2) that the working given by the assessee is not correct. Hon’ble High Court of Delhi in case of Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - DELHI HIGH COURT] held that, “it is incumbent upon the AO to record satisfaction as to the working given by the assessee that no expenses have been incurred by it to earn the dividend income”. In view of the matter, we are of the considered view that addition made by the AO and confirmed by the ld. CIT (A) u/s 14A is not sustainable, hence ordered to be deleted. Addition u/s 36(1)(iii) - disallowance of interest - disallowance has been confirmed rejecting the contention of the assessee that the impugned advances have been made out of business expediency - HELDTHAT:- In view of the financials brought on record by the assessee company discussed in the preceding para, we are of the considered view that since transactions are pertaining of business of shares/future/option of securities & advances having been given on account of commercial expediency of the group companies, disallowance made by the AO and confirmed by the ld. CIT (A) u/s 36(1)(iii) is not sustainable, hence ordered to be deleted Disallowance on account of foreign tour and travel expenses - expenses incurred by Director of assessee company which are pertaining to his travel to Australia and New Zealand on the ground that Shri Saurav Arora is neither Director nor employee of the assessee company and assessee company has not conducted any transactions with Australia and New Zealand Stock Exchanges - HELD THAT:- From the perusal of the reply filed by the assessee company before the ld. CIT (A), extracted in para 7.2 of the impugned order, assessee company has failed to prove the purpose for which foreign tours have been carried out by Shri Saurav Arora. Emails brought on record by the assessee company also failed to explain the purpose of foreign visits. Perusal of the foreign detail given by the assessee company, available at page 50 of the paper book, also does not disclose the purpose and result of the foreign visits. We are of the considered view that expenses Incurred by Shri Saurav Arora, Director of the assessee company when not proved to be incurred for business purpose of the assessee company, its addition cannot be made against assessee company rather its addition can be made against Shri Saurav Arora in his individual capacity. In these circumstances, addition of ₹ 4,48,911/- made in the name of assessee company is not sustainable, hence ordered to be deleted. TP Adjustment - addition on account of arm’s length price value of the interest receivable on loans outstanding in the name of Jaypee Singapore Pte Ltd. against which the assessee has shown nil interest - HELD THAT:- AO has no authority to re-characterize the transaction of making investment by the assessee company in equity shares of subsidiaries as a loan; secondly, OECD Guidelines also discourage restricting of legitimate business transaction; thirdly, when the AO has not come up with specific finding that the transaction in question is a sham transaction, he cannot treat the transaction of “capital infusion” by the assessee company as a loan and to charge the interest thereon on notional basis; and fourthly, in the absence of any specific finding by the AO that any income has arisen from international transaction, TP provisions contained in Chapter-X of the Act do not apply. Section 92(1) of the act says that income arisen from international transaction is a condition precedent for application of Chapter-X of the Act. Consequently, we are of the considered view that addition made by the AO and confirmed by the ld. CIT(A) on account of arm’s length price of value of interest receivable on loans outstanding in the name of Jaypee Singapore Pte Ltd. is not sustainable, hence ordered to be deleted - Decided in favour of the assessee.
|