Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 896 - AT - Income TaxTP Adjustment made on account of notional interest on loan given to wholly owned subsidiary by the assessee company - As argued only LIBOR rate should be taken for the purpose of adding notional interest income on account of interest free loan given to foreign subsidiary - HELD THAT:- As relying on own case [2021 (2) TMI 1018 - ITAT MUMBAI] we direct the ld. TPO to consider only LIBOR rate @1.52% as arm’s length price for benchmarking the interest free loan given by the assessee to its AE and recompute the transfer pricing adjustment accordingly. Accordingly, the ground No.1 raised by the assessee is partly allowed. Transfer pricing adjustment made on account of fee for corporate guarantee - HELD THAT:- As decided in own case [2021 (2) TMI 1018 - ITAT MUMBAI] we do not find any merit in the submissions of the assessee that provision of corporate guarantee is not an international transaction. As regard the arm's length rate of fee/commission, the learned Counsel for the assessee relying decision of the Asian Paints India Ltd. (supra) has submitted that it should be reduced to 0.2% - on careful perusal of the decision rendered in case of Asian Paints (supra), we find that in the facts of the said case the assessee itself had charged commission @ 0.2% over the years and the Tribunal has accepted the claim of the assessee which was not contested by the Revenue. Taking note of these facts the Hon'ble Jurisdictional High Court has dismissed the appeal of the Revenue. These are not the facts in case of the present assessee. Therefore, we are not inclined to interfere with the decision of learned Commissioner (Appeals) on this issue. Disallowance made on account of alleged non-genuine purchases - HELD THAT:- All the documents furnished by the assessee are only self-serving documents which are available in the books of accounts of the assessee company and which are not corroborated by third party confirmation. Even the assessee had failed to produce parties for examination as directed by the ld. AO. In these circumstances, it would be just and fair to conclude that the purchases made from the aforesaid suppliers remain unverifiable - corresponding sales made out of disputed purchases had not been doubted by the Revenue, it would be safe to conclude that assessee could have made purchases from grey market in order to have some savings in indirect taxes and the incidental profit element thereon for making purchases in cash. Based on the report of the task group for diamond sector published by the Government of India, Ministry of Commerce and Industry in this regard, wherein the benign / presumptive taxation threshold was set at 2.5%, we hold that profit percentage embedded in the value of disputed purchases estimated at 2.5% thereon would meet the ends of justice. The ld. AO is directed accordingly. Disallowance u/s.14A of the Act r.w.Rule 8D(2)(iii) - Assessee made suomoto disallowance of administrative expenses - HELD THAT:- We find that assessee had only made an adhoc disallowance of ₹ 1 lakh in the instant case u/s.14A of the Act and had also not provided the basis of arriving at such disallowance before the lower authorities. Hence, there is no need to record any satisfaction by the ld. AO to disapprove the said adhoc disallowance. The ld. AO had proceeded to make the disallowance based on computation mechanism provided under Rule 8D (2)(iii) of the Rules, which action cannot be faulted with. The only dispute before us is with regard to disallowance made under Rule 8D(2)(iii) of the Rules. Hon’ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] had held that only those investments which had yielded exempt income to the assessee during the year alone should be considered for the purpose of making the disallowance under Rule 8D(2)(iii) of the Rules. Respectfully following the same, we hereby direct the ld. AO to consider only the investments of ₹ 40,01,64,994/- and apply 0.5% thereon for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules which would work out to ₹ 20,00,825/-. AO is directed to disallow a sum of ₹ 19,00,825/- (20,00,825- 1,00,000) in the instant case u/s.14A of the Act read with Rule 8D(2)(iii) of the Rules. Accordingly, the ground No.4 raised by the assessee is partly allowed.
|