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2022 (7) TMI 385 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - As per assessee no exempt income has been earned by the assessee - HELD THAT:- Factum of earning no dividend income by the assessee company during the years under consideration i.e. A.Y. 2009-10, 2010-11 & 2013-14 is admitted one. It is settled principle of law that when no exempt income has been earned by the assessee during the years under consideration no disallowance can be made under section 14A read with rule 8D of the Act. So finding no illegality or perversity in the impugned deletion of addition, findings returned by Ld. CIT(A) are upheld. - Decided against revenue. Addition u/s 14A read with rule 8D under Minimum Alternate Tax (MAT) computation under section 115JB - HELD THAT:- When there is no disallowance under section 14A read with rule 8D of the Act, no disallowance is sustainable under section 14A read with rule 8D under MAT computation under section 115JB of the Act as has been held by Special Bench of the Tribunal in case of ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] - Decided against revenue. Disallowance of write off of the security deposits - CIT(A) decided the issue by referring the same back to the AO to verify whether the same were actually written off and if so allow the sum as deduction - HELD THAT:- Since department is not prejudiced in any manner with the findings returned by the Ld. CIT(A) as the amount if actually written off is an allowable deduction. It would be done by the AO only after verification. So this ground is determined against the Revenue. TP adjustment qua interest on shareholders’ deposit - Addition on the ground that the assessee has taken risk by giving deposit to an international Associate Enterprise (AE) without taking any security and charged the interest @ 11.71% with additional amount of 1% to the rate of interest for not taking any security, to the amount of shareholders’ deposit - HELD THAT:- The co-ordinate Bench of the Tribunal [2017 (11) TMI 376 - ITAT MUMBAI] decided the identical issue qua transfer pricing adjustment in relation to non-interest bearing shareholders’ deposit by considering the permission accorded by RBI and by considering the decision rendered in case of CIT vs. Hukumchand Mills Ltd. [1983 (2) TMI 1 - BOMBAY HIGH COURT] and decision rendered in case of Uco Bank [1999 (5) TMI 3 - SUPREME COURT] and as such no addition on account of transfer pricing adjustment qua non-interest bearing shareholders’ deposit is sustainable in the eyes of law. Hence, ground No.3 of A.Y. 2009-10, 2010-11 & grounds No.1 to 7 of A.Y. 2013-14 of Revenue are determined against it. TP adjustment towards accrual of technical knowhow fees from AE in Indonesia – PTFSI - technical fee received/receivable from AE were not reported in the agreement - HELD THAT:- Co-ordinate Bench of the Tribunal by relying upon the decision rendered by the Hon’ble Supreme Court in case of Godhra Electricity Co. Ltd. [1997 (4) TMI 4 - SUPREME COURT] held that when there is an uncertainty involved in collection of technical knowhow fees from PTFSI due to its bad financial conditions the assessee has rightly not recognized the Revenue. So the necessary entries made by the assessee company are merely on hypothetical income and as such the impugned amount brought to tax by the AO has not represented the income which has really accrued to the assessee company during the years under consideration. In view of the matter the Ld. CIT(A) has rightly deleted the addition by following the order passed by the Tribunal in assessee’s own case for A.Y.L 2012-13. TP Adjustment on accrual of interest on outstanding balances of the AE - HELD THAT:- This issue is no longer resintegra having been decided by co-ordinate Bench of the Tribunal in assessee’s own case in A.Y. 2007-08 AND 2008-09 . [2018 (4) TMI 1925 - ITAT MUMBAI], 2010-11 & 2012-13 [2017 (11) TMI 376 - ITAT MUMBAI] the debit balance outstanding with the AE on the year end does not fall within the ambit of international transactions and as such Ld. CIT(A) has rightly deleted the adjustment proposed by TPO and made by AO. Nature of receipt - subsidy received by the assessee under the package scheme of incentives 2007 from the Government of Maharashtra - revenue or capital receipt - HELD THAT:- As decided in own case since the subsidy has been given as an incentive to set up a new unit or to expand an existing unit to encourage industrial development in the state, the subsidy/incentives received by the assessee is on capital account and as such not chargeable to tax. So the Ld. CIT(A) has rightly decided the issue in favour of the assessee LTCG computation - assessee has offered Long Term Capital Gain (LTCG) by applying the percentage completion method and by taking indexation till the year of sale - AO by disagreeing with the assessee proceeded to hold that the assessee is not entitled for this claim and by removing the wrong claim of indexation and by rejecting the percentage completion method for the working of LTCG, the AO made addition being the differential amount in capital gain offered - HELD THAT:- Since the issue before hand is identical to the issue decided by the co-ordinate Bench of the Tribunal in A.Y. 2012-13 [2017 (11) TMI 376 - ITAT MUMBAI] so by following the order we hereby set aside the same for verification purpose only to verify the sale of stock in trade affected and offered the proportionate capital gains in the relevant years to tax the same accordingly. Because whole of the capital gain on conversion of land to stock in trade in the year in which only part of sale of stock in trade is affected cannot be brought to tax. TP Adjustment on corporate guarantee - assessee company stood as guarantor for a loan availed of by its AE without charging anything for the risk involved - HELD THAT:- As when corporate guarantee has been provided by the parent company for the overall benefit of business of the group and ultimately to the benefit of the parent company itself, the transaction qua providing corporate guarantee is to be treated at arms length without any separate mark up. Moreover, as already decided by co-ordinate Bench of the Tribunal the transaction as to providing corporate guarantee qua the loan availed of by the AE does not cover under the definition of international transactions as defined under section 92B of the Act. So we hereby set aside the order passed by the Ld. Lower Authorities and addition made by Ld. Lower Authorities on account of transfer pricing adjustment qua risk involved in giving guarantee on loan advance to the AE is ordered to be deleted. So ground No.1 of A.Y. 2009-10 & 2010-11 is determined in favour of the assessee. MAT computation qua the subsidy received under package incentive scheme - HELD THAT:- CIT(A) by way of specific ground qua the subsidy received under package incentive scheme of 2007 of Government of Maharashtra as capital subsidy and to exclude the subsidy amount while computing the book profit under section 115JB of the Act which is purely a legal issue, the Ld. CIT(A) was required to decide the issue on merits having been declined by the AO on the ground that this claim was not raised by the assessee by way of filing revised return. So we set aside this issue back to the Ld. CIT(A) to decide afresh.
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