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2023 (5) TMI 350 - AT - Income TaxTP Adjustment - Notional interest imputed on interest-free advances extended by the assessee to its AE -TPO imputed the interest at the rate of 14.86%, i.e., SBI Prima Lending Rate (SBI PLR) has been the alleged ALP by following CUP method - HELD THAT:- In the present case, there is no dispute to the fact that the loans and advances given to AEs are an international transaction. However, the reduction of such loans and advances receivable from the AEs by making provision for doubtful loans and advances in the books of account is an unilateral act of the assessee. It may be true that the provision for doubtful loans and advances was necessitated out of doubtfulness of the recovery of loans given to AEs on account of facts described above. However, the act of making provision for doubtful loans and advances remains a voluntary and unilateral act of the assessee. In the present case, provision for doubtful loans and advances is made in respect of receivables from AEs. In an uncontrolled condition and between persons other than associated enterprises, no prudent person would have given huge loans to a third party and reduce the same by making a provision for bad and doubtful loans and advances. ALP of the same under the comparable uncontrolled price method or other method would be NIL. Thus, even for this reason, we cannot accept the argument that TP adjustment should not be made merely because of reduction of receivables by making provision for doubtful loans and advances. As genuineness of the loans given and the subsequent provision made for the same is under question by the `Project Spirit report’. In view of the above, we confirm the findings of the TPO in making the TP adjustment on interest free loans given to AEs. Fee Imputed on corporate guarantee extended to subsidiaries - Tribunal in assessee’s own case for assessment year 2013-2014 [2022 (4) TMI 1408 - ITAT BANGALORE] had reduced the rate of corporate guarantee commission to 0.5% of the corporate guarantee given - HELD THAT:- In view of the above order of the Tribunal in assessee’s own case, which is identical to the facts of the instant case, we direct the TP addition to be restricted at 0.5% of the corporate guarantee given by the assessee to its subsidiaries. Purchase of raw material from Whyte & Mackay - HELD THAT:- Since the facts raised is identical to the facts considered by the Tribunal in assessee’s own case for assessment year 2013-2014 [2022 (4) TMI 1408 - ITAT BANGALORE], we restore the impugned TP adjustment to the files of the AO / TPO. The AO / TPO is directed to decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. Disallowance u/s 14A - HELD THAT:- The Tribunal in assessee’s own case for assessment year 2013-2014 (supra) by following the order of the Tribunal for assessment year 2012-2013 [2020 (6) TMI 135 - ITAT BANGALORE] had restored the matter to the files of the AO to re-compute the disallowance u/s 14A - Thus we restore the issue of disallowance u/s 14A of the I.T.Act to the files of the AO. Disallowance of interest u/s 36(1)(iii) - as decided in assessee own case for 2013- 2014 [2022 (4) TMI 1408 - ITAT BANGALORE] Tribunal directed the A.O. to examine whether the own funds of the assessee is in excess of the aggregate amount of interest free advances and in such event, the Tribunal held that no disallowance is called for - HELD THAT:- In view of the above order of the Tribunal, we restore the issue raised in ground 5 to the files of the AO. The learned AR has also pointed out that for the relevant assessment year the assessee has been charging interest (as per the amendment to the Companies Act, 2013) at the rate of 13% on advances made to its subsidiaries. This argument raised by the learned AR is also to be examined by the A.O. for the relevant assessment year and if the assessee is charging interest on the advances made during the relevant assessment year, no disallowance is called for u/s 36(1)(iii) of the I.T.Act in respect of the said advances. Disallowance of payments for promotion and advertisement expenses - HELD THAT:- In view of the order of the Tribunal for assessment year 2013-2014 [2022 (4) TMI 1408 - ITAT BANGALORE] and 2012-2013 [2020 (6) TMI 135 - ITAT BANGALORE] we direct the A.O. to grant deduction of sales promotion and advertisement expenses as a revenue expenditure. It is ordered accordingly. Disallowance of payment on Project Spirit Report - HELD THAT:- In the light of the above order of the Tribunal in assessee’s own case for assessment year 2013-2014 [2020 (6) TMI 135 - ITAT BANGALORE] which is identical to the facts of the instant case, we restore the matter to the A.O. The A.O. is directed to examine the issue afresh.
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