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2023 (12) TMI 927 - ITAT MUMBAIDisallowance u/s 14A - CIT (A) has made enhancement of disallowance u/s 14A after applying Rule 8D - HELD THAT:- As undisputed fact that Rule 8D is not applicable in A.Y.2007-08, as it has come into the statute in A.Y.2008-09 and now it is a settled issue that computation of disallowance under Rule 8D cannot be made prior to the A.Y.2008-09. This Tribunal in A.Y. 2005-06 has restricted the disallowance under Section 14A 5% of the exempt income - assessee submitted the calculation of investments after reducing foreign investment and non-dividend yielding investment and other investments as per working given by him which has also been provided at page 101 of the paper book and has submitted that, based on this, the average of opening and closing of investment worked out and disallowance should be reduced substantially. However, his working is based on formula provided in Rule 8D (2)(iii), but once Rule 8D is not applicable in this year then we are not inclined to work out disallowance as Rule 8D. Thus, in line with the earlier decisions of the Tribunal, we hold that 5% of exempt income will be taken as disallowance for the purpose of Section 14A and accordingly, assessee gets part-relief. Disallowance of expenditure incurred on settlement claims - HELD THAT:- This issue is squarely covered by the decision of the Tribunal in assessee’s own case for A.Y. 2005-06 [2020 (3) TMI 799 - ITAT MUMBAI] wherein disallowance in respect of settlement of claims have been allowed. Decided in favour of assessee. TP adjustment commission on letter of credit - international transaction or not? - AO has made addition in respect of non-recovery by the assessee from its AE and the issue of letter of credit holding that assessee has not charged any commission from the AE - HELD THAT:- We find that the Tribunal in A.Y.2005-06 [2020 (3) TMI 799 - ITAT MUMBAI] has decided this issue in favour of the assessee stating CIT(A) after appreciating the contention of assessee concluded that issuance of Letter of Comfort does not constitute an international transaction. CIT (A) appreciated the difference between corporate guarantee and Letter of Comfort. AR further submits that there is a basic difference between corporate guarantee and Letter of Comfort. In a Letter of Comfort, the party issues only a letter that a subsidiary or group company would comply term of financial transaction and have no obligation to indemnify, however, in case of corporate guarantee, the party issuing guarantee is under obligation to the lender. AR further submits that in fact this ground of appeal is also covered by the decision of Tribunal in case of The India Hotel Company Ltd [2019 (9) TMI 1340 - ITAT MUMBAI] wherein similar ground of appeal was considered and by following the decision of earlier years in that assessee and decision of Hon'ble Karnataka High Court in United Braveries Holding Ltd. Karnataka State Industrial Investment and Development Corporation Ltd. [2011 (8) TMI 1331 - KARNATAKA HIGH COURT] wherein it was held that Letter of Comfort merely indicates the parties assurance that respondent would comply with the term of financial transaction without guaranteeing performance in the event of default. Since in the earlier year this precise issue has been decided in favour of the assessee, therefore, as precedence, following the aforesaid decision, we uphold the order of the ld. CIT (A) and consequently grounds raised by the Revenue are dismissed.
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