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2019 (5) TMI 1942 - AT - Income TaxT.P adjustment - Corporate Guarantee given to the subsidiary company of the assessee - International transaction - TPO determined the interest rate difference accruing to the Subsidiary company on account of Corporate Guarantee given by the assessee as 4% - TPO made T.P adjustment @ 2% on the amount of Corporate guarantee given. The Ld DRP also confirmed the same - HELD THAT:- We notice that the Tribunal is consistently holding the transaction of providing Corporate Guarantee as an international transaction. Hence the same is required to be examined under Arms length principles. There should not be any dispute that the provision of Corporate guarantee to its subsidiary in order to enable it to avail loans would bring benefit to the subsidiary, in which case, it is proper to compensate the assessee for those benefits under Arms length principles. We notice that the TPO has made an adjustment of 2%, considering the interest benefit @ 4% and taking the view that half of the same should be attributed to the benefit of the assessee. Hon'ble Bombay High Court has approved the T.P adjustment of 0.50% in respect of Corporate guarantee given in the case of Everest Kento Cylinders Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT]. Though the Ld A.R has pleaded for an adjustment of 0.20% by placing reliance on the decision of Asian Paints Ltd [2014 (1) TMI 16 - ITAT MUMBAI] yet we notice that the Ld A.R did not highlight the parity of facts between the assessee and the case of Asian Paints Ltd. Hence, on a conspectus of the matter, we are of the view that the T.P adjustment in respect of Corporate Guarantee may be made @ 0.50% as per other decisions of Tribunal and Hon'ble Bombay High Court referred above. Accordingly we set aside the order passed by the AO on this issue and direct the AO/TPO to make T.P adjustment in respect of Corporate Guarantee @ 0.50% in all the years under consideration. Disallowance made u/s 14A - Sufficiency of own funds as in excess of value of investment - HELD THAT:- The Hon'ble Bombay High Court has held in the case of HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT] that no disallowance out of interest expenditure u/r 8D(2)(ii) is called for when own funds available with the assessee is in excess of the value of investments. Accordingly we direct the AO to compare the own funds available with the assessee against the value of investments and accordingly apply the provisions of Rule 8D(2)(ii) by duly following the decision rendered by Hon'ble Bombay High Court in the case of HDFC Bank Ltd (supra). In respect of disallowance to be made u/r 8D(2)(iii) out of administrative expenses, the Special bench of Tribunal has held in the case of Vireet Investments Ltd [2017 (6) TMI 1124 - ITAT DELHI] that only those investments, which have yielded exempt income should be considered. Accordingly we direct the AO to compute the disallowance u/r 8D(2)(iii) accordingly.
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