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2020 (1) TMI 607 - AT - Income TaxTP Adjustment - providing of Corporate Guarantee (CG) To Associated Enterprise (AE)- HELD THAT:- As decided in own case [2018 (11) TMI 864 - ITAT MUMBAI] we restrict the rate of impugned additions to 0.50% as against 2.25% taken by the lower authorities. This ground stand partly allowed. The Ld. AO is directed to modify the final assessment order to that extent. As regards the difference from the preceding year, as submitted by the learned counsel of the assessee that there was withdrawal of the corporate guarantee, we are in agreement with the observation of the authorities below that this contention of the assessee cannot be accepted because the corporate guarantee has been given to LMI and, in turn, it has been communicated to the banks in the Dubai. As rightly noted, any withdrawal of the corporate guarantee would be effective only when the withdrawal of the corporate guarantee is communicated to the banks. In this regard assessee had accepted that banks were informed about the withdrawal of the corporate guarantee on 7/8/2013 which is after the date of the previous year under consideration. Therefore authorities below are quite correct in holding that in the eyes of law corporate guarantee was in existence and could be validly invoked against the assessee. The above view is also corroborated by the fact that the balance sheet of the assessee as on 31/3/2013 mentioned the corporate guarantees on behalf of subsidiaries under the head ‘contingent liabilities and commitments’. Furthermore, even information to the RBI for the aforesaid withdrawal was communicated in the next financial year in the month of August. Adjustment to Interest on Loan given to AE - HELD THAT:- As decided in own case [2018 (11) TMI 864 - ITAT MUMBAI] assessee has advanced loan pursuant to loan agreements / arrangements to its AE and was entitled to certain rate of interest. These loan transactions as entered into by the assessee with the AE squarely falls within the ambit of Section 92(1) / 92B as an international transactions as accepted by the assessee in its TP study and the statutory provisions mandates that the income from such transactions is to be computed on the principle of arm's length price irrespective of the fact that no such income has actually accrued to the assessee. This being so, the argument of principles of commercial expediency or notional income or revenue neutrality as raised before us fails since as long as the transaction is an international transaction within the framework of law, the computation of income there-from has to be on the basis of arm's length principle. Disallowance of Interest under section 36(1)(iii) - HELD THAT:- In assessee’s own case ITAT for assessment year 2009 – 10 to assessment year 2012 – 13 has held that no disallowance in this regard is warranted as the interest free loan advanced to the subsidiaries was out of commercial expediency. Furthermore, the tribunal had also held that assessee’s interest free funds to grant loans were sufficient and in this regard it had placed reliance upon Hon’ble Bombay High Court decision in the case of CIT vs HDFC bank [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Disallowance with regard to computation u/s 115JB - As held by Hon’ble Special Bench of the ITAT in the case of ACIT vs. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] for computation of book profit provisions of section 14A cannot be imported into clause ‘f’ of the explanation to section 115 JA - We are of the considered opinion that for computation of book profit under section 115JB disallowance under section 14A cannot be accounted
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