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2023 (2) TMI 348 - ITAT CHENNAITransfer Pricing Adjustment - Import made by the assessee - DRP directed Ld. TPO to adopt the middle value of the price band in FMB [Fertilizer Market Bulletin] price list to iron out the various factors like insurances, extended credit facility etc. - HELD THAT:- The import and export transactions have been benchmarked on transaction-to-transaction basis on the basis of rates published in FMB bulletin. The price quoted therein gives a broad price range and accordingly, the middle price has been accepted while working out TP adjustments. Another fact is that the published prices do not provide any information about quantities shipped at those rates. Assessee sought examination of additional evidences which were not admitted by Ld. DRP. A plea has been raised by Ld. AR to admit these evidences since the same is stated to have material bearing on the determination of ALP - we direct Ld. TPO / AO to admit these additional evidences and rework the TP adjustments after re-examination of the same. AR has pleaded for grant of safe harbor / tolerance range which may also be considered by Ld. TPO in accordance with law. The assessee is directed to provide requisite information and evidences in support of its case. The corresponding grounds stand allowed for statistical purposes. Disallowance u/s 14A - assessee earned exempt dividend income and offered suo moto disallowance - AO, applying Rule 8D, computed aggregate disallowance which was direct expenses disallowance u/r 8D(2)(i), interest disallowance u/r 8D(2)(ii) and indirect expenses disallowance u/r 8D(2)(iii) - HELD THAT:- The limited submissions of Ld. AR are that own funds far exceed the investments made by the assessee and therefore, a presumption would arise that the investments were funded out of own funds. Further, majority of the investments are old investments for which interest disallowance is not justified. Lastly, it is the submission of Ld. AR that only exempt yielding investments are to be considered while working out the disallowance. We find that both the pleas are duly supported by binding judicial precedents. Therefore, we direct Ld. AO to examine whether the own funds exceed the investments made by the assessee and the investments are old investments only. If so, interest disallowance would not be justified. Further, while working out the disallowance, only exempt income yielding investments are to be considered by Ld. AO. We order so. This ground stand allowed for statistical purposes. Disallowance of interest converted into loans - outstanding interest on loan has been disallowed in earlier years u/s 43B since the same was converted into loans and there was no actual payment - HELD THAT:- The assesses has subsequently settled the loans and make a claim for deduction of interest on the ground that the same has actually been paid. However, as rightly noted by lower authorities, the assessee is not in possession of necessary evidences to support the same and not able to provide even the basic working of bifurcation of interest and principal component. No such evidences or computations have been placed before us. We also concur with the observations of Ld. AO that there could be innumerable variations in repayment arrangement / schedules entered into by the lender and borrowers. It may, therefore be not possible to visualize all kinds of arrangement which may be entered into by lenders and borrowers in this regard. The fundamental principle would remain that once an amount has been determined as interest payable to banks of financial institutions, any subsequent change of nomenclatures of interest would not affect its allowability and deduction in terms of Sec.43B. Therefore, by confirming this disallowance, we dismiss the grounds raised by the assessee, in this regard.
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