TMI Blog2014 (7) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... cable for the AYs prior to 2008-09, relying upon Godrej & Boyce Mfg. Co. Ltd. v/s DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - some reasonable basis has to be adopted, for the purpose of disallowance - the Tribunal has already held that 2% of the total exempt income should be disallowed for the purpose of section 14A, which will take care of administrative expenses, the disallowance u/s 14A, should be restricted to 2% of the exempt income earned by the assessee – Decided partly in favour of Assessee. - ITA No. 4433/Mum./2009, ITA no. 4581/Mum./2009), C.O. no. 145/Mum./2010 ITA no. 2403/Mum./2011 ITA no. 2578/Mum./2011 - - - Dated:- 18-6-2014 - Shri P. M. Jagtap And Shri Amit Shukla,JJ. For the Petitioner : Mr. Madhur Agarwal For the Respondent : Mr. Surendra Kumar ORDER Per Bench The above cross appeals for the assessment year 2004-05, are directed against the impugned order dated 12th May 2009, passed by the learned Commissioner (Appeals)-XXXI, Mumbai, whereas, cross appeals for the assessment year 2005-06, are directed against the impugned order dated 3rd January 2011, passed by the learned Commissioner (Appeals)-XV, Mumbai. The cross objection pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Representative, on the other hand, strongly relied upon the order of the learned Commissioner (Appeals). 7. After carefully considering the submissions of the parties and the relevant material on record, we find that this issue has been decided by the Tribunal in assessee s own case for the assessment year 1998-99, 1999-2000 and 2000-01 and also in 2001-02. It is now an admitted legal positions that rule 8D is not applicable for the assessment years prior to 2008-09, in view of the decision of the Jurisdictional High Court in Godrej Boyce Mfg. Co. Ltd. v/s DCIT, (2010), 328 ITR 081 (Bom.). Thus, some reasonable basis has to be adopted, for the purpose of disallowance. Since the Tribunal has already held that 2% of the total exempt income should be disallowed for the purpose of section 14A, which will take care of administrative expenses, therefore, consistent with the same precedence, we also hold that the disallowance under section 14A, should be restricted to 2% of the exempt income earned by the assessee in this year. Accordingly, ground no.1, is treated as partly allowed. 8. Ground no.2, relates to the taxability of interest received on Nostro account and overseas pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the transfer pricing provisions cannot be applied for transactions between Head Office and Permanent Establishment as they are one and the same person and not separate independent enterprise. 6. The learned CIT(A) erred in upholding the action of the A.O. in making additions merely on the basis of TPO s report. 7. The learned CIT(A) ought to have held that in view of the provisions of Article 7(3) of the DTAA between India and France, no account is to be taken of any free or commission for specific services performed in determining the profits of a PE and hence the adjustment recommended by the TPO could not be made. 17. Before us, the learned Counsel for the assessee submitted that he did not wish to press these grounds. Accordingly, these grounds are dismissed as not pressed . 18. Ground no.8, relates to the addition of ₹ 72,25,900, towards interest free and commission with reference to the external commercial borrowings granted by the overseas branches. 19. Before us, the learned Counsel for the assessee submitted that this issue had come up for consideration before the Tribunal in assessee s own case for the assessment year 2002-03 in ITA no.1935/ Mum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services performed by the assessee for foreign currency loan arranged for its existing clients by taking into account only the fee and other charges received by the foreign branches from the borrowers in question. Since none of the parties have come out with the suitable comparables, therefore, we find that the estimation made by the CIT(A) at the rate of 20% is just and proper, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches. Thus, these grounds of the assessee are partly allowed. Thus, consistent with the view taken by the Tribunal in assessee s own case in earlier years, which are also permeating on the facts of this year, we hold that the adjustment in respect of fee and other charges received by the foreign branches on the borrowers of ECG should be estimated @ 20%. Thus, ground no.8 is partly allowed. 22. In ground no.9, the assessee has challenged the addition of ₹ 3,958, on account of interest received on account of call placement with its head office. 23. Before us, the learned Counsel for the assessee submitted that he did not wish to press this ground. Accordingly, this ground is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, in the year under appeal, the A.O. be directed not to bring to tax profit on similar contracts arising in any of the years. 32. The learned Counsel for the assessee submitted before us that if the ground raised by the Revenue for the assessment year 2004-05 is treated as dismissed, in that event, the ground raised in this cross objection will not survive. 33. Since the ground raised by the Revenue in the assessment year 2004-05 has been dismissed, therefore, the ground raised by the assessee in this cross objection does not survive. Consequently, the ground raised by the assessee is stands dismissed. 35. In the result, assessee s cross objection is dismissed. We now take up assessee s appeal being ITA no. 2403/Mum./ 2011, for the assessment year 2005-06. 35. Ground no.1(a) and (b), read as under:- 1(a) The learned CIT(A) erred in disallowing ad-hoc indirect expenses of ₹ 1,00,000 incurred to earn tax free interest income. (b) The learned CIT(A) ought to have held that no indirect expenditure was incurred in relation to exempt income as interest on securities was directly credited by the payee to the appellants bank account. 36. The learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the TPO could not be made. 43. The learned Counsel for the assessee submitted before us that he did not wish to press these grounds. Accordingly, these grounds are treated as dismissed. 44. Ground no.6(a), (b), (c) and (d), read as under:- 6(a) The learned CIT(A) erred in confirming an addition to the extent of ₹ 28,74,327 towards interest, fee and commission with reference to External Commercial Borrowings (ECB) granted by the overseas branches. (b) The learned CIT(A) ought to have appreciated that such interest, fee and commission was relatable to loans granted by overseas branches and had no connection with services rendered by Indian branches and hence no such addition was called for. (c) The learned CIT(A) ought to have appreciated that in respect of the old loans, Indian branch had no role to play and hence attributing interest, fees and commission as a share of Indian branches for their efforts was not justified and no TP adjustment could be made. (d) The learned CIT(A) ought to have held that the borrowers were existing customers of Indian branches and activity, if any, in connection with the disbursal of these loans was only of providing credit inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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