TMI Blog2016 (7) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary resolutions passed and information furnished to authorities to establish the nature of amounts advanced. If the amount is advanced towards loans, then, the transaction would be an international transaction and whether interest can be levied or not has to be examined in the light of the various decisions relied upon. What we also notice is that many of the decisions are not in the context of TP provisions but in the context of general income tax computation. Therefore, the issue is to be re-examined viz-a-viz case law relied upon and the applicable provisions of the Act. Then, the rate of interest would be an issue. In case interest is levyable, then, LIBOR+2% is generally accepted as the rate of interest to be levied on international transactions by various decisions of the Co-ordinate Benches. Therefore, without adjudicating the issue on this, we set aside the matter to the file of AO/TPO to re-examine the facts afresh and then decide the issue accordingly, keeping in mind the provisions and the case law relied upon. Assessee should be given an opportunity to substantiate the contentions. - Decided in favour of assessee for statistical purposes. Eligibility of claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of Assessing Officer (AO) u/s. 143(3) r.w.s. 144C (5) of the Income Tax Act [Act] consequent to the directions of the Dispute Resolution Panel [DRP], Hyderabad. Assessee has raised the following revised grounds: 1.Erred in making the addition of ₹ 47,25,188/- u/s. 92CA of the Act on the investment of ₹ 73,31,22,791/- made during the year of account in its AE, M/s GSS America Inc without appreciating the fact that the shares have been already allotted to the assessee company. 2. Erred in re-categorizing the nature of asset by treating the Investment as Loan which is not permissible u/s 145 of the Act. 3. Erred in not considering the foreign exchange received of ₹ 5,31,09,900/- within 2.5 months from the end of one year from the date of invoice while calculating deduction u/s 1OA without appreciating the fact that the authorised dealer, the AXIS Bank has certified and confirmed that the amount of ₹ 5,31,09,900/- has been received by the assessee. 4. Erred in not considering the export receivable from its subsidiary of ₹ 12,23,68,351/- converted into equity while calculating deduction u/s.10A and the same is carried out as perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o verify the same and re-work the deduction u/s. 10A. It was the contention that AO did not follow the directions; hence assessee has raised the grounds accordingly. 3. We have heard Ld. Counsel and the Ld. DR in detail and considered the above three issues as under: Levy of interest of ₹ 47,25,188/- :- 4. During the FY. 2009-10, assessee advanced a sum of ₹ 30,18,54,791/- as interest free funds to its AE, M/s. GSS America Inc, wherein the opening balance as on 01-04-2009 was at ₹ 43,12,68,000/- and outstanding as on 31-03-2010 stood at ₹ 73,31,22,791/-. The argument of assessee before the TPO was that the funds were given out of free reserves and the amount was in the nature of quasi-equity and the advances converted into equity in FY. 2011-12 and the facts are similar to the decision of the ITAT in the case of Mascan Global Limited in ITA No. 2205/10 dt. 12-08-2011. The TPO however, did not accept and determined the interest at 4.06% pa and worked out the levy of interest of ₹ 47,25,188/-. 4.1. Before the DRP, assessee submitted that most of the business of assessee is from the US region and the advances were given to the assessee s sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity or the amounts advanced originally as loans and later converted to equity. Since facts are not clear, we are unable to give any finding whether the amounts advanced were in the nature of equity or not? TPO order in fact shows that the sums were shown as outstanding and he categorized them as interest free loans. There are also opening balances pertaining to earlier year to an extent of ₹ 43,12,68,000/-. It is not known whether department has accepted the advances in earlier year without any TP adjustment. In the absence of relevant facts, it is difficult to give a finding and apply various case law. Therefore, we are of the opinion that the facts required to be examined by the AO afresh. First of all, AO has to ascertain the nature of advances given to assessee whether it is loan or equity and how they are reflected in the respective accounts in the respective years. If assessee has invested them as investment in subsidiary they would be done under the head investment otherwise, the same would figure under the head loans and advances . Likewise, if the amount is advanced as the share capital, the same would also be shown as share application money in the subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47,92,31,680 5. Domestic Sale 3,39,455 6. Total turnover 47,95,71,135 7. Net Profit 13,19,98,501 8. Exempt Profit 7*4/6 13,19,05,068 5.1. The details of export realization in respect of exports from Hyderabad are furnished as under: Details of Export Amount in Rs. 1. Export from GSS Infotech Ltd, Hyderabad 20,20,07,311 2. Export realisation Upto 30.09.2010 9,67,355 3. Export realisations after 30.09.2010 but within 1 year from date of Invoice 2,84,51,000 4. Export realisations within 3 months after 1 year from date of Invoice 5,02,20,605 5. Sub Total 7,96,38,960 6. Receivables Converted to Equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/H/2010 Export receivable converted into equity of ₹ 12,23,68,351/- c. Onsite sales should not be excluded from Export Turnover M/s. Zylog systems Ltd Vs. ITO (2011) 128 ITD 105 Onsite Consultancy of Branches of ₹ 27,72,24,369/- Whatever amount has been excluded from the export turnover should also be excluded from the total turnover for the purpose of computation of exemption u/s. 10A of the Act ITO Vs. D E Block India Software Pvt Ltd., ITA No. 983 and 984/Hyd/2006 Branch Sales should be excluded from Export turnover as well as from total turnover DCIT Vs. Seven Hills Business Solutions P Ltd., Hyderabad ITA No. 82/Hyd/2009 6. Ld. DR however, relied on the order of the DRP. 7. We have considered the issue. As can be seen from the order of the DRP also, it has more or less accepted assessee s contentions. But while implementing the orders of the DRP, AO did not examine the issues at all. Consequently, we are of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas, AO levied for a period beyond accounting year also which cannot be upheld. 10. Assessee relied on the following case law that no interest can be charged on credit which are given in the course of business. No interest can be charged on mobilization advance it cannot be treated as loan as it has been given during the course of business. No interest can be charged on mobilization advance it cannot be treated as loan as it has been given during the course of business. Pegasystems Worldwide India Pvt. Limited, Hyderabad. ITA No. 1758/Hyd/2014 Interest charged on Receivables Indo American Jewellery Ltd Vs. Dy. Commissioner of Income Tax, Circle-9(2), Mumbai. [2012] 18 taxmann.com 303 (Mum.) Litnas India (P.) Ltd., Vs. ACIT [2012] 27 taxmann.com 300 (Mumbai-Trib.) Evonik Degussa India (P.) Ltd., Vs. ACIT OSD Circle-3(1), [2012] 28 taxmann.com 285 (Mumbai) Nimb ..... 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