TMI Blog2017 (6) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... ro Clinpharm Pvt. Ltd. [2016 (5) TMI 633 - ITAT MUMBAI ]. This provision is applicable from AY 2013-14 onwards. Hence, addition of corporate guarantee in this AY is deleted. Accordingly, the ground raised by the assessee is allowed Disallowance u/s 14A - Held that:- Since the assessee has not received any exempt income during the year, we direct the AO/TPO to delete the addition made on this count. - Decided in favour of assessee. - ITA No. 404/Hyd/2015, And ITA No. 479/Hyd/2015 - - - Dated:- 2-6-2017 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER, AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri P. Murali Mohana Rao For The Revenue : Smt. U. Minichandran ORDER PER S. RIFAUR RAHMAN, A.M.: This appeal is preferred by the assessee against the order passed u/s 143(3) r.w.s. 92CA(3) r.w.s.144C(13) of the Income Tax Act, 1961 (in short Act ) dated 27/02/2015 relating to AY 2010-11. 2. Briefly the facts of the case are that the assessee filed its original return of income for the AY 2010-11 on 24/09/2010 u/s 139(1) of the Act, declaring total income of ₹ 10,30,93,600/- after claiming deduction of ₹ 4,65,41,901/- u/s 80IC in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to Vivimed, Hong Kong, the outstanding balance as on 31.03.2010 is ₹ 12,52,80,067/-. The assessee has received interest of ₹ 94,27,950/- which is 6% on the outstanding balance. The interest rate was determined by the assessee on the comparison of the rates charged in conformity with the guidelines prescribed by the RBI issued under FEMA, 1999 for external borrowings which could be relied upon for application of comparable uncontrolled price (CUP) for confirming the arm's length nature of interest received. Hence, it would be reasonable to conclude that the assessee's international transaction in relation to recipient of interest is consistent with the arms length standard as mandated by the Indian Transfer Pricing Regulations. Since the international transaction entered between the AE is in foreign currency, the domestic prime lending rate would have no applicability and the international rate fixed being UBOR has to be considered and accordingly, we considered the same for the purpose of determining interest rate which is in conformity with the guidelines prescribed by the RBI issued under FEMA, 1999 for external borrowings. Therefore, Comparable Uncon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing international transaction, the proper guarantee rate as held in the case of MIs Nimbus Communications Ltd. (TS-167-ITAT-2013 (Mum)-TP) would be 0.5%. Accordingly, we direct the TPO to recompute the fee to be charged on corporate guarantee for loan of ₹ 76.05 cores and loan of ₹ 6.651 crores at 0.5%. 6. Adjustment u/s 92CA in respect of investment in subsidiary it is observed that during the year under consideration, the assessee has made equity investment of ₹ 98,00,000/- in Vivimed Labs in USA Inc which is wholly owned subsidiary company (AE). This investment was made towards development of software product and new technology products. The assessee relied on Circular No. 14, dated 22/11/2011 and submitted that section 92B(1) is applicable only when income is chargeable and not for capital investment. He also relied on the following case laws: 1. Vodafone India Services (P) Ltd., Vs. Union of India [2014] 50 taxmann.com 300 (Bombay) 2. ITAT Hyderabad in the case of Prithvi Information Solutions Ltd. Vs. DCIT, ITA No. 472/Hyd/2014. 6.1 The DRP following the decision of Vodafone India Services Pvt. Ltd., (supra), directed the AO and TPO to follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance for investment, the ld. AR submitted that capital advances towards investment in the subsidiary companies is not an international transactions because income is not generated. For this proposition, he relied on the following case laws: 1. GSS Infotech Ltd. Vs. ACIT, Hyd., 497/Hyd/2015. 2. M/s Vijay Electricals Ltd. Vs. Addl. CIT, ITA No. 842/Hyd/2012, order dated 31/05/2013. 3. Dana Corporation RE, 321 ITR 178 (AAR) 4. DCIT (OSD), Vs. Cadila Healthcare Ltd., 39 Taxmann.com 51, (Ahmd.) 5. Amiantit International Holding Ltd., 322 ITR 678 (AAR). 12. Ld. DR relied on the orders of revenue authorities. 13. Considered the rival submissions and perused the material facts on record. The assessee has given advances to its AE s i.e. Vivimed USA Hong Kong. It has charged interest in the case of Vivimed Holdings, Hong Kong based on LIBOR but did not charge any interest on the advances given to USA. It has submitted that it is capital advances and were given for administrative convenience. Ld. AR submitted that capital advances towards investment in subsidiary is not an international transaction. He relied on some case laws. We find that these were advances given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction relating to corporate guarantee of ₹ 41,20,050/-, the ld. AR submitted that the transaction relating to the corporate guarantee do not fall within the scope of the term international transaction . It is given out of shareholders obligation for which it has not incurred any cost. For this proposition, he relied on the following cases: 1. Rusabh Diamonds Vs. ACIT, IT Appeal Nos. 2497, 2840 (Mum.) of 2014. 2. Micro Ink Ltd., ITA No. 2873/Ahd/10 3. Bharti Airtel Ltd. Vs. Addl. CIT, ITA No. 5816/Del/2012 4. Redington (India) Ltd. Vs. JCIT, ITA No. 513/Mds/2014 5. Videocon Industries Ltd. Vs. Addl. CIT, 55 Taxmann.com 263 (Mum) 6. M/s Four Soft Ltd., Hyd. Vs. The Dy. CIT, ITA No. 1495/H/2010 7. Siro Clinpharm Pvt. Ltd. Vs. DCIT, ITA No. 1269/Mum/15 8. Siro Clinpharm Pvt. Ltd. Vs. DCIT, ITA No. 2618/Mum/14 15. Ld. DR relied on the orders of revenue authorities. 16. Considered the rival submissions and perused the material facts on record. In the case of Four soft Ltd. (supra), the coordinate bench has held as under: 21. We have considered the rival submissions and perused the materials available on record. We find that the TP legislation prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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