TMI Blog2018 (4) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 154 - Held that:- CIT(A) has already given direction to the Assessing Officer for disposing of the application under section 154 of the Act, filed by assessee which has not been disposed of so far. The Assessing Officer is directed to consider the claim of assessee and pass the order in accordance with law. Needless to say that the Assessing Officer shall grant necessary opportunity of hearing before passing the order. In the result, appeal of the assessee is allowed. Transfer Pricing Adjustment towards this involve in guarantee on loan and advances to Associate Enterprises - Held that:- As decided in assessee's own case when the guarantee has been given by the assessee results in a direct or indirect benefit to the assessee itself, then there arises no need to charge any commission on the same. Thus, following the decisions of the co-ordinates benches of the Tribunal we, in the present case are of the view that the above transaction does not fall within the purview of international transaction as defined under section 92B of the Act and hence, the orders of the lower authorities are reversed. - ITA No.557/Mum/2012, ITA No.588/Mum/2012, ITA No.6055/Mum/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to have held that: - The following amount was receivable from associate company for royalty on technical know how and as per restructuring agreement it was converted into non interest bearing shareholders deposit. - Non interest bearing shareholder's deposits made in earlier years is not an international transaction - RBI and Government of Indonesia have given approval and accordingly, the same cannot be regarded as not being at Arm's length. 3. The Appellant prays that the aforesaid disallowance be deleted. Without prejudice to GROUND III GROUND IV: 1. The appellant also prays that ad hoc rate of interest charged is excessive and ought to be reduced having regard to international practices. GROUND V: Taxation of Long Term Capital Gain: 1. On the facts and circumstances of the case and in law, the CIT(A)-15 erred in confirming the action of AO in not assessing the long term capital gains arising on sale of capital asset which was converted to stock in trade on the alleged ground that the capital gain has not arisen during year under consideration based on the finding of the last assessment order for AY 2006-07 on the year of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are different from the present case. 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. 3. At the outset of hearing, the Ld. Authorized Representative (AR) of the assessee submits that all the grounds of appeal raised by assessee as well as by Revenue in its cross appeal are covered by the decision of Tribunal in assessee s own case for earlier years or by various decisions of jurisdictional High Court. The Ld. AR of the assessee furnished a chart narrating the grounds of appeal and the preposition of law in favour of assessee in assessee s own case for A.Y. 2012-13. On going through the chart and the decision of Tribunal in assessee s own case for A.Y. 2006-07 and 2012-13, the Ld. Departmental Representative (DR) for the Revenue fairly conceded that all the grounds of appeal are covered in favour of assessee and against the Revenue. 4. We have considered the submission of both the parties and perused the material available on record. Ground No. I II relates to disallowance under section 14A r.w. Rule 8D. The Ld. AR of the assessee submits that Rule 8D cannot apply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A is restricted to the exempt income/dividend income of ₹ 28,830/-. The Assessing Officer is directed accordingly. 6. In the result, Ground No. I II of the appeal are allowed. 7. Ground No. III IV relates to addition on account of Transfer Pricing Adjustment in relation to non-interest bearing shareholder deposit of ₹ 1,50,94,363/-. The Ld. AR of the assessee submits that this ground of appeal is covered in favour of assessee in assessee s own case for A.Y. 2012-13 in ITA No. 1617/Mum/2017 reported in 87 taxmann.com 213 (Mum.Trib.). The Ld. DR for the Revenue conceded the contention of Ld. AR of the assessee. 8. We have considered the submission of the parties. We have noted that similar ground of appeal was raised by assessee in appeal for A.Y. 2012-13. The Tribunal passed the following order on identical grounds of appeal: 7. In view of these facts, it is clear that the technical know-how fees are recoverable for the period 1981 to 1995 by both the joint venture partners namely The Bombay dyeing Mfg Co Ltd and Common Wealth textiles. The RBI has given its approval on treating the Outstanding entitlements on account of technical know-how fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .39% amounting to ₹ 1,27,66,301/- in relation to non-interest bearing shareholder's deposits amounting to ₹ 15,21,60,920/- with an associate company. We reverse the orders of DRP and AO/TPO on this issue and allow this issue of the appeal of assessee. 9. Considering the decision of Tribunal in assessee s own case in identical grounds of appeal was allowed in favour of assessee on the same amount of share-holder deposits the Associate Company. Thus, respectfully following the decision of Tribunal in assessee s own case, Ground No. III IV of appeal are allowed in favour of assessee with similar observation. 10. Ground No. V relates to taxation on Long Term Capital Gain. The Ld. AR of the assessee submits that he is not pressing this ground of appeal. Considering the submission of Ld. AR of the assessee, this ground of appeal is dismissed as not pressed. 11. Ground No. VI relates to Long Term Capital Gain on sale of investment not considered. The Ld. AR of the assessee submits that the Assessing Officer has not considered the Long Term Capital Gain on sale of investment. The assessee filed application under section 154 before the Assessing Officer for rectif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law the IA. AO, pursuant to the directions of the ld. DRP. erred in adding the disallowance made u/s. NA to the book profits on the alleged ground that expenditure pertains to earning exempt income. 58. At the outset, the learned Counsel for the assessee stated that this issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of Asstt. CIT v. Vireet Investments (P.) Ltd. [2017] 165 ITD 27/82 taxmann.com 415 (Delhi - Trib.) (SB) wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned CIT Departmental Representative could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. ( supra ), respectfully following the same, we delete the disallowance and allow this issue of assessee's appeal. 15. Considering the decision of Tribunal in assessee s own case for A.Y. 2012- 13 as refereed above and the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, Ld Counsel drew our attention to section 92B of the Act which defines the term international transaction used in section 92(1) of the Act as under:- International transaction means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more enterprises. As will be observed from the above provision the outstanding debit balances with the associates is not directly covered within the ambit of 'international transaction'. Also, the terms any other transaction having a bearing on the profits, income, losses or assets of such enterprises must be interpreted ejusdem generis with the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi Tribunal in the case of Bharti Airtel Ltd. v. Addl. CIT [2014] 63 SOT 113/43 taxmann.com 150, held as under: There can be number of situations in which an item may fall within the description set out in clause (c) of Explanation to Section 92B, and yet it may not constitute an international transaction as the condition precedent with regard to the 'bearing on profit, income, losses or assets' set out in Section 92B(1) may not be fulfilled. For example, an enterprise may extend guarantees for performance of financial obligations by its associated enterprises. These guarantees do not cost anything to the enterprise issuing the guarantees and yet they provide certain comfort levels to the parties doing dealings with the associated enterprise. These guarantees thus do not have any impact on income, profits, losses or assets of the assessee. There can be a hypothetical situation in which a guarantee default takes place and, therefore, the enterprise may have to pay the guarantee amounts but such a situation, even if that be so, is only a hypothetical situation, which is, as discussed above, excluded. In any event, the onus is on the revenue authorities to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( supra ), for providing corporate guarantee. The Mumbai Tribunal in the case of Siro Clinpharm (P.) Ltd. v. Dy. CIT (in ITA No. 2618/M/2014) dated 31-03-2016 for AY 2009-10 following the decision of Mirco Ink Ltd. (s upra ) has, inter alia, held that issuance of corporate guarantees will not fall within the ambit of international transaction u/s. 92(1) of the Act. Thus, following the decisions of the co-ordinates benches of the Tribunal ( supra ), we in the present case are of the view that the above transaction does not fall within the purview of international transaction as defined under section 92B of the Act. 18. Further, we are in agreement with the argument of the assessee that even if providing corporate guarantee falls within the definition of international transaction , in our view, providing such corporate guarantee by a parent company to its wholly owned subsidiary without charging any commission/fees would still be regarded as being at arm's length price, if such corporate guarantee was provided by the parent company for the overall benefit of the business of the group and therefore, ultimately benefiting the parent company itself. Having regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t indicate that there was any such business strategy adopted by the assessee in not charging commission in respect of guarantees issued for its AEs. As a matter of fact, there is nothing to suggest that any such business strategy was adopted by the assessee with specific intention or motive and the case has been sought to be made out merely on the basis of commercial expediency by claiming that the assessee was benefited as a result of giving the guarantees in the form of commercial benefits secured for future. 20. Thus, the above decision of the Mumbai Tribunal reiterates the proposition of the assessee that when the guarantee has been given by the assessee results in a direct or indirect benefit to the assessee itself, then there arises no need to charge any commission on the same. Thus, following the decisions of the co-ordinates benches of the Tribunal ( supra ), we, in the present case are of the view that the above transaction does not fall within the purview of international transaction as defined under section 92B of the Act and hence, the orders of the lower authorities are reversed. This issue of assessee's appeal is allowed. 28. Considering the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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