TMI Blog2018 (9) TMI 1937X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, we remand this issue for this limited purpose back to the ld TPO / ld AO and to determine the issue as directed by us. Disallowance u/s 14A r.w.r. 8D of the Rules both under normal provision of the Act as well as u/s 115JB - HELD THAT:- We find from the comparative statement of own funds vis- vis the investment made for the last six years as submitted by the ld. AR that the assessee is possessing sufficient own funds which are much more than the domestic investments made by it. Hence by placing reliance on the decision of Hon ble Bombay High Court in the case of Reliance Utilities and Power Limited [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] we hold that no disallowance of interest is required to be made under Rule 8D(2)(ii) of the Rules. Disallowance under Rule 8D(2)(iii) of the Rules, the assessee pleaded that domestic investments which had yielded dividend income alone should be considered for the purpose of computing the disallowance under Third limb of Rule 8D(2) of the Rules, We find this argument is in consonance with the decision rendered by this Tribunal in the case of REI Agro Ltd. [ 2013 (9) TMI 156 - ITAT KOLKATA] . Accordingly, we direct the ld. AO to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause prevailing in various tax treaties but the same was not done by the ld. DRP in the year under consideration. Since various factual and legal submissions were indeed made by the assessee before lower authorities as narrated above which were not properly examined by the ld. AO, we deem it may fit and appropriate, to remand this entire issue to the file of ld. AO, for de novo adjudication of the issue afresh in accordance with law. We find that the similar direction has been given by this Tribunal in assessee s own case for assessment year 2012-13 [ 2018 (5) TMI 1853 - ITAT KOLKATA]. Credit of tax deducted at source and tax collected at source - HELD THAT:- this requires factual verification and accordingly we direct the ld. AO to verify the veracity of the said claim of the assessee and grant necessary TDS/TCS credit to it as per law. Error in calculation of dividend distribution tax of gross dividend - HELD THAT:- This issue has been adjudicated by this Tribunal in assessee s own case for assessment year 2012-13 [ 2018 (5) TMI 1853 - ITAT KOLKATA wherein, this issue was remanded back to the file of the ld. AO. - I.T.A No. 2225/Kol/2017 - - - Dated:- 14-9-2018 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. For that we rely on the order of the Coordinate Bench of this Tribunal in the case of Tega Industries Ltd. Vs DCIT (ITA No.1912/Kol/2012 wherein it was held that the provision of corporate guarantee is in the nature of shareholder activity and hence, no TP adjustment on account of corporate guarantee is required. In the said case, this tribunal had held that the assessee s expectation from provision of guarantee was not that of a guarantor i.e. to earn a guarantee fee, rather, the expectation was of a shareholder to protect its investment interest, to help it achieve the assessee s business objective . Thus, we agree with the contention of the assessee that the objective of the assessee for providing guarantee was not to earn guarantee fee but to earn returns in the form of appreciation in investment value and receive dividends and, therefore, no TP adjustment ought to have been made in the facts and circumstances of the case. 12.11. Coming to the alternate plea of the assessee that, in the facts and circumstances the corporate guarantee is not an International Transaction u/s. 92B of the Act, we note that term 'guarantee' was inserted in the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) by the Finance Act 2012 with retrospective effect from 01.04.2002 vide clause (a) to (d). We find that in the said explanation, clause (e) alone has been carved out as an exception wherein, the transaction thereon has been specifically mandated to be an international transaction where a transaction of business restructuring or reorganization, entered into by an enterprise with an AE irrespective of the fact that it has bearing on the profits, incomes, losses, or assets of such enterprises at the time of transaction or at any future date. 12.12. Thus, we hold that when a parent company extends an assistance to the subsidiary, being associated enterprise, such as corporate guarantee to a financial institution for lending money to the subsidiary, which does not cost anything to the parent company, and which does not have any bearing on its profits, income, losses or assets, it will be outside the ambit of international transaction under section 92B(1) of the Act. In this regard, we would like to hold that issuance of corporate guarantee by the assessee to its AE would have influence on the profits , incomes, losses or assets of enterprise but not necessarily have any impa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of corporate guarantee), and, therefore, the assessee or the Court has treated it as an international transaction, then the charge of corporate guarantee has to be in accordance with Arm's Length principle. This means that the price for corporate guarantee should be that which would have been paid and accepted by independent enterprises in comparable circumstances. In that case transfer pricing adjustments are required. In that case, it has to be determined what will be the ALP of corporate guarantee commission paid by associate enterprise to the parent company providing corporate guarantee. Since that is not the case before us, we need not go into it. Respectfully following the same, we hold that the issuance of Corporate Guarantee by the assessee to its subsidiary company does not fall under the ambit of International Taxation u/s 92B of the Act in the facts and circumstances of the case, in as much as there was no guarantee fee charged by the assessee from its subsidiary company. In view of this observation, the adjudication of ground no. 1.4 raised by the assessee on the percentage of guarantee fee need not be gone into. Accordingly, ground nos. 1.1. to 1.4 raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are allowed for statistical purposes. 5. Ground nos. 3.1 to 3.5 raised by the assessee is with regard to disallowance made u/s 14A of the Act read with Rule 8D of the Rules both under normal provision of the Act as well as u/s 115JB of the Act. 5.1. Brief facts of this issue is that the assessee company had earned dividend income of ₹ 14,16,38,749/- during the year and claimed the same as exempt. The breakup of the said dividend income are as under: Dividend from subsidiary companies (Long term investments) ₹ 11,72,50,000/- Dividend from other investments (Trade) ₹ 2,12,43,999/- Dividend from mutual fund ₹ 31,44,750/- Total ₹ 14,16,38,749/- The assessee stated that the aforesaid dividend includes dividend earned amounting to ₹ 5.53 crores from one foreign subsidiary company which was treated as income from other sources in the return of income. Accordingly, it was pleaded that the said foreign dividend was not claimed as exempt under Chapter III of the Act and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we direct the ld. AO to re-compute the disallowance in the light of the decision referred to supra. There is no dispute with regard to disallowance made under Rule 8D(2)(i) of the Rules. Accordingly, ground nos. 3.1 to 3.4 raised by the assessee are partly allowed for statistical purposes. 5.4. With regard to disallowance u/s 14A of the Act read with Rule 8D of the Rules while computing the book profits u/e 115JB of the Act, we hold that the Hon ble Special Bench of Delhi Tribunal had held in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 165 ITD 27 that the computation mechanism provided under Rule 8D of the Rules cannot be applied for the disallowance u/s 14A in the computation of book profit u/s 115JB of the Act and for this purpose, the expenditure debited in the profit loss account is to be gone into by the ld. AO. In the instant case, the assessee had voluntarily disallowed a sum of ₹ 30,73,963/-having regard to its accounts by considering various expenditures debited in the profit and loss account and had attributed some percentage of the same towards the disallowance. We direct the ld. AO to verify the veracity of the said workings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the lessee shall deliver to the lessor the said vehicles at a place designated by the lessor. We hold that since the ownership does not vest with the assessee at any point of time during the subsistence of the lease, the claim of allowability of depreciation u/s 32 of the Act as owner of the vehicles, does not arise. We hold that the lease arrangement cannot be considered as one of hire purchase as per Circular No. 9/1943 No. 9 [R.Dis.No. 27(4)-IT/43] dated 23.3.1943, since the terms of the agreement does not provide that the equipments shall eventually become the property of the hirer or confer on the hirer an option to purchase the equipments. We hold that merely because the lease arrangement has been considered as finance lease for the purpose of AS 19, that itself does not render the lessee (assessee herein) as the owner of asset for IT Act for claiming depreciation. We find that AS 19 provides for various situations in order to decide as to whether the lease can be considered as finance lease or operating lease for the limited purpose of such AS 19. We find that the assessee had duly complied with the Circulars laid down in this regard more so when the CBDT has itself cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the lessee. This reaffirmed the position that the assessee was in fact the owner of the vehicle, in so far as section 32 of the Act is concerned. ( iv) That, therefore, the assessee was the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of section 32 of the Act and, hence, was entitled to claim depreciation in respect of additions made to the trucks, which were leased out. ( v) That for purposes of the assessee's claim to the higher rate of depreciation, the interpretation of the term purposes of business , used in second proviso to section 32(1) of the Act would not be any different from that ascribed to it under section 32(1) of the Act. Therefore, the assessee fulfilled even the requirements for a claim of a higher rate of depreciation and was entitled thereto. Though this decision has been rendered on the allowability of depreciation on leased assets from the angle of the lessor, the principle laid down could be made very much applicable to the facts of the instant case for allowability of lease rentals in the hands of the assessee (lessee). We also find that the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we reverse the order of Ld. DRP and direct the AE to delete the same. This ground of appeal of the assessee is allowed. Respectfully following the aforesaid decision we direct the ld. AO to delete the said disallowance. Accordingly, ground nos. 4.1 to 4.3 raised by the assessee are allowed. 7. Ground no. 5.1 to 5.3 raised by the assessee are with regard to disallowance of certain foreign currency payments u/s 40a(ia) of the Act in the sum of ₹ 3,71,00,345/-. 7.1. The assessee company during the previous year had made the following foreign currency payments towards the following expenditures: Advertisement, participation, sales promotion expenses- ₹ 1,74,67,659/- The assessee being in the luxury hospitality, its business heavily depends on clients from the western world. Consequently as in the past it spent a considerable sum of money of advertisement both in the print, web media. Such advertisement are printed mostly in USA and UK etc. The servers of the web are also located outside India. The targets for the advertisement are foreign tourists. Hence these foreign advertisements are circulated mainly in USA, UK and certain other Europe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountry wise details of foreign remittances made in this regard are as under: The assessee further submitted the following details are as under: 7.5 Inspection Fees ₹ 21,96,677/- The said payments are made for quality audit and the service provider provides report for quality assurance. The same includes fees paid to an overseas party for carrying on inspection outside India. The service is being availed from the same service provider each year and the vendor carries on independent audit about the quality standard of the hotels pertaining to the assessee. The country wise foreign remittances of this expenditure is as under: The assessee further submitted the following details are as under: The ld. AO disregarded the aforesaid contentions of the assessee and proceeded to disallow the entire expenditure of ₹ 3,71,00,345/- u/s 40a(ia) of the Act in the final assessment order. Aggrieved the assessee is in appeal before us. 7.6. We have heard ld. AR. We find that the details of aforesaid various expenditures, nature of remittances, country wise foreign remittances, taxability of the same under the domestic law as well as un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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