TMI Blog2020 (2) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... r/w rule 8D(2)(ii) can be made. In view of the aforesaid, we dismiss the ground raised by the Revenue. MAT u/s 115JB - not to add back provisions for wealth tax while calculating book profit under section 115JB of the Act - HELD THAT:- On a reading of Explanation 1(a) to section 115JB(2) of the Act, it becomes clear that it only speaks about income tax paid or payable or any provisions made for income tax. There is no reference to wealth tax liability under Explanation 1(a) to section 115JB(2) of the Act. Even otherwise also, the issue is covered in favour of the assessee by the decision in CIT v/s Echjay Forgings Pvt. Ltd. [ 2001 (2) TMI 56 - BOMBAY HIGH COURT ] wherein while considering pari materia provisions contained under section 115J(IA) of the Act, the Hon ble High Court has held that wealth tax is not contemplated in income tax paid or payable. In view of the aforesaid, we have no hesitation in holding that wealth tax liability does not come within the purview of Explanation 1(a) to section 115JB(2). Insofar as learned Departmental Representative s contention that wealth tax is an unascertained liability, hence, covered under Explanation 1(c) to section 115JB(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of section 92B of the Act, however, we are of the view that guarantee commission charged by the assessee @ 0.5% is at arm's length requiring no further adjustment. Therefore, we delete the adjustment made by the Transfer Pricing Officer and confirmed by learned DRP. Add back provisions for wealth tax while calculating book profit under section 115JB - HELD THAT:- Adjustment made on account of interest on loan advanced to the AE - HELD THAT:- On a reading of Explanation 1(a) to section 115JB(2) of the Act, it becomes clear that it only speaks about income tax paid or payable or any provisions made for income tax. There is no reference to wealth tax liability under Explanation 1(a) to section 115JB(2) of the Act. Even otherwise also, the issue is covered in favour of the assessee by the decision of CIT v/s Echjay Forgings Pvt. Ltd. [ 2001 (2) TMI 56 - BOMBAY HIGH COURT ] wherein while considering pari materia provisions contained under section 115J(IA) of the Act, the Hon ble High Court has held that wealth tax is not contemplated in income tax paid or payable. In view of the aforesaid, we have no hesitation in holding that wealth tax liability does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. Being of the view that such income cannot form part of the profit derived by the eligible unit from its manufacturing activity, the Assessing Officer called upon the assessee to explain why such income should not be excluded for the purpose of computing deduction under section 80IC of the Act. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer relying upon the decision of the Hon'ble Supreme Court in Liberty India v/s CIT, [2009] 317 ITR 218 (SC) excluded certain items of income as referred to above from the profit of the eligible unit for computing deduction under section 80IC of the Act. This resulted in partial reduction in the quantum of deduction claimed by the assessee under section 80IC of the Act. Though, the assessee objected to the part disallowance of deduction claimed under section 80IC of the Act, before learned DRP, however, relying upon their decision in assessee s own case for the assessment year 2010 11, learned DRP upheld the decision of the Assessing Officer. 4. Shri Farookh V. Irani, the learned Sr. Counsel for the assessee submitted, while deciding identical issue in assessee s own case for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer proceeded to compute the disallowance under rule 8D for an amount of ₹ 94,93,127. The assessee having already disallowed an amount of ₹ 7,70,000, the Assessing Officer made a net disallowance of ₹ 87,23,127, under section 14A r/w rule 8D, both, under the normal provisions as well as while computing book profit under section 115JB of the Act. The aforesaid disallowance made by the Assessing Officer was also confirmed by learned DRP. 10. The learned Sr. Counsel for the assessee submitted, during the year under consideration the assessee has not earned any exempt income by way of dividend. He submitted, the dividend income earned by the assessee was from a foreign company, hence, taxable in India. Accordingly, the assessee has offered the dividend earned to tax. Thus, he submitted, in the absence of any exempt income earned during the year under consideration, no disallowance under section 14A of the Act can be made. Further, he submitted that no disallowance under section 14A of the Act can be made while computing book profit under section 115JB of the Act. The learned Sr. Counsel for the assessee submitted, while deciding identic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re allowed. 14. In ground no.9, the assessee has raised the issue as to whether provision of corporate guarantee would come within the purview of international transaction under section 92B of the Act. Whereas, in grounds no.10 to 15, the assessee has challenged the quantification of arm's length rate of corporate guarantee commission @ 2.5% per annum. 15. Brief facts are, in the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee company has provided corporate guarantee to lenders which enabled its overseas subsidiary to borrow funds from Bank. Further, he noticed that for providing such corporate guarantee, the assessee has charged corporate guarantee fee @ 0.5%. Being of the view that the guarantee commission charged @ 0.5% is not at arm's length, the Assessing Officer proceeded to compute the arm s length price of the corporate guarantee commission by applying the rate of 2.5% per annum. In respect of all the Associated Enterprises (AEs), except, Godrej, Sri Lanka. Learned DRP also upheld the adjustment made by the Transfer Pricing Officer in respect of guarantee commission. 16. The learned Sr. Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for necessary details. On perusal of the details he found that the assessee has benchmarked the interest on loan provided to the AE by charging interest @ six months LIBOR plus 100 basis points as a Comparable Uncontrolled Price (CUP). To justify the aforesaid benchmarking, the assessee submitted that the AE had availed a loan facility from ICICI Bank, U.K., at three months LIBOR plus 120 basis points. The Transfer Pricing Officer, however, did not accept the benchmarking of the assessee and proceeded to determine the arm s length price of the interest on loan advanced @ six months LIBOR plus 3%. 21. Learned DRP also upheld the decision of the Transfer Pricing Officer. 22. The learned Sr. Counsel for the assessee submitted, identical issue came up for consideration before the Tribunal in assessee s own case for the assessment year 2010 11 and the Tribunal has restored the issue to the Assessing Officer with certain directions. 23. The learned Departmental Representative, though, agreed that the issue is covered by the earlier decision of the Tribunal, however, he relied upon the observations of the Transfer Pricing Officer and the DRP. 24. Having considered riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case no exempt income is earned by the assessee during the year, no disallowance under section 14A of the Act can be made. That being the case, the ground raised by the Revenue has become redundant. Suffice to say, if the assessee had sufficient interest free fund available with it to take care of the investment, disallowance of interest expenditure cannot be made. For this reason also, no disallowance under section 14A r/w rule 8D(2)(ii) can be made. In view of the aforesaid, we dismiss the ground raised by the Revenue. 30. In ground no.3, the Revenue has challenged the deletion of disallowance of lease rentals. 31. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee has reduced an amount of ₹ 3,88,927, from the total income towards lease rentals paid for lease of cars. Being of the view that the lease in question is a finance lease and the assessee is the owner of the vehicle, the Assessing Officer disallowed the lease rentals. However, after considering the submissions of the assessee, learned DRP having found that similar disallowance made in preceding assessment year was deleted, followed the same and del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under the said Explanation. Further, he submitted, wealth tax liability is an ascertained liability, hence, not covered under Explanation 1(c) to section 115JB(2) of the Act. In support of his submissions, the learned Counsel relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Echjay Forgings Pvt. Ltd., [2001] 251 ITR 51 (Bom.). 38. We have considered rival submissions in the light of the decision relied upon and perused the material on record. On a reading of Explanation 1(a) to section 115JB(2) of the Act, it becomes clear that it only speaks about income tax paid or payable or any provisions made for income tax. There is no reference to wealth tax liability under Explanation 1(a) to section 115JB(2) of the Act. Even otherwise also, the issue is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Echjay Forgings Pvt. Ltd. (supra), wherein while considering pari materia provisions contained under section 115J(IA) of the Act, the Hon ble High Court has held that wealth tax is not contemplated in income tax paid or payable. In view of the aforesaid, we have no hesitation in holding that w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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