TMI Blog2019 (12) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT vs. Meghalaya Steels Ltd.[ 2016 (3) TMI 375 - SUPREME COURT] and directed the Assessing Officer to include the subsidiary received on sales tax as profits for the purpose of computation of deduction u/s 80IC of the Act. Though, the ld. CIT D/R controverted the findings of the ld. CIT(A), we are of the considered opinion that the judgment of the Hon ble Supreme Court referred above applies on all fours to the facts of the case and hence we uphold the findings of the ld. CIT() on this issue. Write back of expenses, we agree with the finding of the ld. CIT(A) that the expenses in question were allowed as a deduction from profit in earlier years and when the same are written back, they should be included in the profits eligible for deduction u/s 80IC of the Act. Thus, this ground of the revenue is dismissed. - ITA No. 184/Kol/2018 - - - Dated:- 31-12-2019 - Sri J. Sudhakar Reddy, Accountant Member AND Sri S.S. Godara, Judicial Member For the Appellant : Shri Akkal Dudhewala, A/R For the Respondent : Shri P.K. Srihari, CIT Sr. D/R ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the revenue is directed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the Ld. CIT(A), are in line with the decision of the Kolkata 'C' Bench of the Tribunal in the case of M/s. EIH Ltd. v. DCIT (supra) wherein it was held as follows:- 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 definition of 'international transaction' in section 92B by inserting an Explanation in the Finance Act, 2012 with retrospective effect from 01/04/2002. The Explanation states that- For the removal of doubts, it is hereby clarified that (i) the expression international transaction shall include .... (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business. The Explanation states that it is clarificatory in nature and is 'for the removal of doubts'. Thus, it does not alter the basic character of definition of 'international transaction' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 impact on the profits, incomes, losses or assets' as admittedly no consideration was received by the assessee in respect of this corporate guarantee from its AE. We find that the Ahmedabad Tribunal in the case of Micro Ink in ITA No. 2873/Ahd/2010 had observed that if a subsidiary (AE in the instant case) could not borrow money from third party sources on its own standing and the guarantee provided by the parent (assessee in the instant case) enables it to make such borrowing, then the guarantee could be said to be a shareholder function, not warranting a guarantee fee. This ratio would squarely be applicable to the facts of the instant case before us. 12.13 The Ld. CIT, DR's reliance in the case of Everest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce that is not the case before us, we need not go into it. 12.15 We also find that this very same issue came up for adjudication by this tribunal in assessee's own case for the Asst Year 2010-11 in ITA No. 530/Kol/2015 dated 9.6.2017, wherein by placing reliance on the decision of co-ordinate bench of Mumbai Tribunal in the case of (a) Marico Ltd v. ACIT reported in (2016) 70 taxmann.com 214 (Mumbai Trib) wherein it was held that corporate guarantee was not an international transaction ; and (b) Siro Clinpharm P Ltd v. DCIT in ITA No. 2618/Mum/2014 dated 31.3.2016 , wherein it was held that the Explanation introduced by Finance Act 2012 can be made applicable only from Asst Year 201314 onwards. 12.16 Moreover, we find that though the Explanation was introduced by Finance Act 2012, the rules were notified only on 10.6.2013. Hence the assessee cannot be expected to report this transaction also as an international transaction in its transfer pricing study and the audit report thereon. 12.17 In view of the aforesaid findings and respectfully following the various judicial precedents, we allow the Grounds 1.1. to 1.4 raised by the assessee. 5.1 Consistent with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Maxopp Investment Ltd. v. CIT ( 2018) 402 ITR 640 and hence has to be reversed. Nevertheless, the second argument of the assessee that no disallowance can be made under Rule 8D(2)(ii) of the Income Tax Rules, 1962 ( Rules ), where own funds, which are not interest bearing, are more than the investment by applying the proposition of law laid down that, the presumption in such cases is that, interest free funds have been invested in non-interest bearing investments [*HDFC Bank Ltd. v. Deputy Commissioner of Income-tax -2(3), Mumbai [2016] 383 ITR 529 (Bombay)], [*CIT vs. Rasoi Ltd. (ITA No. 109 of 2016) dt. 15/02/2017]. The ld. CIT(A) at page 46 fist para of his order, held that the proposition of law in the above referred judgments, are squarely applicable to the assessee s case and as the assessee has own surplus funds which are not interest bearing and which were sufficient to meet the cost of investments, no disallowance can be made under Rule 8D(2)(ii) of the Rules r.w.s. 14A of the Act. The ld. D/R could not controvert this factual findings. Hence we uphold the same and dismiss Ground No. 10 of the revenue. 7. Ground No. 11 is on the issue of computa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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