TMI Blog2021 (4) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's own case for assessment year 2009-10 placing reliance on the decision rendered in the case of Everest Kento Cylinders Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] held that Corporate Guarantee fee paid @ 0.5% would be at arm's length. Respectfully following the decision of Tribunal in assessee's own case [ 2019 (4) TMI 1429 - ITAT MUMBAI] for assessment year 2009-10, the ground of the appeal is partly allowed in the same terms. Charging of interest on loan to A.E. by applying rate of interest prevalent in Romania + 300 B.P.S - contention of the assessee is that since the loan was granted in EURO, therefore, EURIBOR rate should be applied - HELD THAT:- We find merit in the contentions of the assessee. In the instant case, it is evident from the loan agreement that the assessee had advanced loan to its AE in Romania in EURO, therefore, the interest should be charged in EURIBOR. In principle, we accept the assessee's submissions, however, to determine interest rate we deem it appropriate to restore this issue to the Assessing Officer with a direction to applying EURIBOR + base points, if required. Consequently, the ground No. 2.2 of the appeal is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the AO to apply the rate of interest prevalent in Romania plus a spread of 300 bps ignoring the fact that the borrowing cost of foreign currency borrowing of the appellant company works out to 1.15%. 2.1. The assessee has also raised additional grounds, the same read as under: Additional Ground - Deduction in respect of Education Cess paid on income-tax and dividend distribution tax: 1. On the facts and circumstances of the case and in law, the Appellant prays that deduction in respect of education cess on income-tax paid during the year ought to be allowed as a deduction while computing the total income. 2. On the facts and in the circumstances of the case and in law, the Appellant prays that the Assessing Officer be directed to allow deduction under section 37(1) of the Income-tax Act, 1961 ('Act') in respect of education cess paid on the amount of dividend distribution tax as per section 115-O of the Act during the year, while computing the total income 3. Shri Percy J. Pardiwalla, appearing on behalf of the assessee submitted that the assessee is engaged in manufacturing, export and domestic sale of pharmaceutical products and bulk dru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, as it is difficult to find interest rate prevalent in Romania. To substantiate that loan was granted in EURO, he referred to Loan Agreement at page 110 to 112 of the Paper Book. It was pointed that clause -1 2 of the agreement clearly state that the loan of EURO 2,50,000/- is granted by the assessee to Unique Pharmaceutical Laboratories, Romania. Secondly, as the underline currency for advancing loan was EURO, EURIBOR rates should be applied. To support his contention the ld. Counsel for the assessee placed reliance on the decision of Tribunal in the case of Tata Autocomp Systems Ltd. vs. ACIT, 149 TTJ 233(Mum). 3.4. The ld. Counsel for the assessee submitted that the assessee has raised additional ground of appeal claiming deduction in respect of Education Cess. He contended that it is a legal issue and no new facts are required to be brought on record. In support of assessee's claim of deduction on education cess paid on Income Tax and Dividend Distribution Tax, reliance is placed on the decision of Sesa Goa Ltd. vs. JCIT, 423 ITR 426 (Bom) and decision of Tribunal in the case of Sony Pictures Network India Pvt. Ltd. vs. Asstt. CIT in ITA No. 6630/Mum/2018 for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors customers and medical practitioners in medical conferences held both in India and abroad. Out of the aforesaid amount, the AO Has segregated an amount of ₹ 1,25,44,723, for computing disallowance towards expenditure incurred in India. As could be seen from the assessment order, the gift items provided by the assessee are T-shirts, suit lengths, umbrella, electronic goods, etc. It is the contention of the assessee that the aforesaid gift items bearing assessee's name and logo are only for sales promotion. The aforesaid factual position has not been controverted by the AO. The only reason for making an ad hoc disallowance of 40 per cent is, CBDT Circular No. 5 of 2012, dt. 1st Aug., 2012, wherein the prohibition imposed by Indian Medical Council with regard to acceptance of gift by medical practitioner/doctor was imposed w.e.f. 10th Dec., 2009. Thus, as could be seen, the prohibition imposed by Indian Medical Council against acceptance of gift is on the medical practitioner and doctor and not on the pharmaceutical companies. The applicability of the aforesaid CBDT circular as well as prohibition imposed by Indian Council on Pharmaceutical companies came up for judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has advanced loan to its Romanian A.E. As per terms of Loan Agreement the assessee has charged interest @ 3.5%. The TPO computed the ALP of interest to AE at 11.75%. In first appeal, the CIT(A) held that since the loan was granted to a Romanian entity the interest be charged at the rate prevalent in Romania + 300 B.P.S. The contention of the assessee is that since the loan was granted in EURO, therefore, EURIBOR rate should be applied. The assessee has placed on record loan agreement at page 110 of the Paper Book. A perusal of the terms and conditions of the loan agreement reveal that the assessee has advanced loan of EURO 2,50,000 to its A.E in Romania. The ld. Counsel for the assessee has placed reliance on the decision rendered in the case of Tata Autocomp Systems Ltd. (supra) to contend that since loan is advanced to AE in EURO, EURIBOR rate should be applied. We have observed that in the case of Tata Autocomp Systems Ltd. (supra) loan was advanced to AE in Germany and the Tribunal held that EURIBOR rate should be applied. The relevant extract of the order of Tribunal reads as under: 19. In the present case the AE is a German company. Eurobior rates are based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we accept the assessee's submissions, however, to determine interest rate we deem it appropriate to restore this issue to the Assessing Officer with a direction to applying EURIBOR + base points, if required. Consequently, the ground No. 2.2 of the appeal is allowed for statistical purpose. 11. The ground No. 3 of the appeal is general in nature, hence, require no adjudication. 12. The assessee has raised an additional ground claiming deduction in respect of Education Cess paid on income tax and dividend distribution tax. The ld. Departmental Representative opposed the additional ground raised by the assessee at such a belated stage. We find that the additional ground raised by the assessee is legal in nature and no fresh evidence is required to be adduced. It would be relevant to mention here that this appeal was filed by the assessee in 2016. The Hon'ble Jurisdictional High Court rendered the judgment in the case of Sesa Goa Ltd. vs. JCIT (supra) in February, 2020. Thus, at the first appellate stage or at the time of filing of second appeal before the Tribunal, the assessee had no cause to raise this legal issue. The additional ground of appeal raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in a manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicable, and a deduction should be allowed, where a tax is imposed by a district board on business with reference to 'estimated income' or by a municipality with reference to 'gross income'. Besides, unlike Section 10(4) of the 1922 Act, this sub-clause does not refer to 'cess' and therefore, a 'cess' even if levied upon or calculated on the basis of business profits may be allowed in computing such profits under this Act. Since, the issue has been raised for the first time before the Tribunal, we deem it appropriate to admit the additional ground and restore the issue back to the Assessing Officer for consideration in the light of ratio laid down in the case of Sesa Goa Ltd. (supra). The additional ground of appeal is thus, allowed for statistical purpose. 14. In the result, appeal by the assessee is partly allowed. ITA NO. 554/MUM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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