TMI Blog2018 (12) TMI 1905X X X X Extracts X X X X X X X X Extracts X X X X ..... w that no further adjustment to determine the ALP is to be made. This issue of assessee s appeal is allowed. Disallowance of professional fee treating it as a capital expenditure - HELD THAT:- We do not agree with this contention of the appellant since any expenditure relating to issue of securities is capital in nature. In case of Brooke Bond India Ltd. [ 1997 (2) TMI 11 - SUPREME COURT ] it was held by Hon ble Supreme Court that expenditure incurred for issue of shares, is capital in nature and hence not allowable u/s. 37(l) of the IT Act. Similar observations were made by Hon'ble Apex Court in Punjab State industrial Development Corporation [ 1996 (12) TMI 6 - SUPREME COURT ] - ITA No. 1258/Mum/2015 - - - Dated:- 11-12-2018 - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM For the Appellant : Shri Farrokh Irani, AR For the Respondent : Shri Vachas Pat i Tr ipathi, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-58, Mumbai [in short CIT(A)], in appeal No. CIT(A)-58/Arr.20/2014-15 vide order dated 09.12.2014.The Assessment was framed by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017] 394 ITR 449 (SC). The learned Counsel for the assessee then narrated the fact that it had substantial own funds with reserves along at the opening of the year being ₹ 1348.78 crores (post merger effect). Thus, the total owned funds of the Company are ₹ 1,421.99 crores (post merger effect). Even premerger the company had a total free reserve of ₹ 177.78 crores at the beginning of the year and ₹ 983.29 crores at year end without including share capital of ₹ 73.21 crores. During the year, there was an infusion of ₹ 39.01 crores by another shareholder Unilazer Exports and management Consultants Limited a promoter group company. These funds were used for downstream investment into subsidiaries of ₹ 376.36 crores and temporarily also parked in Mutual Funds 28.35 crores. These investments together comprise a total investment of ₹ 404.71 crores, which is directly correlated to the infusion of funds by the shareholders and not to any borrowed funds. These facts have not been denied by the learned Sr. Departmental Representative. 5. As regards to the application of Rule 8D(2)(iii) i.e. 1.5% of the average value of investment i.e. admin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he presumptions as held by Hon ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) is in favour of assessee because the Revenue could not establish any nexus with the expenses claimed by assessee vis- -vis exempt income. In the absence of the same, the presumptions in favour of assessee and hence, we delete the addition. We also delete the addition on the issue of satisfaction. Once, the addition is deleted on the issue of satisfaction, nothing will remain even on administrative expenses. This issue of assessee s appeal is allowed. 8. The next issue in this appeal of assessee is against the order of CIT(A) confirming the adjustment made by TPO on account of guarantee commission under section 92C of the Act. For this assessee has raised the following ground No. 2: - 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the adjustment of ₹ 97,51,164/- under section 92C of the Act on account of guarantee commission. 9. Briefly stated facts are that the TPO, Mumbai has passed an order under section 92A(3) of the Act on 29.01.2013 determining Arms Length Price of International Taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 7.2.2. of his order, the assessee has not clarified as how much risk is being taken while giving this guarantee, whose assets are mortgaged, whether there is any sort of indirect guarantee as regard to performance etc. These details have not been provided even during the course of appellate proceedings. These details have not been provided even during the course of appellate proceedings. Further, the so called CUP of Chartered Bank is not supported by the agreement. What has been produced is the letter from the bank to the Prasar Bharati which does not provide any information regarding the securities offered and risk involved. Further no copy of the agreement between the appellant and the Ae has been produced. For want of these documents, contention of the appellant is not verifiable and hence rejected. iii. It is mentioned here that in a recent decision dated 6th June, 2012 in ITA Nos. 8597/Mum/2010 and 7999/Mum/2011 in the case of Mahendra Mahendra Ltd., the Hon'ble ITAT, Mumbai Bench has held that guarantee fee of 3% would represent the arm s length price. Further, Hon'ble ITAT Mumbai in the case of M/s Tecnimount ICB Pvt. Ltd. vs. DCIT vide ITA No. 6394/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion we are of the view that the appeal does not raise any substantial question of law and it is dismissed. There will be no order as to costs.. 11. As the issue is squarely covered in favour of assessee, wherein guarantee commission is to be charged at 0.5% as bench mark by the assessee, we are of the view that no further adjustment to determine the ALP is to be made. This issue of assessee s appeal is allowed. 12. The next issue in this appeal of assessee is against the order of CIT(A) upholding the disallowance of professional fee of ₹ 50 lacs made by the AO treating it as a capital expenditure. For this assessee has raised the following ground No. 3:- 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance of professional fees of ₹ 50,00,000 made by the AO. treating it as capital expenditure. 13. We have gone through the facts and circumstances of the case ..... 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