TMI Blog2021 (9) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the ALP is to be made. This issue of assessee s appeal is allowed. TP Adjustment on Charging of interest on share application money - TPO held that since the shares are not allotted within a reasonable period, the share application money is in the nature of temporary funding till the allotment is made and proposed interest rate @ 14% and calculated the adjustment - HELD THAT:- Share application money being capital account transaction is outside the purview of section 92 of the Act and the transfer pricing adjustment cannot be made on capital account transactions as per the decision of VODAFONE INDIA SERVICES PVT. LTD.[ 2014 (10) TMI 278 - BOMBAY HIGH COURT] - Decided in favour of assessee. Short deduction of TDS - TDS u/s 194C or 194J - Addition u/s 40(a)(ia) - Payment relating to processing charges, photo guard coating and subtitling charges - HELD THAT:- As provisions of section 40(a)(ia) of the Act are applicable in case of non deduction of TDS. Provisions of section 40(a)(ia) of the Act are not applicable in case of short deduction of TDS and for this proposition, in our considered opinion, the learned CIT(A) has perfectly relied upon the findings given in Vodafo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5, raised by the Revenue relates to disallowance of ₹ 7,69,10,639, under section 14A of the Income Tax Act, 1961 (for short the Act ) r/w rule 8D of the Income Tax Rules, 1962. 4. During the year under consideration, the assessee company received dividend of ₹ 4,33,649. The Assessing Officer sought explanation from the assessee as to why disallowance under section 14A of the Act r./w rule 8D of the Rules should not be made with reference to the income claimed as exempt. The assessee submitted that no disallowance under rule 8D is warranted as the company has substantial own funds of ₹ 994.37 crore of which the investments made by the company are of ₹ 552.,69 crore only. The assessee submitted that the major investments of the company during the year amounts to ₹ 58.89 crore. The other investments of the company are investments in foreign companies which do not yield any income which is not chargeable to tax. He submitted that similar investments which do not exist being sold out do not yield any exempt income. The Assessing Officer considering the submissions of the assessee noticed that assessee company has made huge investments of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 2015, wherein it was held that no disallowance under section 14A of the Act can be made while computing book profits as per section 115JB of the Act. 8. Having considered the rival submissions and having perused the material on record in the light of the decisions relied upon, before us, both the learned Counsel appearing for the parties agreed that this issue is now settled by the decision of the Tribunal, Mumbai Bench, rendered in assessee s own case for the assessment year 2009 10 in UTV Software Communications Ltd. v/s ACIT, ITA no.1258/Mum./ 2015, order dated 11th December 2018, wherein the Tribunal decided the issue in favour of the assessee by observing as follows: 6. After hearing both the sides, we have gone through the assessment order and noted that the AO has simply invoked the provisions of section 14A of the Act read with Rule 8D(2)(ii). Even there is no whisper that how the administrative expenses are linked to these exempt incomes. We find that this issue is squarely covered in favour of assessee and against the Revenue by the decision of Hon ble Supreme Court in the case of Maxopp Investment Ltd. (supra), wherein Supreme Court held as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verest Kanto Cylinders Ltd., [2015] 378 ITR 57 (Bom.) and restricted the transfer pricing adjustment of corporate guarantee fee to 0.5%. 13. The learned Departmental Representative submitted that application of 3% as adjustment of corporate guarantee fee by the Transfer Pricing Officer is justified. 14. The learned Counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of the Tribunal rendered in assessee s own case for the assessment year 2009 10, wherein the commission on guarantee fee was restricted to 0.5%. The learned Counsel also relied upon the decision of the Hon'ble Jurisdictional High Court in Everest Kanto Cylinders Ltd. (supra). 15. Considered the rival submissions and perused the material on record. We find that this issue is covered by the decision of the Co ordinate Bench of the Tribunal rendered in assessee s own case for the assessment year 2009 10 in UTV Software Communications Ltd. v/s ACIT, ITA no.1258/Mum./2015, order dated 11th December 2018, wherein the commission on guarantee fee was restricted to 0.5%. 10. At the outset, the learned Counsel for the assessee stated that the Hon ble Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. 16. Since the Tribunal has been maintaining consistent view in restricting the commission on guarantee fees @ 0.5%, similar directions are also issued in the year under consideration by restricting the commission on guarantee fee @ 0.5%. Consequently, we uphold the order passed by the learned CIT(A) by dismissing the ground no. 2 to 2.11, raised by the Revenue. 17. The issue raised in grounds no.3 to 3.8, relates to charging of interest on share application money. 18. The Transfer Pricing Officer held that since the shares are not allotted within a reasonable period, the share application money is in the nature of temporary funding till the allotment is made. The Transfer Pricing Officer proposed interest rate @ 14% and calculated the adjustment of ₹ 3,47,57,513. The Assessing Officer followed the directions of the Transfer Pricing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to accrue, arise or receive is at all income. The issue of shares to the holding company is a capital account transaction, therefore, has nothing to do with income. We, thus do not find substance in the above submission. 44. It was also contended that Chapter X of the Act is a complete code by itself and not merely a machinery provision to compute the ALP. It is a hidden benefit of the transaction which is being charged to tax and the charging Section is inherent in Chapter X of the Act. It is well settled position in law that a charge to tax must be found specifically mentioned in the Act. In the absence of there being a charging Section in Chapter X of the Act, it is not possible to read a charging provision into Chapter X of the Act. We can do no better than refer to the following observations of the five Member Bench of the Apex Court in CIT v. Vatika Township (P.) Ltd. [2011] 49 taxmann.com 249:- 'Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax. In Billings v. U. S, the Supreme Court clearly acknowledged this ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vasa Shetti [1981] 128 ITR 294/5 taxmann. com 1, there is a qualitative difference between the charging provisions and computation provisions and ordinarily the operation of the charging provisions cannot be affected by the construction of computation provisions. In the present case, there is no charging provision to tax capital account transaction in respect of issue of shares at a premium. Computation provisions cannot replace/ substitute the charging provisions. In fact, in B.C. Srinivasa Shetti (supra), there was charging provision but the computation provision failed and in such a case the Court held that the transaction cannot be brought to tax. The present facts are on a higher pedestal as there is no charging provision to tax issue of shares at premium to a non-resident, then the occasion to invoke the computation provisions does not arise. We, therefore, find no substance in the aforesaid submission made on behalf of the Revenue. 23. In view of the above, we are of the opinion that share application money being capital account transaction is outside the purview of section 92 of the Act and the transfer pricing adjustment cannot be made on capital account transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of tax. 28. The learned Counsel for the assessee supporting the observations of the learned CIT(A) submitted that in case of short deduction of TDS, no disallowance can be made by invoking provisions of section 40(a)(ia) of the Act and in support of this argument, the learned Counsel relied upon the decision of the Hon ble Calcutta High Court in CIT v/s S.K. Tekriwal, [2014] 361 ITR 432 (Cal.) and the decision of the Co ordinate Bench of the Tribunal, Mumbai Bench, in ACIT v/s UTV Entertainment Television Ltd., ITA no.6784/Mum./2016, dated 11th December 2020. 29. We have considered the rival submissions of the learned Counsel appearing for the parties and perused the material on record. Insofar as disallowance under section 40(a)(ia) of the Act is concerned, we find that provisions of section 40(a)(ia) of the Act are applicable in case of non deduction of TDS. Provisions of section 40(a)(ia) of the Act are not applicable in case of short deduction of TDS and for this proposition, in our considered opinion, the learned CIT(A) has perfectly relied upon the findings given by the Hon'ble Jurisdictional High Court in Vodafone India Services Pvt. Ltd. (supra). In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be a situation where income is recognized in one year and expenses in subsequent year. He held that income is recognized and expenses are not considered which is patently incorrect. In view of these aspects, he held that the addition made by the Assessing Officer is not sustainable and allowed the ground raised by the assessee. 33. The learned Departmental Representative relied upon the order of the Assessing Officer and submitted that the learned CIT(A) was not justified in ignoring that such claim is not as per the accounting practice consistently followed by the assessee and thus, the learned CIT(A) was not correct in deleting the addition on account of excess claim of ₹ 15,04,60,771. 34. The learned Counsel for the assessee relied upon the observations of the learned CIT(A). He submitted that the discount on the issue of commercial paper is an allowable as revenue expenditure and is allowed in the first year when the liability is actually incurred i.e., discount given. In support of his arguments, the learned Counsel relied upon the following case laws: i) Taparia Tools Ltd. v/s JCIT, [2015] 55 taxmann.com 361 (SC); ii) JCIT v/s Mukund Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not debited to Profit Loss Account. 41. Considered the rival submissions and perused the material on record. Insofar as debenture issue expenses is concerned, we find the Assessing Officer has disallowed the claim on the ground that the assessee has not debited the debenture issue expenses in the Profit Loss Account but debited it to the securities premium account which is capital in nature and cannot be considered as revenue expenditure claimable under section 37 of the Act. Contrary to this view of the Assessing Officer, the learned Counsel for the assessee relied upon the decision of the Hon ble Supreme Court in Kedarnath Jute Mfg. Co. Ltd. (supra), wherein it has been held that deduction cannot be denied merely because such expenses were not debited to the books of account. In our view, the learned CIT(A) has perfectly held that the debenture has character of loan unlike share capital and hence the debenture issue expenses are permissible deduction. The learned Departmental Representative has not brought anything on record contrary to the submission of the learned Counsel and the decision of the learned CIT(A) to enable us to take a view other than the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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