TMI Blog2022 (10) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... of decision of the Special Bench of the Tribunal in the case of Vireet investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] should be granted to the Assessee. Accordingly, we direct the Assessing Officer to verify the investment which yielded exempt income during the year and re-compute disallowance under Section 14A read with Rule 8D(2)(iii) of the Rules by taking into consideration only the investments which yielded exempt income during the previous year for the purpose of calculating Average Value of Investment. Ground raised by the Assessee is, therefore, partly allowed. Deduction for foreign exchange loss - Assessee had claimed deduction for Foreign Exchange Loss in the return of income for the Assessment Year 2009-10 even though the same was changed to Profit Loss Account only in the Assessment Year 2010-11 which is under consideration - Assessee made an alternate claim during the assessment proceedings of the Assessment Year 2010-11 and claimed deduction for the aforesaid Foreign Exchange Loss - HELD THAT:- Rejection of the alterative claim resulted in double disallowance in the hands of the Assessee first disallowance made by the Assessing Officer in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of proportionate interest attributable to the advances given by the Assessee to its subsidiary/group companies at concessional interest rate or interest free - Decided against revenue. Addition u/s 40(a)(ia) - Whether second proviso to Section 40(a)(ia) is retrospective? - HELD THAT:- Second proviso to Section 40(a)(ia) is retrospective in nature, we note that the Tribunal had, in the case of Rajiv Kumar Agarwal [ 2014 (6) TMI 79 - ITAT AGRA] had held that the Second Proviso to Section 40(a)(ia)of the Act was declaratory and curative in nature and therefore, applied retrospective with effect from 01.4.2005. The aforesaid decision of the Tribunal was approved by the Hon ble Delhi High Court in the case of CIT-1 vs. Ansal Land Mark Township (P.) Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] . In the case of PCIT vs. Perfect Circle India Pvt. Ltd. [ 2019 (1) TMI 1532 - BOMBAY HIGH COURT] has also held that the second proviso to Section 40(a)(ia) of the Act being beneficial to the assessee and declaratory/curative in nature, must be given retrospective effect. - Decided against revenue. - ITA No. 2348/MUM/2015 ITA No. 2408/MUM/2015 - - - Dated:- 26-9-2022 - SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Draft Assessment Order which were disposed off vide order, dated 29.12.2014 passed under Section 144C(5) of the Act. In conformity with the directions issued by the DRP, the Assessing Officer passed the Final Assessment Order on 29.01.2014 under Section 143(3) read with Section 144C of the Act making transfer pricing adjustment of INR 42,25,22,481/- as against transfer pricing adjustment of INR 106,67,93,791/- proposed in Draft Assessment Order. The Assessing Officer also made disallowance/addition of INR 7,67,10,046/- under Section 14A of the Act read with Rule 8D of the Rules as proposed in the Draft Assessment Order. The DRP, however, deleted the disallowance of INR 42,38,39,399/- under Section 36(1)(iii) of the Act and the disallowance of credit card commission expenses of INR 3.87 Crores proposed by the Assessing Officer in the Draft Assessment Order. DRP also directed deletion of the proposed secondary adjustment on account of interest by re-characterizing capital infused by the Assessee as interest free loan. Being aggrieved the Revenue has challenged the deletion of the aforesaid disallowance of INR 42,38,39,399/- under Section 36(1)(iii) of the Act, disallowance of INR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rayer of the Appellant that the transfer pricing order, draft assessment order and the final assessment order are bad in law, null and void and liable to be quashed. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 4. We have heard both sides on admitting the additional grounds and are of the view that the additional grounds raised by the Assessee are legal/jurisdictional grounds which do not require examination of any facts not already on record. Accordingly, in view of the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT: 229 ITR 383, the additional grounds raised by the Assessee are admitted. 5. Advancing arguments on behalf of the Assessee the Ld. Authorised Representative pressed into service the Additional Ground No.1 raised by the Assessee and submitted that the order passed by the Transfer Pricing Officer (TPO) on 30.01.2014 is barred by limitation in view of the judgment of the Hon ble Madras High Court in the case of M/s Pfizer Healthcare India Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would advert to the provisions contained under section 92CA(3) read with section 153 of the Act. 12. Undisputedly, sub-section (3A) to section 92CA has been inserted w.e.f. 01.06.2007 providing time limit for the Transfer Pricing Officer to pass the order i.e. within a period of 60 days prior to the date of completion of assessment as per section 153. So, under section 92CA (3A) read with section 153, Ld. TPO was required to pass the order within the period of 60 days prior to the date on which the period of limitation referred to in section 153 expires i.e. 21 months. 13. Undisputedly the assessment order was passed on 01.11.2019 whereas the Ld. TPO was required to pass the order within 60 days prior to the date of which period of limitation referred to in section 153 of the Act expires. 14. Now the question arises as to how the period of 60 days prior to the date of transfer pricing order i.e. 01.11.2019 is to be computed. Hon'ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. (supra) while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Operative part of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 months is to be added in case reference is made under section 92CA of the Act to the Ld. TPO, meaning thereby the period of 60 days expires to pass the transfer pricing order on 31.10.2019 whereas the transfer pricing order has been passed in this case on 01.11.2019 i.e. beyond the period of 60 days, hence barred by limitation. 17. Since the order passed by the Ld. TPO is held to be barred by limitation the same is illegal, null and void ab-initio, hence quashed. Consequently, the assessment order passed by the AO, qua transfer pricing adjustment only, is also without jurisdiction and as such is not order in the eyes of law hence quashed. Keeping in view the findings returned by the Bench on legal issue we deem it not necessary to go into grounds raised by the assessee on merit. Consequently, appeal filed by the assessee is allowed. Ground No. 2 is allowed. (Emphasis Supplied) 8. Respectfully following the above decision of the Co-ordinate Bench of the Tribunal, we hold that the order passed by the Transfer Pricing Officer on 30.01.2014 is barred by limitation and therefore, the transfer pricing adjustments made in the Final Assessment Order, dated 26.02.2015 are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Hon'ble DRP, erred in not allowing deduction for foreign exchange loss amounting to Rs.11,63,00,000 already taxed in Assessment Year 2009-10. It is prayed that the learned AO be directed to allow deduction for the foreign exchange loss of Rs.11,63,00,000. 14. The Assessee had claimed deduction for Foreign Exchange Loss of INR 11.63 Crores in the return of income for the Assessment Year 2009-10 even though the same was changed to Profit Loss Account only in the Assessment Year 2010-11 which is under consideration. Accordingly, the same was suo moto added back to the income and offered to tax in the return of income for the Assessment Year 2010-11. 15. The Learned Authorised Representative for Assessee submitted that since during the assessment proceedings of Assessment Year 2009-10, the deduction for said foreign exchange loss was disallowed by the Assessing Officer on account of such foreign exchange loss not being debited to Profit Loss Account, the Assessee made an alternate claim during the assessment proceedings of the Assessment Year 2010-11 and claimed deduction for the aforesaid Foreign Exchange Loss of INR 11.63 Crores. Rejection of the alterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the same has been deferred in the books of accounts. The Assessee has, in our view, correctly offered the same to tax in the computation of income for the Assessment Year 2010-11. We do not find any infirmity in the directions issued by the DRP and the Final Assessment Order passed by the Assessing Officer on this issue. Ground No. 9 raised by the Assessee is dismissed. Ground No. 10 21. 10. On the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the Hon'ble DRP, erred in not allowing the deduction for foreign exchange loss of Rs.52,43,00,000 on revaluation of shareholders' deposit. It is prayed that the learned AO be directed to allow the deduction for foreign exchange loss of Rs. 52,43,00,000 on revaluation of shareholders' deposit. 22. During the previous year relevant to the Assessment Year 2010-11, the Assessee revalued Shareholders Deposit as on March 31, 2010 and debited the exchange loss on revaluation to Reserve Account in Balance Sheet instead of the Profit and Loss Account. In the return income for the Assessment Year 2010-11 the Assessee did not claim deduction of the said exchange los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (TCS) amounting to Rs. 1,63,09,096. It is prayed that the learned AO be directed to grant credit for TDS and TCS amounting to Rs.1,63,09,096. 27. In Ground No. 11 the Assessee seeking directions for grant of credit of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) amounting to INR 1,63,09,096/-. The issue is remanded to the file of Assessing Officer. The Assessing Officer is directed to verify the amount of TDS/TCS credit available to the Assessee and grant credit for the same to the Assessee as per law. Ground No. 12 28. 12. On the facts and in the circumstances of the case and in law, the learned AO erred in computing the total demand payable at Rs. 19.24.85,270 as against the actual demand of Rs.19.07,01,458, thereby determining the excess demand by Rs. 17,83,810. It is prayed that the learned AO be directed to reduce the demand by Rs. 17,83,810. 29. Ground No. 12 pertains to computation of total demand payable by the Assessee. It is the contention of the Assessee that excess demand of INR 17,83,810/- has been determined. The Assessing Officer is directed to consider the aforesaid contention raised by the Assessee while computing demand at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut appreciating that on a similar issue the Department is in appeal before the Hon ble Bombay High Court in assessee s own case for A.Y. 1998-99 to 2002-03. 37. During the relevant previous year, the Assessee had claimed deduction for interest on borrowed funds amounting to INR 152.90 Crores. The Assessing Officer noticed that the Assessee had made investments in overseas entities of INR 1790.49 Crores consisting of investment of INR 1600.26 Crores International Hotels Management Services Inc. (IHMS) and investment of INR 190.23 Crores in Taj International Hotels HK Ltd. (TIHK). According to the Assessing Officer, the Assessee had utilized interest bearing funds to make aforesaid investments and therefore, the Assessing Officer proposed disallowance of proportionate interest amounting to INR 42.38 Crores in the Draft Assessment Order invoking provision of Section 36(1)(iii) of the Act. The Assessee filed objections before DRP against the proposed disallowance of interest under Section 36(1)(iii) of the Act. After considering the details submissions filed by the Assessee the DRP granted relief to the Assessee by directing deletion of the proposed disallowance under Section 36(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T vs. Tulip Star Hotels Ltd. [2011] 338 ITR 482 (Delhi) - CIT Mumbai-2 vs. The Indian Hotels Co. Ltd : order dated 27.03.2015 passed in ITA No. 1325/1334/1335/1656/1657/1658 of 2013 - DCIT vs. The Indian Hotels Co. Ltd: 92 ITD 97 (Mum)(TM) - DCIT, Circle 2(2) vs. The Indian Hotels Co. Ltd: common order of the Mumbai Bench of the Tribunal dated 23.11.2012 passed in appeals for Assessment Year 1994-95, 1998-99 to 2002-03. Further, placing reliance upon the judgment of the Hon ble Bombay High Court in the case of CIT-7 Vs. Reliance Communication Infrastructure Ltd.: [2013] 260 CTR 159 (Bombay), the Ld. Authorised Representative for the Assessee submitted that the fact that borrowed funds were utilzised for making the investments would not disentitled the Assessee from claiming deduction for interest so long as the investment has been made on account of business expediency. 41. We have heard the rival contention and perused the material on record including the judicial precedents cited during the course of hearing. The Assessee has been able to demonstrate before the DRP as well as in the present appellate proceedings that the investments made by the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinued with the CDL and paid interest to the financial institutions without charging anything from the CDL. The Tribunal did not accept the stand and held that the conclusions of the Commissioner of Income-tax (Appeals) were in order. On being moved for reference, the questions as set out above have been referred for the opinion of this court. Their Lordships observed as under: An expenditure to which one cannot apply an empirical or subjective standard is to be judged from the point of view of a businessman and it is relevant to consider how the businessman himself treats a particular item of expenditure. The term commercial expediency is not a term of art. It means everything that serves to promote commerce and includes every means suitable to that end. In applying the test of commercial expediency, for determining whether the expenditure was wholly and exclusively laid out for the purpose of the business the reasonableness of the expenditure has to be judged from the point of view of the businessman and not the Revenue [See CIT v. Walchand and Co. (P) Ltd. [1967] 65 ITR 381 (SC); J.K. Woollen Manufacturers u. CIT [1969] 72 ITR 622 (SC); Aluminimum Corporation of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration are accordingly dismissed. 44. While the Ld. Departmental Representative submitted that the Revenue is in appeal before the Hon ble Bombay High Court against the above decision of the Tribunal for the Assessment Years 1994-95, 1998-99 to 2002-03, the Assessee has placed on record order, dated 27.05.2012, passed by the Hon ble Bombay High Court the case of the Assessee in appeal filed by the Revenue before the Hon ble Bombay High Court for Years 1998-99 to 2002-03 [ITA No. 1325,1334,1335,1656,1657 1658 of 2013] wherein the Hon ble High Court has declined to admit the appeals filed by the Assessee on the issue of disallowance of proportionate interest under Section 36(1)(iii) of the Act holding as under: 3. With the assistance of Mr. Suresh Kumar, we have perused the questions of law in Income Tax Appeal No.1325 of 2013 at pages 3 4 of the paper-book. In the case of same assessee, on similar question Nos.1 2, the Tribunal found that loans and advances given by the assessee company to its subsidiary company was raised for the assessment year 1989 90 and it was decided in favour of the assessee. In the present case, we are concerned with the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 5420/Mum/2014 pertaining to Assessment Year 2011-12 placed on record by the Ld. Authorised Representative for the Assessee. In Assessee s own case while examining the liability of the Assessee to withhold tax under Section 194H of the Act from payment of credit card collection charges to the banks, the Tribunal has held as under: 5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decision of the Tribunal and also the relevant material placed before us. On perusal of the said decision of the Tribunal (supra) dated 1.5.2015, we find, on identical issue, the Tribunal dismissed the Revenue s appeal and upheld the decision of the CIT (A) vide para 2.1 of its order. Considering the significance of the said para 2.1 of the Tribunal s order (supra) for the sake of completeness of this order, the same is extracted as under: 2.1. We have considered the submissions of Ld DR and perused the material available on record. The facts, in brief are that the assessee is in the business of retails in electronic goods, kitchen appliances, computers, laptops and related accessories through dedicated outlets called Croma . The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed. 7. Since, the issues raised in other appeal ITA No.5420/M/2014 (AY 2011-2012) are identical, therefore, our decision given in appeal ITA No.5419/M/2014, in the above paragraphs of this order, squarely applies to the present appeal too. Considering the same, we upheld the decision of the CIT (A) and the grounds raised by the Revenue are dismissed. (Emphasis Supplied) 49. Further, Notification No. 56 of 2012, dated 31.12.2012, issued by the Central Board of Direct Taxes clearly provides that no deduction of tax shall be made on the payments made to a bank (excluding foreign banks) which are in the nature of credit card or debit card commission for transaction between the merchant establishment and acquirer bank. 50. As regards legal contention raised by the Revenue that the DRP and the Assessing Officer have erred in holding that the Second proviso to Section 40(a)(ia) is retrospective in nature, we note that the Tribunal had, in the case of Rajiv Kumar Agarwal v. ACIT [IT Apeeal No. 337 (Agra) of 2013], had held that the Second Proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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