TMI Blog2023 (2) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... y following the assessee s own case for assessment year 2016-2017 [ 2022 (6) TMI 660 - ITAT BANGALORE] had restored the matter to the AO / TPO to consider the issue afresh in line indicated by the Tribunal in the order passed for assessment year 2015-2016 [ 2021 (11) TMI 1076 - ITAT BANGALORE] - Thus AO / TPO is directed to decide the issue afresh in the light of the directions issued by the Tribunal in assessee s own case for assessment year 2015-2016. Disallowance u/s 14A - HELD THAT:- It is claimed that the assessee had earned exempt income during the relevant assessment year. If the assessee proves that it had not earned any exempt income during the relevant assessment year, no disallowance u/s 14A of the I.T.Act can be resorted to. For examination whether the assessee has earned any exempt income during the relevant assessment year, the matter is restored to the files of the A.O. Appeal filed by the assessee is partly allowed. - IT(TP)A No.322/Bang/2022 : - - - Dated:- 22-11-2022 - Shri George George K, JM Shri Laxmi Prasad Sahu, AM For the Appellant : Sri.Ankur Pai, Advocate For the Respondent : Sri.Manjunath Karkihalli, CIT DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain positive directions to the AO / TPO. As regards the corporate guarantee fee, the objections of the assessee was rejected and the DRP upheld the view of the TPO in computing the corporate guarantee fee at 1.75%. As regards the TP adjustment on interest on outstanding receivables, the objections of the assessee was rejected and the TPO s order benchmarking the same as a separate international transaction was upheld by the DRP (refer page 66 of the DRP s order). On the corporate tax front, the disallowance u/s 14A of the I.T.Act made by the A.O. was upheld by the DRP. The DRP, however, accepted the objections of the assessee and directed the A.O. to delete the amount of disallowance u/s 14A of the I.T.Act, which was added to the book profit u/s 115JB of the I.T.Act. The DRP also rejected the claim of the assessee for higher profits u/s 10AA of the I.T.Act. 6. Pursuant to the DRP s directions, the A.O. passed the impugned final assessment order, without giving effect to the directions of the DRP. The A.O. observed that the TPO has not provided the order giving effect to the directions of the DRP and the assessment was getting time barred. Therefore, the A.O. adopted the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of TPO giving effect to the DRP s directions. 9. The learned Departmental Representative, on the other hand, furnished copy of the order of the TPO giving effect to the DRP s directions, wherein, the TP adjustment under SWD segment was completely deleted. 10. We have heard rival submissions and perused the material on record. On perusal of the DRP s directions, it is seen that the TP adjustment with reference to the software development segment has been completely deleted. We notice that the A.O. has not given effect to the directions of the DRP and incorporated the adjustment proposed in the draft assessment order, while completing the final assessment order. The A.O. is directed to give effect to the DRP s directions and accordingly modify the final assessment order. With these observations, we disposed off grounds 1 to 20. The other grounds, we shall dispose off as under: Grounds 21 to 27 : Rate of corporate guarantee fee (TP adjustment) 11. In the above grounds, the assessee had only pressed for ground 26 with reference to the rate of corporate guarantee. 12. The TPO also benchmarked the corporate guarantee fees charged by the assessee and dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee commission the assessee ought to have earned, and accordingly, restricted the addition of corporate guarantee commission to 0.50% of the total loan amount. The relevant finding of the Tribunal with reference to the same reads as follows:- 6. We have considered the rival submissions. We have perused the decision cited by the learned DR and we find that in that case, the assessee himself had offered 0.875% as the appropriate arm s length guarantee commission and therefore the said decision will not be applicable as a precedent in other cases. We are therefore inclined to follow the decision of the Bengaluru Benches of the Tribunal in the case of United Spirits (supra) and hold that 0.5% of the amount of the loan for which the assessee stood as a guarantee would be the appropriate arm s length guarantee commission that the assessee ought to have earned and this addition is accordingly directed to be restricted to 0.5% of the loan amount. 17. Facts for the relevant assessment year are identical to the facts of the Tribunal for the immediately preceding assessment year. Therefore, following the order of the Tribunal in assessee s own case for assessment year 2016- 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved, the assessee has raised this issue before the Tribunal. The gist of the submissions made by the learned AR are as follows:- (a) The weighted average method adopted by TPO is incorrect. (b) The assessee has not charged interest on outstanding receivables, both from AEs and Non-AEs and hence the Benchmarking analysis should be done with uncontrolled transactions and not by adopting an arbitrary number. (c) The average credit period for both the AEs and non-AEs are the same and the credit period is about 99 days for invoices raised during the current year and 74 days for the invoices raised during the earlier year, which is within the credit period allowed in the RBI circular. (d) The rate of LIBOR at 6 months + 400 basis points adopted by the TPO is without any basis. The rate should be adopted after a proper benchmarking analysis. (e) The DRP directed the TPO to rework the interest computation based on the delay of individual invoices, which has not been done. 5.3 The learned Departmental Representative supported the order of the AO / TPO. 5.4 We have heard rival submissions and perused the material on record. The DRP has directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the AO to examine the issue just like the Tribunal has done in of assessee s own case for assessment year 2016-2017 (supra). 26. The learned AR did not have any serious objection for the matter to be remanded to the AO to examine whether the assessee has earned any exempt income during the relevant assessment year. 27. We have heard rival submissions and perused the material on record. It is claimed that the assessee had earned exempt income during the relevant assessment year. If the assessee proves that it had not earned any exempt income during the relevant assessment year, no disallowance u/s 14A of the I.T.Act can be resorted to. For examination whether the assessee has earned any exempt income during the relevant assessment year, the matter is restored to the files of the A.O. Since the issue with regard to the disallowance u/s 14A of the I.T.Act is restored to the files of the AO, ground 39 with reference to adjustment of 14A disallowance while computing book profit u/s 115JB of the I.T.Act and ground 42 as regards re-computation of deduction u/s 10AA of the I.T.Act on higher profits after considering disallowance u/s 14A of the I.T.Act are left open and not adju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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