TMI Blog2023 (3) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... erest on receivables after netting off payables - HELD THAT:- Since the AO in the instant case has not followed the direction of the ld.DRP, therefore, the grounds on this issue are restored to the file of the Assessing Officer with a direction to follow the directions of the DRP and make appropriate addition. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- DRP upheld the action of the AO in the draft assessment order holding that the disallowance under section 14A r.w.Rule 8D is mandatory in nature irrespective of earning or not earning any exempt income. Assessee submitted that he has not earned any exempt income during the year. All these investments are made outside India in assessee s subsidiary companies, the income of which when received is taxable in India. A perusal of the order of the AO DRP shows that the same is very cryptic on this issue. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh. Addition towards duty drawback - HELD THAT:- Since the assessee had not provided the necessary details with supporting evidence, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Apart from the above two additions, he also made addition of Rs.1,49,18,829/- on account of disallowance u/s 14A and addition of Rs.67,46,635/- on a/c of duty drawback received. Accordingly, the Assessing Officer determined the total income of the assessee at Rs.23,59,83,602/- in the draft assessment order passed. 5. The assessee filed objections before the DRP and the DRP vide order dated 28.6.2022 gave partial relief to the assessee wherein the DRP reduced the corporate guarantee to Rs.74,35,000/- and interest receivable on outstanding to Rs.55,03,931/-. However, the DRP upheld the addition of Rs.1,49,18,829/- being disallowance u/s 14A and the addition of Rs.67,46,635/- being duty drawback received. The Assessing Officer in the final order passed on 30.07.2022 made the above additions as sustained by the DRP and determined the total income at Rs.20,50,33,895/-. 6. Aggrieved with such order of the Assessing Officer/TPO DRP, the assessee is in appeal before the Tribunal by raising the following grounds: 1. On the facts and circumstances of the case, the Final assessment order ('FAO ) dated 30.07.2022 passed by the Asst. Commissioner of Income Tax and the Ld. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with Rule10B(1) of the Income Tax Rules, 1962. 2.9 The AO/TPO erred in not appreciating the fact that no comparison can be made between guarantee issued by commercial bank and the corporate guarantee issued by the holding company for the benefit of AE. 2.10 The AO/TPO erred in not appreciating the tact that the comparison should be based on real transactions of similar nature and it cannot be based on the hypothesis as to what would have happened if the assessee was to have similar transactions with Non-AEs. 2.11 The AO/TPO erred in not appreciating the fact that when | two divergent views are possible, the view which is favorable to assessee should be adopted. 2.12 Without prejudice to above, the AO/TPO erred in calculating the guarantee fee on the entire amount of the guarantee instead of restricting to the extent of fresh guarantee provided during the year under consideration. 2.13 Without prejudice to above, the AO/TPO erred in calculating the guarantee fee on the entire amount of the guarantee instead of restricting the amount to the extent of the withdrawal of guaranteed amount by the AEs. 2.14 Without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated assessee the fact that the is following a policy of not charging interest on receivables irrespective of the fact that whether the sales 3.6 3.7 A 3.8 As are made to AE or Non- AE. 3.9 The AO/TPO ought to have appreciated that assessee did not charge any interest on advances given to AE's and Non-AE. 3.10. AO/TPO erred in not considering the fact that working capital adjustment itself takes the impact of interest receivables accordingly no separate adjustment can be made for the receivables. 3.11 The AO/TPO ought to have appreciated the ALP fact that no adjustment is required to be made in a case where after reducing the amount of notional interest charged on outstanding receivables from of operating profit, the margin comparable is less than the margin of the assessee. 3.12 The AO/TPO ought to have appreciated the fact that allowing of extended credit period to the associated enterprises is closely linked to the determination of sale price, which is in-turn base to arrive at the margins of the assessee. 3.13 Without appreciating the fact that the outstanding receivables are foreign currency receivable and same has to be benchmark with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 14A of the Act and further the AO ought to have appreciated the fact the Assessee not have any dividend income during the year. 5. Erred in upheld the addition of Rs. 67,46,635/- towards duty drawback: 5.1 The Ld AO erred in making the addition of duty drawback of Rs. 67.46,635/- based on suspicions and surmises without having any cogent reasoning. 5.2 The Ld AO erred in making the addition without giving the assessee any reasonable opportunity of being heard which is against the principles of natural justice. 5.3 The Ld AO ought to have appreciated the fact that the assessee company has already offered the income of duty drawback to tax under the head business income in profit and loss account and further addition leads to double taxation. 5.4 The Ld AO erred in appreciating the fact that the duty drawback is on the exports made during the year under consideration. 5.5 The Ld AO ought to have appreciated the fact that the 5.5 assessee has maintained all the documents and Books of As stat Account as per provisions of Income Tax Act. 6. The appellant may add, alter or modify any other point to the Grounds of appeal at any time before o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Relying on the provisions of section 92B inserted retrospectively by the Finance Act 2012, information from the websites of various banks and and OECD guidelines, the TPO determined the ALP of corporate guarantee fees at Rs.1,34,01,000/- by adopting the PLI rate of corporate guarantee @ 1.80% per annum. The Assessing Officer accordingly made addition of the same in the draft assessment order. When the assessee objected, the DRP reduced the corporate guarantee charges to 1%. The Assessing Officer in the final assessment order made addition accordingly. Aggrieved with such order of the Assessing Officer/TPO/DRP, the assessee is in appeal before the Tribunal. 8.4 The learned Counsel for the assessee at the outset drew the attention of the Bench to the order of the Tribunal in assessee s own case vide ITA Nos.186 to 189/Hyd/2021 dated 12.04.2022 and submitted that the Tribunal in assessee s own case for the A.Y 2014-15 to 2017-18 has directed the Assessing Officer to adopt lumpsum commission rate of .5%. He accordingly submitted that the corporate guarantee commission be reduced to .5%. 8.5 The learned DR, on the other hand, heavily relied on the order of the Assessing Officer/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as under: 2.3.22 In view of the above, considering the objections of the assessee, the TPO is directed to impute interest on receivables after netting off payables following credit period mentioned in the intercompany agreement with AEs or as per the invoice period date applying the SBI short term deposit rate . 9.2 He submitted that since the Assessing Officer in the final order has not followed the directions of the DRP, therefore, he has no objection if the matter is restored to the file of the Assessing Officer with a direction to compute the interest on receivables after netting off payables. 9.3 The learned DR has no objection for the same. 9.4 Since the AO in the instant case has not followed the direction of the ld.DRP, therefore, the grounds on this issue are restored to the file of the Assessing Officer with a direction to follow the directions of the DRP at Para 2.3.22 of its order and make appropriate addition. Needless to say, while deciding the issue the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. While doing so, he shall keep in mind the order of the Tribunal for the precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly made addition of the same. 10.3 Aggrieved with such order of the Assessing Officer/DRP, the assessee is in appeal before the Tribunal. 10.4 The learned Counsel for the assessee made two fold arguments. He submitted that there is no exempt income and therefore, no disallowance could have been made. In his second plank of arguments, he submitted that the investments are made outside the Country in assessee s own subsidiary company. He submitted that any income from assessee s subsidiary from the foreign country is taxable in India. Therefore, no disallowance u/s 14A is called for. He accordingly submitted that no disallowance u/s 14A r.w.r 8D be made. 10.5 The learned DR, on the other hand, while supporting the order of the Assessing Officer and the DRP submitted that the arguments now advanced by the learned Counsel for the assessee were never advanced before the lower authorities. Therefore, she has no objection, if the matter is restored to the file of the Assessing Officer for verification of the facts. 10.6 We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the DRP and the Paper Book filed on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,46,635.00 (b) Duty drawback 1,87,22,31.43 (c) Other Operating Revenues 4,47,62,396.54 Total 2,61,38,58,572.57 11.3 Based on the arguments advanced by the assessee, the DRP directed the Assessing Officer to verify the claim of the assessee from the books of account and if the claim is found to be correct, proposed addition be deleted. Assessing Officer thereafter in the final order made the addition. 11.4 Aggrieved with such order of the Assessing Officer, the assessee is in appeal before the Tribunal. 11.5 The learned Counsel for the assessee submitted that despite the direction given by the DRP, the Assessing Officer in the final order made the addition. He submitted that since the assessee has already declared the duty drawback under the head business income, the same should be deleted. 11.6 The learned DR, on the other hand, referring to the order of the Assessing Officer submitted that when the assessee has not properly submitted evidences to support his claim against the addition, the Assessing Officer had no other option but to make the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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