TMI Blog2016 (10) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the considered opinion that the issue requires to be examined by the TPO afresh in the light of the above materials and the ratios and accordingly remit the issue to the TPO. Disallowance u/s 14A - AR pleaded that the disallowance made u/s 14A read with rule 8D(2)(iii) has been made without demonstrating the incorrectness of the claim of the assessee that it has not incurred any expenditure towards earning exempt income. The said disallowance is therefore bad in law - HELD THAT:- We are of the considered opinion that the issue requires to be examined by the AO afresh in the light of the above amendments and accordingly remit the issue to the AO. Addition under the caption Excess deduction' u/s.10A /10AA - HELD THAT:- On the facts and circumstances of the case, it is clear that neither the AO has examined these issues properly nor they received due attention at the hands of the DRP. We are of the considered view that the above issues are required to be adjudicated by the AO afresh in the light of the above ratio and if the facts are similar to apply the above ratios accordingly and hence these issues are also remitted to the AO. Short credit of TDS - assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has benchmarked this transaction against the LIBOR using the CUP method. The six monthly US LIBOR is taken at 0.79% as against which it has received @4.61% and 3.24% interest, respectively, which are higher. Hence, these transactions were considered by the assessee to be at arm s length. 03. However, the TPO considered corporate bonds issued by the companies in India as against the government bonds for comparability of the interest rate earned. The TPO further relied upon the safety level of the corporate bonds based on the grading issued by CRISIL and considered the loans given by the assessee similar to corporate bonds falling within the grade of BB to D . The TPO was of the view that the risks in the loans given were too high for the company and considered the same to be in the grade of BB and corresponding interest rate was computed @14.74 percent and accordingly, Rs.2,67,68,300/ was added to the assessee s ALP. The DRP confirmed said addition. 04. Thereafter, the assessee filed a rectification petition dt.10.02.2014 before the TPO submitting, inter alia , that the AO computed interest on loan on an average / closing balance as on 31.03.2010. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46,00,977/-). 05. The Ld. AR submitted that its main objections to the TPO s proposal was that Sasken was a debt-free company, the loans provided were from internal funds. Sasken India earns mostly in foreign currency with 80% of its sales and some of the domestic sales being in foreign currency. As per the newly introduced Safe Harbour rules by the CBDT, the prescribed ALP rate is the base rate of SBI if the loan to Indian subsidiaries outside India is in Indian currency. All these facts are acknowledged by the TPO in his order. Relying on this tribunal decisions in Sami Labs Ltd v DCIT, IT(TP)A no 1358/ Bang/2011 dt 04.12.2015 Indegene Lifesystems P Ltd v ACIT , 2015 60 taxmann.com28 , he pleaded that the impugned loan to its AEs were out of its own funds , not out of borrowed funds, the loans are given in US dollars, interest was received in Indian rupees and when such transactions between it and its AEs are in international transactions ,the ratio of the above cases ie the transaction would have to be looked upon by applying commercial principles in regard to international transaction and in such cases the domestic prime lending rate would not have applicability and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment made for earning tax-free dividend income even though no such exempt income is earned during the year. It would be fair to note that investment decisions are complex in nature and a company is run by its Board of Directors and the business and investments are managed by key personnel, executives etc., for which experts are often consulted. The very existence of a corporate entity and its structure requires an administrative stablishment which require incurring of multifarious expenses including establishment, general and administrative expenses. It held that the case laws relied upon by the assessee cannot rescue it in-as-much as it has not maintained any accounts as mandated in section 14A(2)(3) and such an inaction on the part of the assessee cannot automatically shift the burden to the AO which is otherwise placed upon the assessee at the first instance. In this view of the matter, the Panel found no merit in the arguments of the assessee and held that the provisions of section 14A are attracted in this case and that the working of the disallowance made by the AO as per Rule 8D is in order. Panel also held that this is also in accordance with the circular No.5/2014 of CBD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and exclusion of foreign currency expenditure, additional telecommunication and insurance expenses from export turnover although the assessee raised such issues before the DRP. The assessee filed a petition under Rule 13 of the IT (DRP) Rules, 2009, requesting the DRP to give specific directions in respect of the above mentioned objections. The DRP vide its order dt. 07.09.2015 , inter alia, held although the assessee raised the above issues viz grounds 7,8 10, however the DRP has not issued any direction on such issues . It held that the rectification under rule 13 of DRP rules read with Section 144C can not be equated with section 154 as the scope under section 154 is entire order , whereas the subject matter of rectification under rule 13 of DRP rules is only the direction (s) issued within the specified time. After such specified time , the DRP can not issue fresh directions and held that the request for rectification is not tenable and accordingly dismissed the petition filed by the assessee under Rule 13 of the Rules. It is pleaded that in the following decisions, it has been held that royalty income constitutes profits of the business of 10A units and consequently eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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