TMI Blog2022 (11) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign exchange loss on revaluation of shareholders deposits - HELD THAT:- Ground raised by the Assessee is dismissed since, admittedly, the very basis on which the Assessee had set up this alternative/without prejudice claim does not survive. Further, in our view the two pleas set up by the Assessee are not alternative but mutually destructive. While preparing return of income the Assessee has treated the exchange loss on revaluation of Shareholders‟ Deposits as capital in nature, during the assessment proceedings the Assessee has claimed the same to be Revenue in nature while retaining the stand that the exchange gain on revaluation of Shareholders‟ Deposits in earlier years is capital in nature. While there is no bar on taking any inconsistent or alternative pleas, mutually repugnant and contradictory pleas which are destructive of each other cannot be permitted to be urged simultaneously. Computing the amount of MAT credit to be carried forward without including surcharge and cess - HELD THAT:- As considered the rival submissions. Assessing Officer is directed to re-computed the amount of MAT Credit to be carried forward, after including surcharge and cess a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into International Transactions with its Associated Enterprises (AEs) and therefore, a reference under Section 92CA(3) of the Act was made to the Transfer Pricing Officer (TPO) for determination of Arms Length Price (ALP) of the International Transactions. The TPO, vide order dated 30.01.2015, passed under Section 92CA(3) of the Act proposed aggregate transfer pricing adjustments of INR 179,61,83,140/- which was incorporated by the Assessing Officer in the Draft Assessment Order, dated 31.03.2015 passed under Section 143(3) read with Section 144C of the Act. The Assessing Officer also proposed (a) disallowance of INR 8,55,98,057/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as the Rules‟) in addition to suo-moto disallowance of INR 4,22,01,943/- offered by the Assessee, (b) a disallowance of INR 32,73,14,212/- under Section 36(1)(iii) of the Act, (c) a disallowance of credit card commission expenses of INR 4,22,19,634/- claimed by the Assessee for failure to deduct tax invoking provisions of Section 40(a)(ia) of the Act, and (d) disallowance of advertisement expenditure of INR 3,46,25,000/-. During the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional submission in relation to some of the issues raised in the present appeal. ITA No. 2308/Mum/2016 (Appeal by Assessee) 5. The Assessee has raised 12 grounds of appeal. Ground No. 1 is general in nature. Ground No. 2 to 7 are directed against the transfer pricing adjustments whereas Ground No. 8 to 10 are directed against the corporate tax additions/disallowances. Ground No. 11 pertains to short grant of credit of tax deducted at source and tax collected at source amounting to INR 2,06,85,052/-. Ground No. 12 pertains to short grant interest under Section 244A of the Act. In addition to the above, vide letter, dated 06.06.2022, the Assessee has also raised the following additional grounds of appeal: Additional Ground No. 1: On the facts and in the circumstances of the case and in law, the order dated 30 January 2015 passed by the Learned Transfer Pricing Officer (Ld. TPO) under section 92CA of the Act is beyond the time limit prescribed under section 92CA(3A) r.ws 153 of the Income-tax Act, 1961 (Act) thus making the transfer pricing order illegal, bad in law, null and void and liable to be quashed. Additional Ground No. 2 On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passing order by the TPO under Section 92CA(3A) of the Act expired on 29.01.2015 whereas the order has been passed by the TPO on 30.01.2015. He further submitted that the judgment of the Hon‟ble Madras High Court has been followed by the Tribunal in the case of (a) ECL Finance Ltd. vs. ACIT: ITA No. 899/M/2018, dated 22.09.2021, and (b) M/s Emerson Electric (Company) India Pvt. Ltd. vs. DCIT: ITA No. 933/M/2021, dated 18.05.2022. The Ld. Authorised Representative for the Assessee submitted that as per the aforesaid judicial precedents 31.03.2015 is to be excluded and therefore, the period of 60 days is to be computed by taking 30 days of March, 28 days of February and 2 days of January (i.e. 30th and 31st day of January) since TPO was under obligation to pass order under Section 92CA(3) of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Section 153/153B for making the order of assessment/reassessment expires. Accordingly, the period of limitation prescribed under Section 92CA(3A) of the Act expired on 29.01.2015. Therefore, the order passed by the TPO is barred by limitation. He further submitted that identical issue sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 judgment is extracted for ready perusal as under : 30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after time expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 am on 01.01.2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31.12.2019. The period of 21 months therefore, expires on 31.12.2019 that must stand excluded since Section 92CA(3A) states 'before 60 days prior to the date on which the period of limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deleted. Additional Ground No. 1 raised by the Assessee is allowed and Ground No 2 to 7 pertaining to the transfer pricing issues raised in the appeal are disposed of as being infructuous. (Emphasis Supplied) 10. Both the sides agreed that there is no change in the facts and circumstances of the case. Therefore, respectfully following the above decision of the Tribunal [ITA No. 2348/Mum/2015, dated 26.09.2022] preferred by the assessee for the Assessment Year 2011-12, in the case of the Appellant, Additional Ground No. 1 raised by the Assessee in the present appeal is allowed. Ground No 2 to 7 pertaining to the transfer pricing issues are disposed of as being infructuous. Ground No. 8 11. 8. 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 making disallowance of Rs. 12,78,00,000 under Section 14A of the Income-tax Act, 1961 ('the Act'). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2022 shall have retrospective effect has been rejected. 15. We have considered the rival submissions and in view of the judgment of the Hon‟ble Delhi High Court we are not inclined to accept the contention raised by the Revenue. We note that the Mumbai Bench of the Tribunal has, in the case of Assistant Commissioner of Income Tax- Circle 3(1)(1) Vs Bajaj Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai - Trib.)[29-06-2022] held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment Year 2022-23. 16. We note that this issue stands decided in favour of the Assessee in ITA No. 2348/Mum/2015 preferred by the Assessee for the Assessment Year 2011-11. The relevant extract of the judgment read as under: 12. Having considered the rival submission, we find merit in the submission advanced on behalf of the Assessee that the benefit of decision of the Special Bench of the Tribunal in the case of Vireet investments Private Limited (supra) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had overturned the decision of the assessing officer by holding that exchange gains on revaluation of Shareholders Deposits were capital in nature and therefore, not taxable. The decision of the CIT(A) was confirmed by the Tribunal vide order, dated 23.11.2012. Learned Authorised Representative for Assessee further submitted that the Appeal filed by the Revenue against the aforesaid order of the Tribunal was not admitted by the Hon‟ble Bombay High Court and therefore, the issue is settled. 22. In view of the above submission advanced by the Learned Authorised Representative for Assessee, Ground No. 10 raised by the Assessee is dismissed since, admittedly, the very basis on which the Assessee had set up this alternative/without prejudice claim does not survive. Further, in our view the two pleas set up by the Assessee are not alternative but mutually destructive. While preparing return of income the Assessee has treated the exchange loss on revaluation of Shareholders‟ Deposits as capital in nature, during the assessment proceedings the Assessee has claimed the same to be Revenue in nature while retaining the stand that the exchange gain on revaluation of Shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of hearing. ITA No.3022/Mum/2015 (Department's Appeal) 29. The Revenue has raised 7 grounds of appeal which are taken up in seriatim hereinafter. Ground No. 1 to 5 30. 1. The order of the DRP is opposed to law and facts of the case. 2. On the facts and circumstances of the case and in law, the Hon. DRP has erred in directing the AO to adopt a rate of 1.5% to arrive at Arm‟s Length Price on account of guarantee fees to be charged by the assessee to the Associated Enterprises for letter of comfort issued, without appreciating that in the A.Y. 2007-08 2008-09, adjustment at the rate of 3% had been upheld by the Hon. DRP. 3. On the facts and circumstances of the case and in law, the Hon. DRP in directing the AO to adopt a rate of 1.5% to arrive at Arm‟s Length Price on account of guarantee fees in respect of the guarantee issued by the assessee for the borrowing made by its Associated Enterprises without appreciating that in the AYrs 2007-08 and 2008-09, adjustment at the rate of 3% has been upheld by the Hon‟ble DRP. 4. On the facts and in the circumstances of the case and in law, the Hon‟ble DRP e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound raised by the Revenue in appeal for the Assessment Year 2010-11 was dismissed by the Tribunal vide order, dated 26.09.2022 passed in ITA 2408/Mum/2015. The relevant extract of the aforesaid decision read as under: 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 direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /decisions: - S.A. Builders Ltd. vs. CIT(Appeals) : [2007] 288 ITR 1 - CIT 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. 41. 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. 42. 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 befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned it was submitted that when funds were available, the assessee without any reason permitted it to be continued 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleting the disallowance made by the AO on this issue. The relevant grounds of the Revenue‟s appeal for all the six years under consideration are accordingly dismissed. 47. 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 subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 48. We note that the issue raised by the Revenue stands decided favour of the Assessee by the decision of the Tribunal in ITO (TDS) (OSD)-3(4) vs. The Indian Hotels Company Ltd.: ITA No. 5419 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 availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the above settled nature of the issue and respectfully following the judgment of the Hon‟ble Delhi High Court (supra) and the decision of the Tribunal (supra) for the AY 2009-2011, we are of the opinion, the decision taken by the 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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