TMI Blog2024 (4) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... .e.f. 24.03.2008, no arbitrary disallowance u/s. 14A was to be done by the ld. A.O. and the ld. A.O. was to compute the disallowance in accordance with section 14A r.w.r. 8D of the Rules. In this note, we deem it fit to remand this issue back to the file of the ld. CIT(A) to decide the grounds of disallowance made u/s. 14A on the merits of the case in accordance with the provision of the Act after duly considering the submission of the assessee. Hence, ground allowed for statistical purpose. Adjustment of the book profit u/s. 115JB of the Act in relation to the expenditure relatable to earning income - HELD THAT:- As this issue has already been decided in the case of Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] which has held that for computation under clause (f) of Explanation 1 to section 115JB(2) of the Act restart to computation u/s. 14A r.w. Rule 8D should not be made where there is a separate mechanism available for adjustment to the book profit of such expenditure incurred. As these issues are identical and covered by various decisions including the decision in assessee s case, we deem it fit to allow the grounds raised by the assessee in its cross objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration of the said agreement that had taken place during the year under consideration - CIT(A) had deleted the impugned addition made by the ld. A.O. on this ground - we find no infirmity in the order of the ld. CIT(A) - Decided against revenue. TP Adjustment - ALP determined for the performance guarantee - prescribed methods for determining the ALP of the international transactions - HELD THAT:- As observed that neither the assessee nor the lower authorities have adopted any of the prescribed methods for determining the ALP of the international transactions for the reason that the assessee has not considered the same to be an international transaction and the TPO has also not applied any of the prescribed method as being the most appropriate method for determination of the ALP. CIT(A) has also not determined the ALP for financial guarantee by applying MAP. As the transaction of issuance of corporate guarantee to its AE given by the assessee on behalf of its AE is held to be an international transaction, the same has to be determined at ALP by bench marking the said transaction by applying any of the method prescribed under the provisions of the Act. The determination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 115JB of the Act after making various additions/disallowances. 3. The assessee was in appeal before the first appellate authority, challenging the impugned order and the ld. CIT(A) had partly allowed the appeal filed by the assessee on various grounds. Both the Revenue as well as the assessee are in appeal and the assessee has also filed the cross objection challenging the order of the ld. CIT(A). 4. Ground No. 1 of the Revenue s appeal is on the disallowance made u/s. 14A of the Act where the ld. CIT(A) has restricted the said disallowance to Rs. 10 lacs as against Rs. 6,83,36,620/- disallowed by the Assessing Officer ('A.O.' for short). The facts of this grounds are that the assessee has claimed exempt income u/s. 10 of the Act amounting to Rs. 84,20,83,084/- which are tabulated as below: Sr. No. Particulars Amount (in Rs. ) 1 Dividend 17,25,20,478 2 Income from partnership firm 4,26,45,913 3 Long term capital gain 62,69,16,693 Total 84,20,83,084 5. It is observed that the assessee has suo moto made a disallowance of Rs. 5 lacs u/s. 14A of the Act being the expenses attributable to the earning of the above mentioned exempt income as per Annexure 9 of the audit report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Authorised Representative ('ld. AR' for short) for the assessee contended that the A.O. has not recorded his dissatisfaction to the assessee s claim prior to applying Rule 8D where the suo moto disallowance made by the assessee was not considered by the ld.A.O. The ld. AR further stated that the major amount of dividend income was received from the group concern of the assessee and has also made investments mostly in the group companies. The ld. AR contended that the lower authorities and the co-ordinate bench has restricted the disallowance to Rs. 10 lacs in assessee s case for A.Ys. 2008-09, 2009-10 and 2010-11 and the same has been upheld by the Hon'ble High Court. The ld. AR relied on various decisions which are in support of the assessee. 7. The learned Departmental Representative ('ld.DR' for short), on the other hand, controverted the said fact and stated that the ld. A.O. in para 5.5 of the assessment order has recorded dissatisfaction and the ld. CIT(A) has failed to consider the same. The ld. DR relied on the order of the Hon'ble Delhi High Court in the case of Indiabulls Financial Services Ltd. vs. Dy. CIT [2016] 76 taxmann.com 268 (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cee Manufacturing Company Ltd. vs. DCIT (Civil Appeal No. 7020 of 2011) PCIT vs. Bombay Stock Exchange Ltd. [2020] 113 taxmann.com 303 (Bom) PCIT vs. Bajaj Finance Ltd. [2019] IT Appeal No. 237 485 of 2017 (Bom) Pr. CIT vs. Vedanta Ltd. [2019] 102 taxmann.com 95 (Del) Eicher Motors Ltd. vs. CIT [2017] 398 ITR 51 (Del) and various other decisions to hold the proposition that the ld. A.O. is casted upon the onus to explain with cogent reason for the dissatisfaction in the assessee s claim. These decisions relied upon by the assessee and the first appellate authority does not support the assessee s case for the facts and circumstances of this case. We hereby reject the assessee s plea of non recording of dissatisfaction by the A.O. 10. The ld. AR has relied on the order of the Tribunal in assessee s case for A.Y. 2010-11 on identical issue. The Tribunal has upheld the disallowance on administrative expenses to Rs. 10 lacs. It is observed that during A.Y. 2010-11, the assessee has declared dividend income amounting to Rs. 2.33 crores out of interest expenditure and Rs. 1 lacs as administrative expenses. The A.O. computed the administrative expenses under Rule 8D(2)(iii) of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the co-ordinate bench in the case of Dy. CIT vs. Viraj Profile Ltd . [2015] 65 taxmann.com 52 (Mum- Trib). The assessee contended that for computing income u/s. 115JB of the Act only the adjusted book profit should be the basis for computation and not the income computed under the normal provisions of the Act. The assessee had relied on catena of judgments for the proposition that section 14A read with Rule 8D is not applicable for computing the profit u/s. 115JB of the Act. The ld. CIT(A) by relying on the decision of the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investment (P). Ltd. [2017] 82 taxmann.com 415 (Delhi-Trib)(SB) had held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without adopting disallowance u/s. 14A read with Rule 8D and restricted to the suo moto disallowance amounting to Rs. 5 lacs made by the assessee. Both the Revenue and the assessee has challenged this ground. 12. We have heard the rival submissions and perused the materials available on record. It is observed that the A.O. made addition of Rs. 6,93,36,620/- u/s. 14A read with Rule 8D and had added the said amount while computing the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said advance was not for business activities. The ld. CIT(A), on the other hand, deleted the impugned addition for the reason that on identical issues for A.Ys. 2008-09 to 2011- 12, the Tribunal had decided this issue in favour of the assessee and the same was upheld by the Hon'ble Jurisdictional High Court. 14. The Revenue is in appeal before us, challenging the order of the ld. CIT(A). 15. The ld. DR has contended that the said transaction is a colorable device and there was no genuine business transaction with and M/s. PRS Enterprises. Further, the ld. DR stated that there are Investigation Wing reported against Shri Nilesh Janardan Thakkar and his group concerns during A.Ys. 2008-09 and 2009-10. The ld. DR further stated that Rs. 141.50 crores was not adopted by the assessee in its P L account as expenses and the same was also not included in the work in progress and remains his advance for land purchase under the current assets. The ld. DR stated that these advances are not for the business activities of the assessee and that the A.O. has rightly disallowed the interest income of Rs. 19.81 crores. The ld. DR relied on the order of the A.O. 16. The ld. AR, on the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvances made by the assessee. We, therefore, find no infirmity in the order of the ld. CIT(A) and ground no. 3 raised by the Revenue is dismissed and ground nos. 7, 8 and 9 of the assessee s cross objection are allowed. 18. Ground no. 4 of the Revenue s appeal and the ground nos. 10 and 11 of the assessee s cross objection pertains to the addition of Rs. 67,96,000/- towards unexplained money with respect to the sale of immovable property during the year under consideration. The facts of this ground are that the assessee vide its Memorandum of Agreement (MOA for short) dated 08.03.1999 entered into with Siemens for sale of property for a consideration of Rs. 1,85,000/- received in March, 1999 and the possession of the said property was handed over to Siemens in the year 1999. The assessee contended that since the transfer of property had taken place in March, 1999 relevant to F.Y. 1998-99, the same cannot be taxed during the year under consideration. The assessee further stated that it had inadvertently denied the said transaction during the assessment proceeding and the A.O. based on the Transaction Statement (ITS) had made an addition of Rs. 67,96,000/- u/s. 69A of the Act by valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been duly reported by Joint Sub Registrar in the AIR. The assessee s contention that the sale actually took place in 1999 for a consideration of Rs. 1,85,000/- and handed over the possession to the buyer in the same year along with all the original documents, was not accepted by the A.O. for the reason that the assessee has failed to furnished the evidences and the other supporting documents to establish its claim. It is observed that the assessee has furnished additional evidence before the ld. CIT(A) establishing the fact that the original agreement was executed in 1999 for which the assessee has paid consideration and the possession of the property was also handed over in the year 1999 while entering into in Memorandum of Agreement with Siemens. The ld. CIT(A) has sought for the remand report from the ld. A.O. on these facts and held that it was only the registration of the said agreement that had taken place during the year under consideration which was valued at Rs. 67,96,000/-. The ld. CIT(A) had deleted the impugned addition made by the ld. A.O. on this ground. On considering both the rival submissions, we find no infirmity in the order of the ld. CIT(A) and we, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Comfort SAR 97,000,000 Rs. 1,404,026,500 3. Barwa City Real Estate Company, WLL Shapoorji Pallonji Qa WLL Performance Guarantee Rs.1,112,459,400* 4. Exim Bank, India Natural Oil Venture Co. Ltd. Financial Guarantee Rs.419,405,000 26. It is observed that the ld. TPO had proposed the following adjustment pertaining to guarantee commission which is summarized as below: Sr. No. AE Amount Arm s Length Guarantee Margin Amount of Adjustment 1. Shapoorji Pallonji Mid East LLC AED =59,000,000 Rs. 3,206,945,000 0.75% 24,052,088 2. Shapoorji Pallonji Mid East LLC AED = 97,000,000 Rs. 1,404,026,500 0.95% 13338252 3. Shapoorji Pallonji Mid Qatar WLL 1,112,459,400 0.95% 10,568,364 4. Natural Oil Ventures Co. Ltd. 419,405,000 0.70% 2,935,835 Total (INR) 6,142,835,900 5,08,94,539 It is observed that the ld. TPO had determined the Arm s Length Guarantee Margin (ALGM) as 0.75% for guarantee commission for letter of comfort and 1.5% guarantee commission on issuance of performance and financial guarantee. The ld. A.O./TPO determined the ALP at Rs. 5,08,94,539/- for issuance of letter of comfort guarantee and financial guarantee. The ld. TPO also proposed an additional adjustment of Rs. 2,40,52,088/- f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on pertaining to the ALP determined for the performance guarantee. The ld. AR on the issue of financial guarantee relied on the decision of the Hon'ble Jurisdictional High Court in the case of Everest Kento Cylinder (supra) where 0.5% on financial guarantee has been approved by the Hon'ble High Court. The ld. AR relied on the order of the Hon'ble High Court and the ld. CIT(A) s order. 30. The ld. DR, on the other hand, contended that the issue of whether Letter of Comfort is an international transaction or not has been a settled proposition of law by various decisions. It is observed that the assessee in its Letter of Comfort has given various undertakings such as it will own atleast 49% of the AE s equity: 1. The assessee will continue to own at least 49% of AE s equity 2. They will not transfer, assign, dispose off, place, charge or create any lien on these shareholdings. 3. They will furnish details in agreed format every year. 4. The bank can inspect the records of the assessee. This undertaking of the assessee protects the investments made by the assessee in the AE s by not divesting its share holding in the AE. This creates a liability on the assessee for the adva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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