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TMI Blog2025 (1) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2022 proposing certain Transfer Pricing (TP) adjustment. Incorporating the same, a draft assessment order was passed on 29.09.2023 which was subjected to assessee's objections before Ld. DRP. Pursuant to the directions of Ld. DRP, final assessment order was passed against which the assessee is in further appeal before us. The grounds of appeal read as under: - 1. Depreciation on right to use Leasehold Property: 1.1 The AO/DRP erred in confirming disallowance of depreciation amounting to Rs. 43,49,938/- on right to use of Leasehold Property claimed in respect of land taken on long lease by appellant and used in its business. 1.2 The AO/DRP ought to have appreciated that payment by Appellant to owner of land (SIPCOT) gave Appellant permission to construct building and set up manufacturing facility on the land thereby acquiring the right to use leasehold property which is a commercial right obtained by Appellant being in the nature of an intangible asset entitled to depreciation. 1.3 The AO/DRP failed to consider the Karnataka High Court decision in the case of DCIT vs Bangalore International Airport Ltd (IT APPEAL NO. 115 OF 2017) where in it was held that "where assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds Transfer Pricing Adjustment on interest receivable on loan given. 4.2 The TPO/DRP ought to have appreciated that loans granted to subsidiary (Sundram International Inc., (SII)) were not out of borrowed funds and it was granted considering the financial position of SII which had sufficient cash generation of Rs 17,621 Lakhs during the year. 4.4 Without prejudice, considering the financial position of subsidiary, TPO/AO ought to have held that under similar circumstances, Appellant would not have charged interest from 3rd party. 4.5 The TPO/DRP erred in adopting 4.318% (6 Months LIBOR + 200bps) as the interest rate the Appellant should have charged for loans which is highly arbitrary and requires to be deleted. 4.6 The TPO/DRP failed to consider the ITAT judgement granted in favour of the appellant for A Y 2010-11 wherein the AO re-examined the matter in the light of observation made by the ITAT and identified that your appellant had surplus funds available and also there was no nexus between the borrowed funds and the advance made by the appellant to the Associate Enterprise. 5. Transfer Pricing upward adjustment on Corporate Guarantee: 5.1 The TPO/DRP erred in makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we issue similar directions. The corresponding grounds as raised by the assessee stand allowed for statistical purposes. 4. TP adjustment of Corporate Guarantee 4.1 The assessee provided corporate guarantee for its AE but did not charge any fees. The Ld. TPO benchmarked the same @2.55% which was nothing but average rate of guarantee fee charged by the bank. Accordingly, Ld. TPO proposed adjustment of Rs. 6.06 Crores. The same was confirmed by Ld. DRP against which the assessee is in further appeal before us. 4.2 This issue has been adjudicated by Tribunal in ITA Nos.32 & 33/Chny/2021 dated 08.11.2024 for AYs 2015-16 and 2016-17. In para- 4.2 of the order, the bench directed Ld. AO to benchmark the same @0.5%. Facts being pari-materia the same, we direct Ld. AO to adopt benchmarking rate of 0.5%. The corresponding grounds stand partly allowed. 5. Depreciation on right to use leasehold property for Rs. 43.49 Lacs 5.1 The assessee claimed depreciation on a leasehold property. The depreciation was claimed @12.5% i.e., half of 25% depreciation. The same was on the ground that the rights were shown as intangible assets which would be eligible for 25% depreciation. The Ld. AO rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spired that the assessee earned exempt income of Rs. 321.52 Lacs and it had made investments in equity share capital. The assessee made disallowance of Rs. 12.98 Lacs. It was stated that the investments were made out of self generated funds only. The Ld. AO did not make any interest disallowance but worked out indirect expenses disallowance u/r 8D(2)(ii). The same was computed at 1% of annual average of monthly average of the opening and closing balances of the value of investment, income from which do not form part of total income. The same came to be Rs. 335.39 Lacs and accordingly, the differential of Rs. 322.41 Lacs was proposed to be disallowed u/s 14A. The Ld. DRP confirmed the same, inter-alia, by relying upon amendment made to Sec.14A w.e.f. 01.04.2022 which provided that such disallowance was to be computed regardless of the fact whether the investments have yielded any exempt income or not. Aggrieved, the assessee is in further appeal before us. 7.2 This issue has been adjudicated by Tribunal in ITA Nos.32 & 33/Chny/2021 dated 08.11.2024 for AYs 2015-16 and 2016-17. In para- 18.3 of the order, the bench directed Ld. AO to compute disallowance u/r 8D(2)(ii) by considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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