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TMI Blog2023 (10) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved, Revenue raised ground Nos. 1 to 3, which are argumentative and factual and hence, need not be reproduced. 3. We have heard rival contentions and gone through facts and circumstances of the case. The facts are that the assessee company is engaged in the business of manufacturing two wheelers. The assessee's case was selected for scrutiny assessment for the relevant assessment year 2013-14 and the AO during the course of scrutiny assessment proceedings noticed that assessee entered into international transaction as per Form No. 3CEB for more than Rs. 15 crores, a reference was made to the Transfer Pricing Officer (TPO) by the AO on 30.09.2015 for determination of Arms Length Price. Accordingly, TPO passed order u/s. 92CA of the Act on 27.10.2016 by making transfer pricing adjustment towards corporate guarantee provided to the AE by the assessee. Draft assessment order passed on 31.12.2016 and thereafter assessment was completed by the AO by passing final assessment order u/s. 143(3) r.w.s. 144 of the Act on 13.02.2017 making this disallowance on account of corporate guarantee at the rate of 1% by treating the LOC as fee for guarantee and the same has been considered as Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven to the CIT(A), which are reproduced in the order of CIT(A) at page 3 and the same is being reproduced from the order of CIT(A) as under:- Nature of the loan Bank Loan Amount Interest Rate Remarks Term Loan IFC USD 12 mil or INR 53.88 Cr. 5.52% * Loan obtained on March 19,2019 * Loan was for the period of 9 years * Payable semi-annually starting 15 March 2013 Working capital credit facility SBI Indonesia USD 3 mil USD loan - 6.5% p.a. IDR (Indonesian Rupiah - 12.00% p.a) The working capital credit facility was issued against the Letter of Comfort issued by SBI, CAG, Chennai. TVSM had provided counter guarantee for the issuance of Letter of Comfort. 6. On the other hand, the ld.CIT-DR Dr. A. Sasikumar stated that this issue is squarely covered in favour of Revenue and against assessee by the decision of Hon'ble Bombay High Court in the case of Everest Kento Cylinder Ltd., (2015) 378 ITR 57. He urged that the transaction to be treated as international transaction and the adjustment be given at the rate of 1% as has been done by the TPO. 7. We have heard rival contentions and gone through facts and circumstances of the case. We noted that this issue is squarely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by the Parent company. It does not involve any cost of risk to the shareholders. Further, the retrospective amendment of Section 92B does not enlarge the scope of the term international transaction to include the Corporate Guarantee in the nature provided by the assessee therein. The Tribunal held that in case of default, Guarantor has to fulfill the liability and therefore, there is always an inherent risk in providing guarantees and that may be a reason that Finance provider insist on non~charging any commission from Associated Enterprise as a commercial principle. Further, it has been observed that this position indicates that provision of guarantee always involves risk and there is a service provided to the Associate Enterprise in increasing its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on P & L account, but inherent risk cannot be ruled out in providing guarantees. Ultimately, the Tribunal upheld the adjustments made on guarantee commissions both on the guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such only 50% of additional depreciation was claimed in the first year in which the new assets were put to use. The balance 50% of the additional depreciation eligible to the assessee is claimed in the second year of the assets being put to use. The legal submissions of the assessee is accepted as being correct and justified. Several judicial decisions supporting the stand of the assessee are noted as under:- Shri T.P. Textiles P Ltd (HC of Madras) (79 taxmann.com 411) Rittal India P Ltd (HC of Karnataka) (66 taxmann.com 4) Birla Corporation Ltd (Kolkata ITAT) (55 taxmann.com 33) Cosmo Films Ltd (Delhi ITAT) (24 taxmann.com 189) Century Enka Ltd (Kolkata ITAT) (58 taxmann.com 318) Automotive coaches and components (ITAT Bench in ITA No. 1789/Mds/2014) Meenakshi India Ltd (ITAT Bench in ITA No. 206/Mds/2016) Considering the above, the Assessing Officer is directed to allow the balance 50% of depreciation claimed in the second year. Assessee gets relief to the extent of Rs. 4,53,04,584/-. 11. We noted that the Hon'ble High Court of Madras in assessee's own case for assessment year 2004-05 has held that the additional depreciation is allowable for the reminder period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the AO for verification. 15. As regards to disallowance under Rule 8D(2)(iii) of the Rules, the ld.counsel for the assessee only made submission that only dividend yielding investments should be considered for disallowance under Rule 8D(2)(iii) in view of the decision of Delhi Special Bench of this Tribunal in the case of ACIT Vs. Vireet Investments Pvt. Ltd., in ITA No. 502/Del/2012 & CO No. 68/Del/2014, reported in 165 ITD 27. The ld.counsel for the assessee has given its computation under Rule 8D(2)(iii), which reads as under:- Computation of disallowance under section 14A Name of the Company Year of Inv. Inv. On 31.03.2013 Inv. On 31.03.2012 Avg. Investment Dividend Income Suprajit Engineering Ltd 1999-2000 8,00,000 8,00,000 8,00,000 20,24,400 Ucal Fuel Systems Ltd 1999-2000 25,00,000 25,00,000 25,00,000 3,67,040 Sundaram Auto Components Ltd. (Subsidiary company) 1999-2000 in 2011-12 60,90,00,000 60,90,00,000 60,90,00,000 1,73,25,000 Total Rs. 61,23,00,000 1,97,16,440 14 A Disallowance @ 0.5% of dividend yielding investment 30,61,500 Less: Amount already disallowed in computation of total income 16,500 Balance disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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