AIA ENGINEERING LTD.,,AHMEDABAD vs. THE DY.CIT.,CIRCLE-1,, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH (Virtual Court) Before: Shri Rajpal Yadav, Vice President And Shri Amarjit Singh, Accountant Member

Sl. ITA No. Appellant Respondent A.Y. No. 1 1766/Ahd/2012 Dy. CIT, AIA 2008-09 Circle-1, Ah’d Engineering Ltd. Ah’d 2 2342/Ahd/2015 Dy. CIT, AIA 2009-10 Circle-1(1)(1), Engineering Ah’d Ltd. Ah’d 3 2343/Ahd/2015 Dy. CIT, AIA 2010-11 Circle-1(1)(1), Engineering Ah’d Ltd. Ah’d 4 1112/Ahd/2017 Dy. CIT, AIA 2011-12 Circle-1(1)(1), Engineering Ah’d Ltd. Ah’d 5 1835/Ahd/2017 Dy. CIT, AIA 2012-13 Circle-1(1)(1), Engineering Ah’d Ltd. Ah’d 6 2805/Ahd/2017 Dy. CIT, AIA 2013-14 Circle-1(1)(1), Engineering Ah’d Ltd. Ah’d 7 1757/Ahd/2012 AIA The Additional 2008-09 Engineering CIT, Range-1, Ltd. Ah’d Ah’d 8 2224/Ahd/2015 AIA Dy. CIT, 2009-10 Engineering Circle-1, Ah’d Ltd. Ah’d 9 2225/Ahd/2015 AIA Dy. CIT, 2010-11 Engineering Circle-1(1)(1), Ltd. Ah’d Ah’d 10 1028/Ahd/2017 AIA Dy. CIT, 2011-12 Engineering Circle-1(1)(1), Ltd. Ah’d Ah’d 11 1850/Ahd/2017 AIA Dy. CIT, 2012-13 Engineering Circle-1(1)(1), Ltd. Ah’d Ah’d 12 2726/Ahd/2017 AIA Dy. CIT, 2013-14 Engineering Circle-1(1)(1), Ltd. Ah’d Ah’d

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 2 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

Revenue by: Shri Vinod Tanwani, Sr. D.R. Assessee by: Shri T.P. Hemani, Sr. A.R. & Shri Parimal Sinh Parmar, A.R.

Date of hearing : 09-10-2020 Date of pronouncement : 04-01-2021 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

These twelve appeals filed six by revenue and six by assessee for A.Y. 2008-09 to 2013-14, arise from order of the CIT(A), Ahmedabad, in proceedings under section 143(3) r.w.s. 144C & 143(3) of the Income Tax Act, 1961; in short “the Act”.

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sustained by the ld. CIT(A) , the revenue and assessee have contested in the instant appeal. The facts and nature of issues are discussed while adjudicating the grounds of appeal as under:- ITA No. 1766/Ahd/2012 A.Y. 2008-09 filed by revenue Ground No. 1(Deleting addition of Rs. 18,39,75,000/- in respect of income from investment in free zone entity in Ajman Free Zone Alternatively the said amount would have been added to income of assessee under the provision of transfer pricing)

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body. In support of this contention, the assessee has submitted the supporting documents i.e. a copy of memorandum of incorporation of Vega, UAE, tax resident certificate of Vega Industries UAE, a certificate issued by Ajman Free Zone etc. The relevant part of the reply of the assessee is reproduced as under:- “With regard to the proposed addition of the income of Vega industries (Middle East) FZE (Vega-UAE) to the Total Income of the Company, please note that this matter pertaining to A. Y. 2006-07 has been heard by ITA T in our case of A. Y. 2006-07 on 3-11-2011 and we are of the view that the matter will be decided in our favour and the ITAT order will be received by us before 31-12-2011. In view of this, you are requested not to make any addition on account of this ground. Further please note that Vega UAE is an independent Body Corporate. In support of this content/on, we attach herewith the fallowings: • A copy of the Memorandum of Incorporation of Vega UAE dated 22 April 2002 (enclosed as Annexure A). • The Tax Residence Certificate of Vega UAE dated 3rd February,2010 issued by Executive Director of Revenue and Budget, i.e., Ministry of Finance of UAE (enclosed as Annexure B). • A Certificate issued by A/man Free Zone Authority (enclosed as Annexure C) dated 15 July 2009 confirming that Vega UAE is a registered company, a body corporate incorporated in the Free Zone of Ajrnan (UAE) under the law laid down by the Amiri Decree No, (2) of 1996 on amending the Arniri Decree No. (3) of 1988. In view of the above above, we submit that Vega UAE is an independent company and it is managed and controlled out of the UAE. Further, we also submit that Vega UAE is a company for the purposes of Section 2(17) of the Act. • Vega UAE has independent operations and separate Board of Directors. • Vega UAE is a 'Company'/ 'Body Corporate' incorporated in UAE and cannot be treated as proprietary concern of the Assessee. • Vega is a Tax Res/dent of UAE under the India-UAE Tax Treaty. • It is submitted that the management and control of Vega UAE being located in UAE, no part of its income can be brought to tax in India as Vega UAE is a separate company and cannot be said to be wholly controlled and managed in India, • Vega UAE is a Body Corporate under Section 2(17) of the Income-tax Act 1961. • We submit that in the preceding Assessment Years 2006-07 and 2007-08 the Circular No. 8(26)/2(7)/ 63-PR dated 13 March 1963 under the Companies Act 1956 and the provisions of Section 2(17) of the Act has been incorrectly interpreted to conclude that Vega UAE cannot be recognized as 'body corporate' due to non-satisfaction of (a) perpetual succession; (b) a legal entity apart from members constituting it. With respect to each of these points, the Company's submissions are as under: • Section 2(17) of the Act defines a company to include - "any body corporate incorporated by or under the laws of a country outside India'. It is thus clear that this Section make no reference to the provisions of the Companies Act, 1956 and the need to have at/east two shareholders to be treated as Body Corporate. What is relevant here are the laws of the Country outside India and not what is prevalent in India. • It is submitted that perpetual succession in the context of Indian Company Law means that an incorporated entity never dies except when it is wound up as per law. The Company, being a separate legal person is unaffected by death or departure of any shareholder or member and remains the same entity, despite a total change in the membership. Even under the Indian Company Law, a Company's life can be determined by the terms of its Memorandum of Association. • It is submitted that it will be a gross error in applying the criteria under the Companies Act, 1956 to Vega UAE without appreciating the fact that only laws of UAE i.e. the Amiri Decrees issued by Em/rates of Ajman is applicable in this case. Further, please note that Vega UAE is a Body Corporate under the laws of Ajman in accordance with the constitution of UAE and thus, there is no need to carry out test beyond this point and more so keeping in mind the proposition that Indian Tax Officers very respectfully are not expected to be experts in Constitutional, Legal and Company Law Matters of any Country outside India, including the UAE. Based on the above, the Company submits that Vega UAE is an independent body corporate being managed from UAE and not a proprietary concern of AI A. Therefore, the income of Vega Industries (Middle East) FZE should not be added in the total income of the Company, The Company also places reliance on the following: The decision of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) wherein the Supreme Court held that the Tax Residence Certificate issued by the Government of other Contracting State would be a conclusive proof of residential status of the company. CBDT Circular No. 789, dated 13 April 2000, where it has been clarified that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the Double Tax A voidance Convention accordingly. The Assessee submits that the principle laid down by this Circular also stands extended to cases under any other treaty including for Vega UAE.”

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The assessee has explained that Vega UAE was a body corporate under the law Ajman and was not a proprietary concern of the assessee company, therefore, the income of Vega Industries Middle East FZE should not be added in the total income of the assessee company. The Assessing Officer has not agreed with the submission of the assessee by making reference to assessment order passed for assessment year 2006-07. The Assessing Officer also stated that a reference u/s. 92CA of the Act for the computation at arms length price in relation to international transaction was made to the transfer pricing office-1Ahmedabad on 14-07-2009. The transfer pricing officer vide order u/s. 92CA(3) of the Act dated 26th October, 2009 has made upward adjustment of Rs. 17,64,60,761/- on account of sale price to Vega Industries Middle East FZE for which no separate addition was made as Assessing Officer was of the view that Vega Industries (Middle East) FZE was the proprietary concern of the assessee carrying out business from Ajman Free Zone and the whole of the income including Rs. 17,64,60,761/- on account of upward adjustment on sale price to Vega Industries (Middle East) FZE to be taxed in India. The Assessing Officer treated the Vega Industries (Middle East) as proprietary concern of the assessee and the entire profit earned by it amounting to Rs. 18,39,75,000/- was treated to be taxable in India in the hands of the assessee.

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January 2012 in ITA number 580/AHD/2011 decided the issue in favour of the appellant. The decision of ITAT on this issue is given in para-9 to 14 of the said order which is quoted below- "9. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the objection of the A.O. is this that Vega UAE is not a legally independent entity and 'it is a sole proprietorship concern of the assessee and this view of the A.O. is based on this premise that the assessee is a sole shareholder having 100% shares holding in this entity and therefore, this entity is not a company and an independent entity. In this regard, we feel that the provisions of Section 2(17) of Income Tax Act ore very much relevant and the same are reproduced below: "[(17) "company" means— (i) any Indian company, or (ii) any body corporate incorporated by or under the laws of a country outside India, or (iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 {] I of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or (iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company : Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April 197], or on or after that date) as may be specified in the declaration ] 10. As per these provisions of Section 2(I7J, for other than an Indian company, a company means any body corporate incorporated by or under the laws of a country outside India and Vega UAE is definitely not an Indian company. Now, we have of examine as of whether if can be said that Vega UAE is a body corporate incorporated by and under the law of a country outside India. The certificate of formation of Vega UAE issued by A/man Free Zone Authority which is available on page 677 of the paper book - III. The contents of this certificate are reproduced below: "AJMAN FREE ZONE 28m January, 2004 AFZA/408/2004/registered co./DG/as Certificate of Formation

We, the government of A/man Free Zone Authority certify that M/s. Vega Industries (Middle East) is a registered company within the free trade zone of A/man, under the license No. 1165 which issued on 22/4/2003. The above mentioned company is formed under our seal of A/man Free zone" 11. As per the memorandum of incorporation of Vega UAF which is available on page 5-10 of the paper book, we find that as per this, it has been stated that a Free Zone Establishment (FZE) is duly incorporated on 22.04.2002 in accordance with Amiri Decree no.(3) of 1988 in respect of establishment of free zone in Emirates of A/man as amended, its enforcement regulations and according to various terms and conditions specified in this certificate. In the said certificate, detail of founder/owner has been given and as per this, the assessee company is the owner of this entity. In Article (1) of this certificate of incorporation, it was certified that this is a FZE with limited liability with corporate entity and independent and separate financial liability for those of its owner but at Article (2), it has been stated that the owner will be personally responsible for any omission of such information i.e. mentioning of FZE along with the name of that entity on all business documentation, contracts, advertisement and invoices and that it will be pursuant to Amiri Decree No. (3) of 1988 as amended and if there is any omission on this account, the owner shall be personalty responsible for any omission of such information. On the basis of this Article

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{1} of the Memorandum of Incorporation, it is the allegation of the A.O. that this entity has no separate legal status because the owner is personally responsible for any omission of such information. In this regard, we do not find any force in this contention of the A.O. because as per Article (1) of the said Memorandum of Incorporation, it has been stated that this entity is established with corporate entity and independent and separate financial liability from those of its owner in accordance with this memorandum of incorporation and the only situation where the owner will be treated as personally responsible is regarding omission of some specified information that the entity is a free zone establishment (FZE) and it will be pursuant to Amiri Decree No.(3) of 1988 as amended. In our considered opinion, this is a situation where it specifies that corporate veil may be lifted. This may differ from country to country and in India also, in some situations, corporate veil can be lifted and, therefore, because of this restriction alone, it cannot be said that Vega UAF is not a separate legal entity. 12. the main objection of the A.O. is that since the assessee is the only shareholder and holding 100% shares of Vega UAF, it is not a valid company because as per Indian Companies Act and as per UAE CCL, two shareholders are required. The argument of the revenue is this that as per CL of UAE, two shareholders are required and as per Article 151 of the Constitution of UAE, the provisions of constitution shall have precedence over the constitution of Emirates which are the members of the federation but the contention of ld. counsel for the assessee is that an exception has been carved out in Article 149 of the said constitution which is available on page 715 of the paper book-til and the same is reproduced below: "Article 149- in exception to the provisions of Article 121 of this Constitution, the Emirates may issue the legislation necessary to regulate the mattes indicated in the said Article, without prejudice to the provisions of Article 151 of this Constitution." 13. From the above Article, it is seen that with regard to the provisions of Article 121 of this constitution which includes 'company', the Emirates can issue legislation necessary to regulate the matter indicated in the said Article i.e. Article 121 without prejudice to the provisions of Article 151 of this constitution. Hence, for the regulation of a company, the Emirates con have their own legislation and for this. Article 151 is not applicable and, therefore, it has to be accepted that Amiri Decree issued by Emirates of A/man is not in conflict with the constitution of UAE and, therefore, it is valid. 14. As per this Amiri Decree No.(2) of 1996 promulgated by His Highness the Ruler of Emirates of -A/man, Free Zone Establishment (FIE) can be established with limited liability and shall have the body corporate capacity and it shall belong either to one natural person or one judicial person. It goes to show that Vega UAE is duly incorporated as a body corporate under the law of a country outside India which is a requirement of Section 2(17] of the Income tax Act, 1961 and, therefore. Vega UAE has to be accepted as a company within the definition of Section 2(17) of the Income tax Act, 1961. Once it is accepted, the addition made by the A.O by holding that Vega UAE is a sole proprietorship concern of the assessee company is not sustainable and hence, the addition made by the A.O. is to be deleted. We hold accordingly. Ground No. 1 of the assessee is allowed. Regarding various other contentions raised by both sides, we would like to observe that the same are not relevant in view of our above decision." From the aforesaid decision of jurisdictional ITAT in the appellant's own case on the same issue, it is clear that Vega ME is held to be an independent entity and not a proprietorship concern of the appellant. ITAT has met with all the arguments of the assessing officer and therefore the same are not repeated here. Since highest fact-finding authority has held that Vega UAE is an independent corporate body, the profit of Vega UAE cannot be taxed in the hands of appellant. Respectfully following the decision of jurisdictional tribunal in the appellant's own case in the immediate preceding year on the identical facts, it is held that Vega UAE is a separate company and accordingly profit of Vega UAE cannot be added to the income of the appellant. As a result of this, addition made by the assessing officer is deleted.”

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 8 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

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analysis conducted by the assessee had been rejected by the TPO. He has adopted the transfer pricing adjustment on the basis of operating cost/operating profit percentage of Vega UAE, Vega UK and Vega US. Regarding this aspect that as to whether Vega UIAE is a distributor or simply marketing service provider, we find that the objection of the revenue on this aspect is not sustainable in view of the facts of the present case because we find that the assessee company has executed proper distributor agreement with Vega UAE and it has been adhered to also and since the objection of the revenue that Vega UAE is not bearing any inventory and credit risk, we find that as per the facts of the present case, both these objections are not correct and Vega UAE is carrying both the inventory risk as well as credit risk and therefore, we hold that Vega UAE is not a marketing service provider in the facts of the present case but if is a distributor of the assessee company. Once it is accepted that Vega UAE is a distributor, ALP has to be determined on the basis of profit on sale of goods by the assessee company as compared to the comparable companies. The assessee has demonstrated that the arithmetic mean of 3 years weight age average NOPM of 12 comparable companies was 7.92% as against NOPM of 18.89% of the assessee for the present year. Later on the assessee has also furnished the revised arithmetic mean of NOPM of the comparable companies on the basis of current year data only and it was 7.04% whereas mean of 3 years weight age average NOPM of 12 comparable companies was 7.92% as against NOPM of 18.89% of the assessee for the present year. Later on, the assessee has also furnished the revised arithmetic mean of NOPM of the comparable cases on the basis of current year data only and it was 7.04% as against 7.92% on the basis of 3 year weight age average. The assessee has also furnished one alternative working on the basis of net operating profit margin of Vega UAB, Vega UK and Vega US and arithmetic mean of comparable companies. The arithmetic mean of comparable companies is higher in respect of all the three Vega entities and hence, on both these basis, no TP adjustment is called for. TP adjustment had been proposed by the TPO and confirmed by DRP on the basis of operating cost/operating profit margin of Vega UAE, Vega UK and Vega US. The same for Vega US was considered as base and difference of Vega UAE was proposed as TP adjustment by the TPO but while doing so, if has to be kept in mind that operating cost/operating profit margin depends on level of operating expenses incurred by the respective Vega entities and also the making of business earning by the respective Vega entities. We find that percentage of employee cost to total turnover of Vega US is highest i.e. 6.5% and if is lowest for Vega UAE i.e.1.3%. Similarly, percentage of administrative expenses to turnover is highest for Vega US and Vega UK © 4.9% and if is only 2% for Vega UAE. If the operating cost is higher in Vega US, if cannot be said that the profit margin of other Vega Entities i.e. Vega UK and Vega UAE should be at par with the profit margin of Vega US and hence, TP adjustment proposed by TPO and confirmed by DRP on the basis of operating cost/operating profit of Vega US is not sustainable. Various allegations raised by the TPO for not accepting the TP analysis carried out by the assessee are not found to be valid and hence, we hold that no TP adjustment is called for in respect of Vega UAF. The same is deleted. Hence, ground No.2 of the assessee is allowed." From the above, it is clear that honorable 1TAT has treated Vega UAE (Middle East) as full-fledged distributor of the appellant as against marketing service provider treated by TPO. All the arguments of TPO were considered and it was held that Vega Middle East was performing all the functions of a distributor. It was held to be taking inventory risk, credit risk and other risks associated with the business. Vega ME (Middle East) has now become global distributor with Vega US and Vega UK becoming its sub-distributors. This entity was found to be performing all the roles of a distributor of developing marketing strategy, logistic handling, inventory management, working capital management etc. The Vega ME remained full scale distributor even under the new distribution model in which it was made global distributor. Appellant executed distributorship agreement with Vega ME and also adopted associated risks as earlier years. There was no dilution of its activities during the year as compared to earlier years. Accordingly, the findings of ITAT in assessment year 2006-07 that Vega UAE was distributor to the appellant completely apply to this year. Respectfully following the order of jurisdictional ITAT in appellant's own case in assessment year 2006-07, it is held that Vega ME was a full-fledged distributor to the appellant and not marketing service provider during the year. Once if is held that the AE is a distributor, the ALP has is to be determined on the basis of profit on sale of goods

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rather than operating margin to value added expenses. Like earlier years, this year also appellant had margin of 20.3% as against average margin of comparable companies of 12.63%. Therefore the profit margin of the appellant is much higher than the average operating margin of comparable companies. In view of this, no TP adjustment can be made this year also.” Following the decision of the Co-ordinate Bench as supra we do not find any error in the decision of ld. CIT(A) therefore alternative contention of the Revenue also stands dismissed.

Ground No. 2 (Restricting disallowance u/s. 35D to Rs. 3,92,316/- instead of Rs. 11,09,684/-) of revenue and Ground No. 2 ( Disallowance of Rs. 3,92,331 u/s. 35D of the Act.) of assessee

After referring the aforesaid provision, the Assessing Officer has stated that only specific expenditure incurred in connection with issue of shares for

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public subscription are allowable. Therefore, on verification, the Assessing Officer stated that assessee has debited number of expenses under this head which are not covered by section 35D(2) of the Act. Accordingly, the Assessing Officer stated that in the case of the assessee company the expenses which are not covered by section 35(2) are as under:- Travelling and Hotel Expenses 97323848 (Staff + Enam + SPI Cap + Amarchand) Other Expenses (Gift Vouchers to Press Reporters etc.) 41000.00 SEBI Filing Fees of Draft R.H.P. 250000 00 BSE For Processing fee to get their approval to use - 62600 Use Usage of Electronic Facility & Software of the 783500 Initial Listing Fees 20000 Annual Listing Fees 30000 896100.00 NSE Use Usage of Electronic Facility & Software of the 870125 Initial Listing Fees 7000 Annual Listing Fees 28500 905625.00 Sanjay Majmudar 8 Associates Professional Fees - 500000 Air Fare - Mum - A'bad - 2965 Hotel charges & Local Conv. Expenses – 19326 522291.00 Ria Fintelligence 22000.00 Intime Spectrum Registry Ltd. 816144.50 National Securities Depositors Ltd. 401953.00 Central Depositors Services (India) Ltd. 220070.00 Talati & Talati - Certificate in connection with prospectus filed with SEBI 500000.00 Total ... 5548421.50 Referring the provisions of section, the Assessing Officer observed that only specific expenditure incurred in connection with issue of shares for public subscription are allowable. Accordingly, out of the total expenditure on which the assessee has made claim u/s. 35D of the Act, the Assessing Officer has reduced the aforesaid amount of Rs. 55,48,421/- and consequently 1/5 such expenses to the amount of Rs. 11,09,684/- was disallowed out of the claim pertaining to the year under consideration.

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reducing the ineligible expenses of Rs. 55,48,422/- out of total public issue expenses of Rs. 7,55,92,199/-. In the light of the above facts and findings, we do not find any error in the findings of the ld. CIT(A) holding that difference of Rs. 7,20,05,356/- and Rs. 7,00,43,777/- is to be considered for the purpose of disallowance as against disallowance of Rs. 55,48,421/- made by the Assessing Officer. Therefore, we consider that ld. CIT(A) is justified in restricting the disallowance to the extent of Rs. 3,92,316/- as against disallowance of Rs. 11,09,684/- made by the Assessing Officer. In view of the above facts and findings of the ld. ld. CIT(A), we do not find any merit in the appeal of the Revenue and the assessee. Accordingly, this appeal of Revenue and assessee stands dismissed.

Ground No. 3 (Deleting disallowance of Rs. 6,51,81,105/- towards burning loss)

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scrap was generally around 2%. The Assessing Officer considered that burning losses claimed was much more than the average burning loss reported by the industry therefore restricted the loss of raw material in the melting process of scrape to 2% and the remaining claim of melting loss to the amount of Rs. 6,51,81,105/- was added to the total income of the assessee.

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Even if assessing officer's argument is accepted, the burning loss/metal loss in all processes of manufacturing will be much more than 2%. Further, export import policy allowed 16% more input in foundry industries in their input-output ratio. Even in the case of appellant's subsidiary company (now part of the appellant itself) burning loss in excess of even 10% was held to be allowable. The disallowance was made by the assessing officer in respect of burning loss in excess of 5% which was set aside by ITAT with specific directions. After considering the same, no disallowance on account of burning loss was made. Since this decision is in respect of appellant's subsidiary doing the job work of appellant only, this is directly applicable to the facts of the appellant's case. This entity is now part of the appellant company and therefore these decisions cannot be ignored. The certificate from Centre for Foundry Education and Research submitted before ITAT clearly mentioned that burning loss is from 10 to 14%. Considering all these facts and absence of any evidence to prove claim of burning of wrong, I find burning loss claimed by the appellant reasonable and within industry norms. Accordingly, the addition made by the assessing officer is deleted.”

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Ground No. 4 (Deleting the addition of Rs. 1,73,93,300/- u/s. 115JB) 12. During the course of assessment, the Assessing Officer has made adjustment on account of product warranty expenses treating the same as unascertained liabilities. The Assessing Officer has asked the assessee to explain why the product warranty expenses of Rs. 1,73,93,300/- should not be added for the calculation of book profit u/s. 115JB of the Act. The assessee explained that there was no provision with respect to addition of warranty expenses as well as expenses disallowable u/s. 14A of the act. The Assessing Officer has not accepted the explanation of the assessee and he was of the view that these expenses were provided on estimation basis and the same were of the nature of unascertained liability. Therefore, the Assessing Officer has added these expenses to the book profit under section 115JB of the act.

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said expenses are to be included in book profit. The estimation of such expenses is as per rule 8D. Even without applying this rule, the expenses relating to exempt income has to be added to the book profit. Therefore I confirm the assessing officer's action of including expenses relating to exempt income to the book profit under section 115 JB.”

ITA No. 1757/Ahd/2012 A.Y. 2008-09 filed by assessee Ground No. 1 (Disallowance of Rs. 62,41,258/- u/s. 14A of the act) 15. During the course of assessment, the Assessing Officer noticed that assessee has earned dividend income of Rs. 9,70,22,344/- claimed as exempt from income tax. The Assessing Officer further noticed that assessee has made investment to the amount for Rs. 1,16,01,24,000/- as on 31st March,

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2008 and the value of the investment as on 31st March, 2007 was Rs. 164,32,79,863/. On perusal of the material on record, the Assessing Officer observed that assessee had made substantial investment out of which it had earned substantial income claimed as exempt from tax. The exempt income was constituted 11% of the total profit earned by the assessee company however the assessee has not disallowed any amount according to the provision of section 14A of the Act. On query the assessee submitted that during the year the assessee company has not utilized any borrowed money for the purpose of investment and the investment had been made out of its own fund. It is also submitted that assessee company has not incurred any direct expenditure to earn the exempt income and stated that section 14A r.w.r. 8D was not applicable in respect of investment made out of its own fund. The assessee has further submitted that to avoid litigation it has calculated disallowance of Rs. 9,32,489/- u/s. 14A r.w.r. 8D of the IT act. The Assessing Officer has not accepted the submission of the assessee stating that assessee has not disallowed any amount as required under the provisions of section 14A of the Income Tax Act. The Assessing Officer also stated that return on investments was not automatic and it involves time, energy and resources in terms of finance, administration, decision making and managing activities involving buying and selling of the investment and investment of the dividends. In the light of the above facts and circumstances, the Assessing Officer stated that he was not satisfied with the correctness of the claim of the assessee and disallowance of expenditure was worked out as per rule 8D of I.T. Rule. Accordingly, an amount of Rs. 71,73,745/- u/s. 14A r.w.r. 8D of the I. T Act was added to the total income of the assessee.

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fund for making investment. The ld. counsel has also placed reliance on the following decisions:- > CIT vs. Torrent Power Ltd. - 363 ITR 474 (Guj.) > CIT vs. Suzlon Energy Ltd. - 354 ITR 630 (Guj) > CIT vs. Gujarat Power Corporation Ltd. - 352 ITR 583 (Guj) > CIT vs. Hitachi Home & Life Solutions (I). Ltd. - (2014) 41 taxmann.com 540 (Guj) > CIT vs. Reliance Utilities & Power Ltd. - 313 ITR 340 (Bom) > Munjal Sales Corporation vs. CIT - 298 ITR 298 (SC) The ld. counsel also submitted that assessee was having substantial interest free funds than the investment. On the other hand, the ld. Departmental Representative has supported the order of lower authorities and contended that Assessing Officer has made dissatisfaction on the action of the assessee of not making disallowance according to provision of section 14A of the Act.

(A) Shareholder's fund 52513.38 42562.02 Pgs.36-128 @ 80ofPB-I

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(B) Investments 11601.24 16432.79 Pg. 10 ofAsst. Order

Ratio (in times) 4.53 times 2.59 times

After taking into consideration, the aforesaid facts and availability of interest free fund and finding of the various judicial pronouncements as cited by the ld. counsel, we consider that no disallowance should be made out interest income as assessee has having substantial interest free fund. The assessee has given the detail of calculation vide which it has bifurcated the expenditure in three categories. (i) Expenses directly related to manufacturing and sales.

(ii) Expenses deemed to relatable to exempt income.

(iii) Expenses directly related to exempt income.

Accordingly as per the detailed submission of the assessee produced at page no. 12 of the assessment order , the assessee has suo moto computed the disallowance related to exempt income to the amount of Rs. 9,32,487/-. However, without contradicting the computation made by the assessee with any specific finding the Assessing Officer has simply stated that working provided by the assessee was arbitrary and was void of any merit. The Assessing Officer has made general observation stating that investment was not automatic and involves time, energy, and resources etc. stating the aforesaid dissatisfaction, the Assessing Officer has computed the disallowance as per rule 8D to the amount of Rs. 71,73,745/-. In this regard we have gone through the provision of sub-section 2 of section 14A wherein it is provided that disallowance shall be determined in accordance with such

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method as may be prescribed, if the Assessing Officer, having regards to the account of the assessee, is not satisfied with the correctness of the claim made by the assessee in respect of expenditure related to exempt income. Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT (2011) taxman.com 390/203 taxman 364/[2012] 347 regarding recording of satisfaction prior to invoking section 14A held that before invoking 14A, the Assessing Officer has to record his satisfaction, having regard to the accounts of the assessee, that claim made by the assessee of an expenditure incurred in earning exempt income, or a claim that no expenditure is incurred by him in earning exempt income is not correct. It has been provided in the provisions that Assessing Officer has to record a satisfaction having regards to the accounts of the assessee. It means that the Assessing Officer has to examine the accounts of the assessee and arrived at a finding that claim made by the assessee about expenditure incurred in relation to exempt income is not correct. There has to be a reference to fact situation or any credible reasoning or material by the Assessing Officer and satisfaction has to be arrived at having regard to accounts of assessee. Further, in the case of the assessee itself, the C-ordinate Bench of the ITAT vide AIA Engineering vs. Additional CIT (2012) 18 taxman.com 307/50 SOT 134 (Ahd) held that Assessing Officer has to demonstrate the reason as to why he is not satisfied with the correctness of the claim of the assessee. Any error in computation made by the Assessee has to be recorded or else the Assessing Officer is not justified in concluding and making fresh computation of disallowance u/s. 14A. In the paper book, the assessee has placed the submission at page no. 242 made to the Assessing Officer for assessment year 2008-09 on 8th Nov, 2011 stating that during the year the

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assessee company had earned dividend of Rs. 9,70,22,344/- as per detailed below:-

(a) Dividend from Welcast Steels Ltd. Rs. 9,13,762/-

(b) Dividend from Mutual Funds Rs. 9.61,08,582/-

Total Rs. 9,70,22,344/-

In the aforesaid submission, the assessee company has specifically brought to the knowledge of the Assessing Officer that the exempt income was earned in the form of dividend on the aforesaid investment which was made through IPO funds and to earn this dividend income no direct expenditure was incurred by the assessee company. It was also brought to the notice of the assessee that to invoke rule 8D, the Assessing Officer has to record his satisfaction after establishing the nexus of the expenditure with the exempt income. Then again in its submission dated 24th August, 2011 placed at page no. 302 of the paper book, the assessee has again brought to the notice of the Assessing Officer that assessee company has not incurred any direct expenditure to earn the exempt income and highlighted the nature of investment made by the assessee company. The assessee has also submitted its copy of annual reports placed at page no. 36 to 128 of the paper book, for perusal of the Assessing Officer wherein as per Profit and Loss Account, the assessee has shown gross sale for financial year 2007-08 to the amount of Rs. 77,137.59 lacs. The assessee has also given details of all the expenditure in its annual account. From the perusal of the annual account, it is clear that the main activity of the assessee company was manufacturing and trading of alloy Steel Casting. In the annual account, the assessee has

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enclosed all the schedule pertaining to income and expenditure along with the accounting notes. It is reflected from the annual account and schedule of the assessee that its major expenses are incurred for its main business operation in trading of alloy steel casting. Looking to the above facts and circumstances, it is noticed that Assessing Officer has not specifically considered the nature of expenses reflected in the annual accounts of the assessee before invoking the provision of rule 8D in computing the disallowance for earning exempt income. In the light of the above facts and finding given in the judicial pronouncement as referred supra in this order, we consider that Assessing Officer is not justified in computing the disallowance without recording specific satisfaction and examination of the detailed account of the assessee company. In view of the facts and finding and considering the nature of the investment and the main activities carried out by the assessee company, we consider that it would be appropriate to restrict the disallowance of administrative expenditure towards earning exempt income to the amount of Rs. 15 lacs. Since the assessee has itself made disallowance to the extent of Rs. 9,32,487/-, therefore, we restrict the administrative expenditure disallowance to the extent of Rs. 5,67,513/- (15,00,000- 9,32,487). Accordingly, this ground of appeal of the assessee is partly allowed.

Ground No. 3( Addition of Rs. 71,73,745/- of the amount of disallowance u/s. 14A for the purpose of computation of book profit u/s. 115JB of the act.) 19. Without repeating the facts as already elaborated while adjudicating the ground no. 1 of appeal of revenue in this order vide 1766/Ahd/2012, we consider that this issue has been adjudicated by the Special Bench of the

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ITAT Delhi in the case of the Vinit Investment 165 ITD 27 (Delhi) (SB) wherein it is held that disallowance u/s. 14A is not to be considered for computing book profit u/s. 115JB of the Act. Therefore, this ground of appeal of the assessee is allowed.

ITA No. 2342/Ahd/2015 A.Y. 2009-10 filed by revenue Ground No. 1 (Deleting addition of Rs. 35,06,67,309/- being income of Vega Industries Ltd.) &

Ground No. 2 (Deleting the disallowance of excess claim of depreciation of Rs. 2,27,644/-

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Officer has rejected the claim of assessee of higher depreciation @ 50% and allowed the depreciation at normal rate of 15%. Therefore, excess claim of depreciation of Rs. 2,27,644/- was disallowed and added to the total income of the assessee.

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Ground No. 3 (Deleting the addition of Rs. 28,36,47,565/- on account of upward revision on arms length price in respect of international transaction) 24. During the course of appellate proceedings before us, the ld. counsel has submitted that similar issue was adjudicated by the ITAT in the case of the assessee for assessment year 2006-07 and the same has been followed by the ld. CIT(A) in assessment year 2007-08 and 2008-09 for adjudicating the issue in favour of the assessee. Ld. Departmental Representative was fair enough not to controvert these undisputed facts that identical issue on similar fact has been decided in favour of the assessee in earlier assessment year as referred above. The ld. CIT(A) has decided this issue in favour of the assessee after following the decision of ITAT pertaining to the assessment year 2006-07 as referred above. The relevant part of the decision of ld. CIT(A) is reproduced as under:- “Ground no. 6 with sub Grounds 6.1 to 6.3, Ground no. 7 to 10 are interlinked against the upward revision of arms length price made by TPO in respect of various international transaction. As discussed above while disposing ground no. 1 that A.O. after following the statutory procedure of referring the appellant's detail of international transaction to TPO who vide dt. 29/01/2013 u/s. 92CA(3) of the Act made upward adjustment of Rs. 287992817(283647565+4345252), but since the A.O. has treated VEGA ME as appellant's proprietary concern made no separate addition of such upward revision. As I have already held that VEGA ME is a separate entity therefore such additions are required to be adjudicated. The A.O. in the impugned order mentioned about the amount with a note that in the eventuality of treating VEGA ME and VEGA UK as separate entity then such upward revision are required to be made. It is therefore, for "the facts and reasons of such upward revision, the TPO order dt. 29/01/2013 u/s. 92CA(3) of the Act has to be considered. The TPO in that order after considering appellant's business, details of international transactions as per audit report in From 3CEB and transfer pricing study report dt. 09/4/2012 where appellant used "CUP" to bench mark purchase of raw material from VEGA US brought out the defects in the TP study conducted by appellant and show cause the appellant (para 5.10 in TP order) The. TPO after considering appellant reply dt. 28/01/2013 (para 6 in TP order) rejected the detailed explanation offered by appellant and conducted a fresh FAR analysis (para 7 in TP order) and held that "such functional analysis as well as perusal of the agreement between Vega ME and AIA appointing Vega as Global Distributor clearly establishes that Vega ME is a marketing support office of the assessee company which also offers basic technical support to the customers of AIA Engineering Ltd. For this function, the reasonable and arm's length remuneration would have been to give Vega a markup on the costs incurred by it. However, as per the agreement between Vega and AIA, while the sale price of AIA has been pegged to a fixed level, Vega has been allowed to charge a negotiated price from the ultimate customers thus effectively transferring the entrepreneurial rewards to Vega while the entrepreneurial role is played by AIA. The TPO further considered functional characterization of Vega ME i.e. brand Vega, Vega as reallocation of

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export office of appellant, contribution in lead generation and order followed-up, rising export and fall export related travel of appellant's personal, distribution agreement etc. as contended by appellant in TP proceedings. The A.O. also considered Vega as tested party and held that " the functional profile of Vega ME reveals that it is no more than a marketing support office of the assesses company deputed to perform additional functions related to rendering of primary technical services in addition to handling booking of sales orders etc." the TPO then found comparable and determined the arms length price on the basis of berry ratio of 1.42 and made upward adjustment of Rs. 283647565/-(para 10.1 and 10.2 of the TP order). The appellant contended in appeal that this issue is covered by the order of Hon'ble ITAT in the case of appellant for A.Y. 06-07 which has been followed by my predecessor in appellant's appeal order for A.Y. 07-08, A.Y. 08-09. The appellant's objection are already discussed at above at para 46. " I am inclined with appellant that on similar issue with similar contention Hon'ble ITAT in the case of appellant for A.Y. 06-07, where such upward revision was upheld by Dispute Resolution Panel set aside such addition and held in favour of appellant. Such order was followed by my predecessor in the case of appellant for A.Y. 08-09 vide order dt. 08/06/2012 as follows: "I have considered the facts of the case; TPO's order and appellant's written submission. TPO made the similar adjustments in assessment year 2006-07 which was confirmed by DRP against which appellant preferred appeal in ITAT. ITAT Ahmedabad by order dated 23rd of January 2012 in ITA number 580/AHD/20T1 decided the issue in favour of the appellant. The decision of ITAT on this issue is given in para-21 of the said order which is quoted below- “21.We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this is one of the rejections of the revenue that Vega UAE is not a distributor but market service provider and merely on this basis, the TP analysis conducted by the assessee had been rejected by the TPO. He has adopted the transfer pricing adjustment on the basis of operating cost/operating profit percentage of Vega UAE, Vega UK and ega US. Regarding this aspect that as to whether Vega UIAE is a distributor or simply marketing service provider, we find that the objection of the revenue on this aspect is not sustainable in view of the facts of the present case because we find that the assessee company has executed proper distributor agreement with Vega JAE and if has been adhered to also and since the objection of the revenue that Vega UAE is not bearing any inventory and credit risk, we find that as per the facts of the present case, both these objections are not correct and Vega UAE is carrying both the inventory risk as well as credit risk and therefore, we hold that Vega UAE is not a marketing service provider in the facts of the present case but it is a distributor of the assessee company. Once it is accepted that Vega UAE is a distributor, ALP has to be determined on the basis of profit on sale of goods by the assessee company as compared to the comparable companies. The assessee has demonstrated that the arithmetic mean of 3 years weight age average NOPM of 12 comparable companies was 7.92% as against NOPM of 18.89% of the assessee for the present year. Later on the assessee has also furnished the revised arithmetic mean of NOPM of the comparable companies on the basis of current year data only and if was 7.04% whereas mean of 3 years weight age average NOPM of 12 comparable companies was 7.92% as against NOPM of 18.89% of the assessee for the present year. Later on, the assessee has also furnished the revised arithmetic mean of NOPM of the comparable cases on the basis of current year data only and it was 7.04% as against 7.92% on the basis of 3 year weight age average. The assessee has also furnished one alternative working on the basis of net operating profit margin of Vega UAE, Vega UK and Vega US and arithmetic mean of comparable companies. The arithmetic mean of comparable companies is higher in respect of all the three Vega entities and hence, on both these basis, no TP adjustment is called for. TP adjustment had been proposed by the TPO and confirmed by DRP on the basis of operating cost /opera ting profit margin of Vega UAE, Vega UK and Vega US. The same for Vega US was considered as base and difference of Vega UAE was proposed as TP adjustment by the TPO but while doing so, if has to be kept in mind that operating cost/operating profit margin depends on level of operating expenses incurred by the respective ' Vega' entities and also "the' making of business earning by- the respective-Vega entities. We find that

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percentage of employee cost to fatal turnover of Vega US is highest i.e. 6.5% and if is lowest for Vega UAE i.e. 1.3%. Similarly, percentage of administrative expenses, to turnover is highest for Vega US and Vega UK @ 4.9% and it is only 2% for Vega UAE. If the operating cost is higher in Vega US, it cannot be said that the profit margin of other Vega Entities i.e. Vega UK and Vega UAE should be of par with the profit margin of Vega US and hence, TP adjustment proposed by TPO and confirmed by DRP on the basis of operating cost/operating profit of Vega US is not sustainable. Various allegations raised by the TPO-for-not-accepting the TP analysis carried out by the assessee are not found to be valid and , hence, we hold that no TP adjustment is called for in respect of Vega (JAE. The same is deleted. Hence, ground No.2 of the assessee is allowed." From the above, it is clear that honorable ITAT has treated Vega UAE (Middle East) as full-fledged-distributor of the appellant as against marketing service provider treated by TPO. All the arguments of TPO were considered and it was held that Vega Middle East was performing all the functions of a distributor. It was held to be taking inventory risk, credit risk and other risks associated with the business. Vega ME (Middle East) has now become global distributor with Vega US and Vega UK becoming its sub-distributors. This entity was found to be performing all the roles of a distributor of developing marketing strategy, logistic handling, inventory management, working capital management etc. The Vega ME remained full scale distributor even under the new distribution model in which it was made global distributor. Appellant executed distributorship agreement with Vega ME and also adopted associated risks as earlier years. There was no dilution of its activities during the year as compared to earlier years. Accordingly, the findings of ITAT in assessment year 2006-07 that Vega UAE was distributor to the appellant completely apply to this year. Respectfully following the order of jurisdictional ITAT in appellant's own case in assessment year 2006-07, it is held that Vega ME was a full-fledged distributor to the appellant and not marketing service provider during the year. Once it is held that the AE is a distributor, the ALP has is to be determined on the basis of profit on sale of goods rather than operating margin to value added expenses. Like earlier years, this year also appellant had margin of 20.3% as against average margin of comparable companies of 12.63%. Therefore the profit margin of the appellant is much higher than the average "operating margin of comparable companies'. In view of this, no TP adjustment can be made this year also.”

On similar issue and identical facts the Co-ordinate Bench of the ITAT in the case of the assessee itself for assessment year 2006-07 has set aside such upward revision and the issue was adjudicated in favour of the assessee. Following the decision of the Co-ordinate Bench of the ITAT for A.Y. 2006-07 as elaborated supra in the findings of the ld. CIT(A), the appeal, of the revenue is dismissed.

Ground No. 3 of assessee vide ITA No. 2224/Ahd/2015 & ground No. 4 of revenue vide ITA No. 2342/Ahd/2015 partly deleting corporate guarantee for assessment year 2009-10)

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Guarantee charged 20,00,000 10,00,000 30,00,000

Conversion at closing rate of 51.76 103520000 51760000 155280000

Guarantee at 2. 965% 3069368 1534684 4604052

Less 0.5% in case of Vega UK 258800

Net guarantee fee payable 3069368 1275884 4345252

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The appellant in appeal reiterated its contention as that were there before the TPO. I have given my careful consideration to the observations of the TPO and the contentions of the Ld. A.R. The transaction representing the advancement of loan is covered by the definition of "international transaction which needs to be benchmarked. Similarly providing guarantee is also covered by the definition of "international transaction". After the Act was retrospectively amended w.e.f. 01-04-2002 by the finance Act 2012, there is no ambiguity that providing guarantee to an associated enterprise is an international transaction which needs to be benchmarked. The following Explanation was inserted by the FA, 2012: "Explanation- for the removal of doubts, it is hereby clarified that -(i) The expression "international transaction shall include— (a).................................................. ........................................................ (c) Capital financing, including any type of long-term or short-term borrowing, lending or guarantee , purchase or sale of marketable securities or any type of advance, payments or deterred payment or receivable or any other debt arising during the course of business; ...................................... ...................................... Thus the explanation, inserted vide the retrospective amendment, makes it amply clear that the transaction of guarantee was already included in the definition of "international transaction" and the same has now been clarified through the retrospective amendment. Therefore the contentions of the appellant that providing corporate guarantee to AEs is outside the ambit of international transaction has to fail. This view is supported by the decision Mumbai Tribunal in the case of Everest Kanto Cylinder [34 Taxman.Com 19 Mumbai ITAT], The TPO was justified in benchmarking the AEs and recovered a fees of Rs. 235201/- as indicated in Form no. 3CEB. It was further observed that no TP analysis of such transaction carried out. It was also observed that fees @ 0.5% for issuance of such guarantee were charged from VEGA UK but no such fess was recovered by VEGA ME. The TPO examined appellant's explanation that such guarantee had not been given for performance bonds and bids so the same are not qualify as guarantee but treated as a corporate function. The A.O. observed that a performance guarantee carries a potential financial liability, which in the case of failure of the beneficiary, has to be met by the guarantor and affects the assets of the guarantor. The TPO followed the ratio of US Tax Court in the case of Container Corporation for treating providing of guarantee as service. The TPO for the bench marking analyzed the bond data in US market and found that the difference in coupon rate (Yield or interest rate) in respect of AA rated bond and BB rated bond comes to 2.706% point. This was further increased 25 basis point for the currency risk to arrive at 2.956%. The TPO computed upward revision as follows: Vega ME Vega UK Total

Guarantee charged 20,00,000 10,00,000 30,00,000

Conversion at closing rate of 51.76 103520000 51760000 155280000

Guarantee at 2.965% 3069368 1^34684 4604052

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Less 0.5% in case of Vega UK 258800

Net guarantee fee payable 3069368 1275884 4345252

The appellant in appeal reiterated its contention as that were there before the TPO. I have given my careful consideration to the observations of the TPO and the contentions of the Ld. A.R. The transaction representing the advancement of loan is covered by definition of "international transaction which needs to be benchmarked. Similarly providing guarantee is also covered by the definition of "international transaction". After the Act was retrospectively amended w.e.f. 01-04-2002 by the Finance Act 2012, there is no ambiguity that providing guarantee to an associated enterprise is an international transaction which needs to be benchmarked. The following Explanation was inserted by the F.A., 2012: "Explanation- for the removal of doubts, it is hereby clarified that -(i) The expression "international transaction" shall include— (a).................................. ...................................... (c) Capital financing, including any type of long-term or short-term borrowing, lending or guarantee purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; .............................. ................................ Thus the explanation, inserted vide the retrospective amendment, makes it amply clear that the transaction of guarantee was already included in the definition of "international transaction" and the same has now been clarified through the retrospective amendment. Therefore the contentions of the appellant that providing corporate guarantee to AEs is outside the ambit of international transaction has to fail. This view is supported by the decision in Mumbai Tribunal in the case of Everest Kanto Cylinder [34 Taxman.Com 19 Mumbai ITAT]. The TPO was justified-in benchmarking the transactions. The Delhi Tribunal judgement [relied on by the A.R]-.in the case of Bharti Airtel Ltd. is not applicable to the instant case, as the appellant is not able to prove that it has not incurred any cost for the guarantee provided[as was done in the case of Bharti Airtel Ltd.], The next issue for the consideration is regarding the quantum of upward adjustment to be made. In this connection, it is seen that the TPO adopted the rate at 2.956% on the total amount of the guarantee provided by the appellant of Rs. 15.53 crores. In the case of Everest Kanto Cylinder, Mumbai Tribunal held as under: "We have already come to the conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We also find that in an independent transaction, the assessee has paid 0.6% guarantee commission to ICICI Bank India for its credit arrangement. This could • be a very good parameter and a comparable for taking it as internal CUP and comparing the-same with the transaction with the AE, The" charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the ICICI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arms length." In the instant case the appellant has furnished documentary evidence to show that it had obtained guarantee from SBI in connection with the appellant's operating contract with Karnataka Power Corporation at a guarantee fee of 0.25%. Going by the above mentioned decision of the Mumbai Tribunal, similar rate of 0.25% can be adopted for the purposes of benchmarking in the instant case. However, it is seen that there different rates of charging such fees which varies from transaction to transaction. Since

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the appellant has charged 0,5% fees from VEGA" UK which gives good comparable for bench marking, In accordance with the safe-harbour rules 10TB to 10TD, applicable from A.Y. 2013-14, the rates specified are 1.75% and 2%, These rules also of help in arriving bench marking @ 1% in the instant case. Accordingly, the upward adjustment is being taken at 1% of total guarantee provided by the appellant of Rs. 15.53 crores. The quantum of adjustment works out to Rs. 1552800/-. Considering that appellant had already charged fees of Rs. 258800 from VEGA UK it is therefore only the balance amount of Rs. 1294000 (1552800-258800) is justified as upward revision. The adjustment made by the AO [on the basis of the order of the TPO] is restricted to the said amount of Rs. 1294000/-. Balance adjustment is directed to be deleted. This ground of appeal is partly allowed.”

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directly proportionate to the rating given to the bond. Higher the risk of default by the issuing company on this bond higher the coupon rate. Details of these bonds are available on the web. On analysis of over 1100 bond data from where the bonds issued during the F.Y. 2008-09 were segregated it is seen that the difference in coupon rate ( yield or interest rate) in respect of AA rated bond and BB rated bond comes to 2.706% points. By taking guarantee for payments on behalf of its associate enterprise, the assessee has incurred significant current year risk as evident by general depreciation of rupees against dollar. Accordingly, 2.956% was found to be reasonable spread which the assessee should have charged as benefit granted to the associate enterprise. Accordingly, the Assessing Officer has made upward adjustment of Rs. 43,45,252/- as given below:- Vega ME Vega UK Total

Guarantees charged 20,00,000 10,00,000 30,00,000

Conversion at closing dollar rate of 103520000 51760000 155280000 51.76

Guarantee at 2.965% 3069368 1534684 4604052 Less 0.5% in case of Vega UK 258800

Net guarantee fee payable 3069368 1275884 4345252

On the other hand, the ld. counsel has submitted that issue of corporate guarantee by assessee on behalf of its subsidiary company was in the nature of quashi capital or shareholder activity and not in the nature of provision of

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service, therefore, the said transaction was to be excluded from the scope of international transaction u/s. 92B of the Act. The ld. counsel has placed reliance on the decision of ITAT Ahmedabad in the case of Micro Link Ltd. vs. ACIT (2015) 63 taxman.com 353 (Ahmedabad Tri).

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that guarantee was a service rendered and the guarantor was justified in charging a suitable guarantee for such services. Therefore, the Assessing Officer has made bench marking as per the report of the TPO as stated supra on the basis of coupon rate yield on various bonds in U.S. market stating that higher the risk of default by the issuing company on the bond higher the coupon rate. The Assessing Officer has taken rate of 2.956% as a reasonable fee for the guarantee given by the assessee and made upward adjustment of Rs. 43,45,252/-. However, the ld. CIT(A) has restricted the upward adjustment at 1% on total guarantee provided by the assessee holding that different rate of charging such fees varies from transaction to transaction. During the course of appellate proceedings before us, the ld. counsel has submitted that issuance of corporate guarantee by assessee on behalf of its subsidiary company was in the nature of quasi capital or share holders’ activities and not in the nature of provision of services. Therefore, the said transaction is to be excluded from the scope of international transaction u/s. 92B of the Act. The ld. counsel has also brought to our notice that identical issue has been adjudicated by the Co-ordinate Bench of the ITAT in favour of the assessee in the case of Micro Ink Ltd. vs. ACIT (2015) 63 taxman.com 353 (Ahd-Trib). The detailed finding of the Co-ordinate Bench in the case of Micro Ink Ltd. supra are reproduced as under:-

“20. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 21. It is only elementary that the determination of arm's length price, under the scheme of the international transfer pricing set out in the Income Tax Act, 1961, can only be done in respect of an 'international transaction'. Section 92(1) provides that, "(a)ny income arising from an international transaction shall be computed having regard to the arm's length price". In order to attract the arm's length price adjustment, therefore, a transaction has to be an 'international transaction' first. The expression 'international transaction' is a defined expression. Section 92 B defines the expression 'international transaction' as follows:

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92 B - Meaning of international transaction (1) For the purposes of this section and sections 92, 92C, 92D and 92E, "international transaction'' means a transaction between two or more associated enterprise s, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. (2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes of sub-section (1), be deemed to be a transaction entered into between two associated enterprises, if there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise. Explanation*: - For the removal of doubts, it is hereby clarified that -- (*inserted by the Finance Act 2012, though with retrospective effect from 1st April 2002) (i) the expression "international transaction" shall include -- (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know -how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature;

(c) capital financing, including any type of long -term or short -term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;

(d) provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service;

(e) a transaction of business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date;

(ii) the expression "intangible property" shall include --

(a) marketing related intangible assets, such as, trademarks, trade names, brand names, logos;

(b) technology related intangible assets, such as, process patents, patent applications, technical documentation such as laboratory notebooks, technical know -how;

(c) artistic related intangible assets, such as, literary works and copyrights, musical compositions, copyrights, maps , engravings;

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(d) data processing related intangible assets, such as, proprietary computer software, software copyrights, automated databases, and integrated circuit masks and masters;

(e) engineering related intangible assets, such as, industrial design , product patents, trade secrets, engineering drawing and schematics, blueprints, proprietary documentation;

(f) customer related intangible assets, such as, customer lists, customer contracts, customer relationship, open purchase orders;

(g) contract related intangible assets, such as, favourable supplier, contracts, licence agreements, franchise agreements, non -compete agreements;

(h) human capital related intangible assets, such as, trained and organised work force, employment agreements, union contracts; (i) location related intangible assets, such as, leasehold interest, mineral exploitation rights, easements, air rights, water rights; (j) goodwill related intangible assets, such as, institutional goodwill, professional practice goodwill, personal goodwill of professional, celebrity goodwill, general business going concern value; (k) methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists, or technical data; (l) any other similar item that derives its value from its intellectual content rather than its physical attributes.'.

Section 92B (2), covering a deeming fiction, provides that even a transaction with non AE in a situation in which such a transaction is de facto controlled by prior agreement with AE or by the terms agreed with the AE.

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alter the basic character of definition of 'international transaction' under Section 92 B. Clearly, therefore, this Explanation is to be read in conjunction with the main provisions, and in harmony with the scheme of the provisions, under Section 92 B. Under this Explanation, five categories of transactions have been clarified to have been included in the definition of 'international transactions'.

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............In the matter of guarantee commission, the adjustment made by the TPO were based on instances restricted to the commercial banks providing guarantees and did not contemplate the issue of a Corporate Guarantee. No doubt these are contracts of guarantee, however, when they are Commercial banks that issue bank guarantees which are treated as the blood of commerce being easily encashable in the event of default, and if the bank guarantee had to be obtained from Commercial Banks, the higher commission could have been justified. In the present case, it is assessee company that is issuing Corporate Guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion we are of the view that the appeal does not raise any substantial question of law and it is dismissed

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includes.....". Thirdly, the amendment is with retrospective effect from 1st April, 1962. Fourthly, the Finance Act 2012 which introduced, inter-alia, the amendment to section 2(47) and section 92CA(2B) is a validating act in view of section 119 thereof.

Disposal or parting with or creating any interest in an asset.

The asset or any interest in the asset.

The disposing of or parting with the asset or creating any interest therein may be:

(a) Direct or indirect.

(b) Absolute or conditional.

(c) Voluntary or involuntarily.

(d) By amendment or otherwise.

(iv) A non-obstante provision regarding the nature of a transfer. If an act, arrangement, transaction etc. constitutes a transfer as defined in the section it would be so notwithstanding the transfer of rights having been categorised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.

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dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.

It would be evident, therefore, that a lot more must now be seen and considered than before while arriving at a conclusion whether the terms and conditions of the Framework agreement constituted a transfer or assignment of the call options by one party to another.

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the channels under the Income Tax Act and proceed to decide these issues in writ jurisdiction under article 226, there cannot obviously be any question of Their Lordships deciding the matter one way or the other. Any observations made by Their Lordships, while declining to decide the matter in writ jurisdiction, cannot be treated as decisive of the issue on merits. While it is true that Hon'ble Bombay High Court has observed that the effect of amendment will have to be considered, Hon'ble Bombay High Court has also observed that even after taking into account the amendments, the legal implications of this amendment is still an open issue which will have to be adjudicated in the light of pleadings of the parties. Even in these observations, which donot anyway decide anything on merits, effect of a retrospective amendment was not in the context of the precise issue before us, or on the scope of the international transaction, but in respect of connotations of 'transfer'. As learned counsel rightly contends, in the light of Hon'ble Bombay High Court's judgment in the case of Sudhir Jayantilal Mulji (supra) "ratio of a decision alone is binding, because a case is only an authority for what it actually decides and not what may come to follow from some observations which find place therein". In view of these discussions, the reliance placed on Vodafone India Services (supra) is also equally misplaced and devoid of legally sustainable merits. In any case, as is noted by Hon'ble Supreme Court in the case of CIT Vs Sun Engineering Works Pvt Ltd (1992) 198 ITR 297 (SC)], "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court" Their Lordships further noted that "A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning" It was also recalled that in Madhav Rao Jivaji Rao Scindia Bahadur vs. Union of India (1971) 3 SCR 9 : AIR 1971 SC 530, Hon'ble Supreme Court had cautioned that "It is not proper to regard a word, clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment." That precisely, however, has been the approach of the revenue authorities in placing reliance on Vodafone India Services (supra) decision. We reject this approach.

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a range of fees that the guarantor would, at least, want to receive and the fees that the guaranteed group company would be willing to pay depending on the prevailing conditions within financial markets in practice".

(7.1) Subsection (2) does not apply to adjust an amount of consideration paid, payable or accruing to a corporation resident in Canada (in this subsection referred to as the "parent") in a taxation year of the parent for the provision of a guarantee to a person or partnership (in this subsection referred to as the "lender") for the repayment, in whole or in part, of a particular amount owing to the lender by a non-resident person, if (a) the non-resident person is a controlled foreign affiliate of the parent for the purposes of section 17 throughout the period in the year during which the particular amount is owing; and (b) it is established that the particular amount would be an amount owing described in paragraph 17(8)(a) or (b) if it were owed to the parent. (http://www.fin.gc.ca/drleg-apl/ita-lrir-dec12-l-eng.pdf)

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GE Capital Canada. There are many more aspects which make this decision wholly irrelevant in the present context but suffice to say that relevant legal provisions and context being radically different, the reliance of this decision must be rejected for this short reason alone.

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and thus highlighting narrow scope of shareholder activity, it states that "Stewardship activities covered a range of activities by a shareholder that may include provision for services to other group members, for example services that would be provided by a coordinating centre". It proceeded to add, in the immediately following sentence at page 207 of 2010 Guidelines, that "These latter type of non-shareholder activities could include detailed planning services for particular operations, management or technical advice (trouble shooting) or in some cases assistance in day to day management". The shareholder activities are thus seen as conceptually distinct from the provision of services. The issuance of corporate guarantee, as long as it is in the nature of shareholder activity, can not, therefore, amount to a "provision for services".

7.6 Under the arm's length principle, the question whether an intra-group service has been rendered when an activity is performed for one or more group members by another group member should depend on whether the activity provides a respective group member with economic or commercial value to enhance its commercial position. This can be determined by considering whether an independent enterprise in comparable circumstances would have been willing to pay for the activity if performed for it by an independent enterprise or would have performed the activity in-house for itself. If the activity is not one for which the independent enterprise would have been willing to pay or perform for itself, the activity ordinarily should not be considered as an intra-group service under the arm's length principle. 7.7 The analysis described above quite clearly depends on the actual facts and circumstances, and it is not possible in the abstract to set forth categorically the activities that do or do not constitute the rendering of intra- group services. However, some guidance may be given to elucidate how the analysis would be applied for some common types of activities undertaken in MNE groups. 7.8 Some intra-group services are performed by one member of an MNE group to meet an identified need of one or more specific members of the group. In such a case, it is

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relatively straightforward to determine whether a service has been provided. Ordinarily an independent enterprise in comparable circumstances would have satisfied the identified need either by performing the activity in-house or by having the activity performed by a third party. Thus, in such a case, an intra-group service ordinarily would be found to exist. For example, an intra-group service would normally be found where an associated enterprise repairs equipment used in manufacturing by another member of the MNE group. 7.9 A more complex analysis is necessary where an associated enterprise undertakes activities that relate to more than one member of the group or to the group as a whole. In a narrow range of such cases, an intra-group activity may be performed relating to group members even though those group members do not need the activity (and would not be willing to pay for it were they independent enterprises). Such an activity would be one that a group member (usually the parent company or a regional holding company) performs solely because of its ownership interest in one or more other group members, i.e. in its capacity as shareholder. This type of activity would not justify a charge to the recipient companies. It may be referred to as a "shareholder activity", distinguishable from the broader term "stewardship activity" used in the 1979 Report. Stewardship activities covered a range of activities by a shareholder that may include the provision of services to other group members, for example services that would be provided by a coordinating centre. These latter types of non-shareholder activities could include detailed planning services for particular operations, emergency management or technical advice (trouble shooting), or in some cases assistance in day-to-day management. 7.10 The following examples (which were described in the 1984 Report) will constitute shareholder activities, under the standard set forth in paragraph 7.6: a) Costs of activities relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company and costs of the supervisory board; b) Costs relating to reporting requirements of the parent company including the consolidation of reports; c) Costs of raising funds for the acquisition of its participations. In contrast, if for example a parent company raises funds on behalf of another group member which uses them to acquire a new company, the parent company would generally be regarded as providing a service to the group member. The 1984 Report also mentioned "costs of managerial and control (monitoring) activities related to the management and protection of the investment as such in participations". Whether these activities fall within the definition of shareholder activities as defined in these Guidelines would be determined according to whether under comparable facts and circumstances the activity is one that an independent enterprise would have been willing to pay for or to perform for itself. (Emphasis, by underlining, supplied by us)

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that enhances the recipient's commercial position, or that may be reasonably anticipated to do so". The expression "activity", in turn is defined, as "including the performance of functions; the assumption of risks; the use by a rendered of tangible or intangible property or other resources capabilities or knowledge (including knowledge of and ability to take advantage of a particularly advantageous situation or circumstances); and making available to the recipient any property or other resources of the rendered" [Regulation 1.482-9(1)(2)]. The issuance of guarantees is not within the ambit of transfer pricing in United States because it is a service but because it is covered by the specific definition discussed above. As a matter of fact, David S Miller, in a paper titled 'Federal Income Tax Consequences of Guarantees; A Comprehensive Framework for Analysis' published in the 'The American Lawyer Vol. 48, No. 1 (Fall 1994), pp. 103-165 (http://www.jstor.org/stable/20771688), has stated that a guarantee is not a service. The following observations, at pages 114, are important:

The position that guarantees are services has been discredited by the courts with good reason38. Guarantee fees do not represent payments for services any more than payments with respect to other financial instruments constitute payment for services39. A guarantor does not arrange financing for the debtor, but merely executes a financial instrument in its favour. See. e.g., Centel Communications Co. V. Commissioner, 92 T.C. 612, 632 (1989), aff d, 920 F2d 1335 (7th Cir. 1990); Bank of Am. V. United States, 680 F.2d 142, 150 (Cl. Ct. 1982). The Service's current position on the characterization of guarantee I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 fees as payment for services under section 482 is inconsistent with its treatment of guarantee fees under other provisions. See P.L.R. 9410008 (Dec. 13, 1993). But cf Federal Nat'l Mortgage Ass'n v. Commissioner, 100 T.C. 541, 579 (1993) (Fannie Mae provided services by buying mortgages).

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commercial position". The benefit test is interlinked with the an arm's length test in the sense that it seeks an answer to the question whether under a similar situation an independent enterprise would have been willing to pay for the activity concerned, or would have performed the activity in-house for itself. So far as the benefit test is concerned, as we have noted earlier, it is alien to the definition of international transaction' under the Indian transfer pricing legislation. So far as arm's length test is concerned, it presupposes that such a transaction is possible in arm's length situation. However, in a situation in which the subsidiary does not have adequate financial standing of its own and is inadequately capitalized, none will guarantee financial obligations of such a subsidiary.

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these are compulsions of his group synergy rather than the assurance that his future obligations will be met. We see no meeting ground in these two types of guarantees, so far their economic triggers and business considerations are concerned, and just because these instruments share a common surname, i.e. 'guarantee', these instruments cannot be said to be belong to the same economic genus. Of course, there can be situations in which there may be economic similarities, in this respect, may be present, but these are more of an exception than the rule. In general, therefore, bank guarantees are not comparable with corporate guarantees.

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guidelines provide for "recognition of the actual transactions undertaken" in paragraphs I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 1.36 to 1.41. Paragraphs 1.36 to 1.38 are important and are relevant to our purpose. These paragraphs are re-produced below: - "1.36 A tax administration's examination of a controlled transaction ordinarily should be based on the transaction actually undertaken by the associated enterprises as it has been structured by them, using the methods applied by the taxpayer insofar as these are consistent with the methods described in Chapters II and III. In other than exceptional cases, the tax administration should not disregard the actual transactions or substitute other transactions for them. Restructuring of legitimate business transactions would be a wholly arbitrary exercise the inequity of which could be compounded by double taxation created where the other tax administration does not share the same views as to how the transaction should be structured. 1.37 However, there are two particular circumstances in which it may, exceptionally, be both appropriate and legitimate for a tax administration to consider disregarding the structure adopted by a taxpayer in entering into a controlled transaction. The first circumstance arises where the economic substance of a transaction differs from its form. In such a case the tax administration may disregard the parties' characterization of the transaction and re- characterise it in accordance with its substance. An example of this circumstance would be an investment in an associated enterprise in the form of interest- bearing debt when, at arm's length, having regard to the economic circumstances of the borrowing company, the investment would not be expected to be structured in this way. In this case it might be appropriate for a tax administration to characterize the investment in accordance with its economic substance with the result that the loan may be treated as a subscription of capital. The second circumstance arises where, while the form and substance of the transaction are the same, the arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner and the actual structure practically impedes the tax administration from determining an appropriate transfer price. An example of this circumstance would be a sale under a long-term contract, for a lump sum payment, of unlimited entitlement to the intellectual property rights arising as a result of future research for the term of the contract (as previously indicated in paragraph 1.10). While in this case it may be proper to respect the transaction as a transfer of commercial property, it would nevertheless be appropriate for a tax administration to conform the terms of that transfer in their entirety (and not simply by reference to pricing) to those that might reasonably have been expected had the transfer of property been the subject of a transaction involving independent enterprises. Thus, in the case described above it might be appropriate for the tax administration, for I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 example, to adjust the conditions of the agreement in a commercially rational manner as a continuing research agreement. 1.38 In both sets of circumstances described above, the character of the transaction may derive from the relationship between the parties rather than be determined by normal commercial conditions as may have been structured by the taxpayer to avoid or minimize tax. In such cases, the totality of its termswould be the result of a condition that would not have been made if the parties had been engaged in arm's length dealings. Article 9 would thus allow an adjustment of conditions to reflect those which the parties would have attained had the transaction been structured in accordance with the economic and commercial reality of parties dealing at arm's length." 17. The significance of the aforesaid guidelines lies in the fact that they recognise that barring exceptional cases, the tax administration should not disregard the actual transaction or substitute other transactions for them and the examination of a controlled transaction should ordinarily be based on the transaction as it has been actually undertaken and structured by the associated enterprises. It is of further significance that the guidelines discourage re-structuring of legitimate business transactions. The reason

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for characterisation of such re-structuring as an arbitrary exercise, as given in the guidelines, is that it has the potential to create double taxation if the other tax administration does not share the same view as to how the transaction should be structured. 18. Two exceptions have been allowed to the aforesaid principle and they are (i) where the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner. 43. It is thus clear that even if we accept the contention of the learned Departmental Representative that issuance of a corporate guarantee amounts to a 'provision for service', such a service needs to be re-characterized to bring it in tune with commercial reality as "arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner". No bank would be willing to issue a clean guarantee, i.e. without underlying asset, to assessee's subsidiaries when the banks are not willing to extend those subsidiaries loans on the same terms as without a guarantee. Such a guarantee transaction can only be, and is, motivated by the shareholder, or ownership considerations. No doubt, under the OECD Guidance on the issue, an explicit support, such as corporate guarantee, is to be benchmarked and, for that purpose, it is in the service category but that occasion comes only when it is covered by the scope of 'international transaction' under the transfer pricing legislation of respective jurisdiction. The expression 'provision for services' in its normal or legal connotations, as we have seen earlier, does not cover issuance of corporate guarantees, even though once a corporate guarantee is covered by the definition of international transaction', it is benchmarked in the service segment. In view of the above discussions, OECD Guidelines, as a matter of fact, strengthen the claim of the assessee that the corporate guarantees issued by the assessee were in the nature of quasi capital or shareholder activity and, for this reason alone, the issuance of these guarantees should be excluded from the scope of services and thus from the scope of 'international transactions' under section 92B. Of course, once a transaction is held to be covered by the definition of international transaction, whether in the nature of the shareholder activity or quasi capital or not, ALP determination must depend on what an independent enterprise would have charged for such a transaction. In this light of these discussions, we hold that the issuance of corporate guarantees in question was not in the nature of 'provision for services' and these corporate guarantees were required to be treated as shareholder participation in the subsidiaries.

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If the natural connotations of a 'service' were to cover issuance of guarantee in general, there could not have been an occasion to give such hedged advice. This will be stretching the things too far to suggest that just because when guarantees are included in the international transactions, these guarantees are included in service segment in contradistinction with other heads under which international transactions are grouped, the guarantees should be treated as services, and, for that reason, included in the definition of international transactions. That is, in our considered view, purely fallacious logic. In our considered view, under Section 92 B, corporate guarantees can be covered only under the residuary head i.e. "any other transaction having a bearing on the profits, income, losses or assets of such enterprise". It is for this reason that Section 92 B, in a way, expands the scope of international transaction in the sense that even when guarantees are issued as a shareholder activity but costs are incurred for the same or, as a measure of abundant caution, recoveries are made for this non chargeable activity, these guarantees will fall in the residuary clause of definition of international transactions under section 92B. As for the learned Departmental Representative's argument that "whether the service has caused any extra cost to the assessee should not be the deciding factor to determine whether it is an international and then gives an example of brand royalty to make his point. What, in the process, he overlooks is that is that Section 92B(1) specifically covers I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 sale or lease of tangible or intangible property". The expression "bearing on the profits, income, losses or assets of such enterprises" is relevant only for residuary clause i.e. any other services not specifically covered by Section 92 B. It was also contended that, while rendering Bharti Airtel decision, the Delhi Tribunal did go overboard in deciding something which was not even raised before us. In the written submission, it was stated that "Hon'ble Delhi ITAT was not requested by the contesting parties to decide the issue as to whether the provision of guarantee was a service or not". That's not factually correct. We are unable to see any merits in learned Departmental Representative's contention, particularly as decision categorically noted that not only before the Tribunal, but this issue was also raised before the DRP- as evident from the text of DRP decision. We now take up the issue with respect to specific mention of the words in Explanation to Section 92B which states that "For the removal of doubts, it is hereby clarified that (i) the expression "international transaction" shall include........ (c) capital financing, including any type of long - term or short -term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business." There is no dispute that this Explanation states that it is merely clarificatory in nature inasmuch as it is 'for the removal of doubts', and, therefore, one has to proceed on the basis that it does not alter the basic character of definition of 'international transaction' under Section 92 B. Accordingly, this Explanation is to be read in conjunction with the main provisions, and in harmony with the scheme of the provisions, under Section 92 B. Under this Explanation, five categories of transactions have been clarified to have been included in the definition of 'international transactions'. The first two categories of transactions, which are stated to be included in the scope of expression 'international transactions' by the virtue of clause (a) and (b) of Explanation to Section 92 B, are transactions with regard to purchase, sale, transfer, lease or use of tangible and intangible properties. These transactions were anyway covered by transactions 'in the nature of purchase, sale or lease of tangible or intangible property'. The only additional expression in the clarification is 'use' as also illustrative and inclusive descriptions of I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 tangible and intangible assets. Similarly, clause (d) deals with the " provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service" which are anyway covered in "provision for services" and "mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises ". That leaves us with two clauses in the Explanation to Sect ion 92 B which are not covered by any of the three categories discussed above or by other specific segments covered by Section 92 B, namely borrowing or lending money. The remaining two items in the Explanation to Section 92 B are set out in clause (c) and (e) thereto,

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dealing with (a) capital financing and (b) business restructuring or reorganization. These items can only be covered in the residual clause of definition in international transactions, as in Section 92B (1), which covers "any other transaction having a bearing on profits, incomes, losses, or assets of such enterprises". It is, therefore, essential that in order to be covered by clause (c) and (e) of Explanation to Section 92 B, the transactions should be such as to have beating on profits, incomes, losses or assets of such enterprise. In other words, in a situation in which a transaction has no bearing on profits, incomes, losses or assets of such enterprise, the transaction will be outside the ambit of expression 'international transaction'. This aspect of the matter is further highlighted in clause (e) of the Explanation dealing with restructuring and reorganization, wherein it is acknowledged that such an impact could be immediate or in future as evident from the words "irrespective of the fact that it (i.e. restructuring or reorganization) has bearing on the profit, income, losses or assets of such enterprise at the time of transaction or on a future date". What is implicit in this statutory provision is that while impact on " profit, income, losses or assets" is sine qua non , the mere fact that impact is not immediate, but on a future date, would not take the transaction outside the ambit of 'international transaction'. It is also important to bear in mind that, as it appears on a plain reading of the provision, this exclusion clause is not for I.T.A. No.: 2873/Ahd/10 Assessment year: 2006-07 "contingent" impact on profit, income, losses or assets but on "future" impact on profit, income, losses or assets of the enterprise. The important distinction between these two categories is that while latter is a certainty, and only its crystallization may take place on a future date, there is no such certainty in the former case. In the case before us, it is an undisputed position that corporate guarantees issued by the assessee to the various banks and crystallization of liability under these guarantees, though a possibility, is not a certainty. In view of the discussions above, the scope of the capital financing transactions, as could be covered under Explanation to Section 92 B read with Section 92B(1), is restricted to such capital financing transactions, including inter alia any guarantee, deferred payment or receivable or any other debt during the course of business, as will have "a bearing on the profits, income, losses or assets or such enterprise". This pre-condition about impact on profits, income, losses or assets of such enterprises is a pre-condition embedded in Section 92B(1) and the only relaxation from this condition precedent is set out in clause (e) of the Explanation which provides that the bearing on profits, income, losses or assets could be immediate or on a future date. These guarantees do not have any impact on income, profits, losses or assets of the assessee. There can be a hypothetical situation in which a guarantee default takes place and, therefore, the enterprise may have to pay the guarantee amounts but such a situation, even if that be so, is only a hypothetical situation, which are, as discussed above, excluded. When an assessee extends an assistance to the associated enterprise, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction under section 92B (1) of the Act.

"We find that the TP legislation provides for computation of income from international transaction as per Section 92B of the Act. The corporate guarantee provided by the assessee company does not fall within the definition of international transaction. The TP legislation does not stipulate any guidelines in respect to guarantee transactions. In the absence of any charging provision, the lower authorities are not correct in bringing aforesaid transaction in the TP study. In our considered view, the corporate guarantee is very much incidental to the business of the assessee and hence, the same cannot be compared to a bank guarantee transaction of the Bank or financial institution."

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by the assessee, with retrospective effect. All this only shows that even when law is specifically stated to have effect from a particular date, its being implemented in a fair and reasonable manner, within the framework of judge made law, may require that date to be tinkered with. When a proviso is introduced with effect from a particular date specified by the legislature, the judicial forums, including this Tribunal, at times read it as being effect from a date much earlier than that too. One such case, for example, is CIT Vs Ansal Landmark Township Pvt Ltd [(2015) 377 ITR 635 (Delhi)] wherein Hon'ble Delhi High Court confirmed the action of the Tribunal in holding that the provision, though stated to be effective from 1st April 2013 must be held to be effective from 1 st April 2005. Whether such an exercise can be done in the present case is, of course, something to be examined and our observations should not be construed as an expression on merits of that aspect of matter. Given the fact that the assessee has succeeded on merits in this case, it would not really be necessary to deal with that aspect of the matter.

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disputes, must include a clear and unambiguous legislative guidance on the transfer pricing implications of the corporate guarantees as also on the methodology of determining its ALP, if necessary. Of course, no matter how good is the legislative framework, the importance of a very comprehensive analysis, in the transfer pricing study, of the nature of corporate guarantees issued by the assesses, can never be overemphasized. The sweeping generalizations, vague statements and evasive approach in the transfer pricing study reports, which are quite common in most of the transfer pricing reports, cannot do good to a reasonable cause. When judicial calls on the complex transfer pricing issues are to be taken, utmost clarity in the legislative framework and a comprehensive analysis of relevant facts, in the transfer pricing documentation, are basic inputs. Unfortunately, both of these things leave a lot to be desired. We can only hope, and we do hope, that things will change for better.” With the assistance of ld. representatives, we have gone through the decision of Co-ordinate Bench of the ITAT in the case of Micro Ink Ltd. supra holding that the issue of corporate guarantee were in the nature of share holder activity and the same could not be included in the provision for services under the definition of international transaction u/s. 92B of the Act. The Co-ordinate Bench has also stated that when an assessee extends assistance to AE which does not cost anything to the assessee and particularly for which the assesse could not have realized money by giving it to someone else during the course of normal business such an assistance or accommodation does not have any bearing on its profit, income, loses or asset and therefore it is outside the ambit of international transaction u/s. 92B of the Act. It is also held that these guarantee do not have any impact on profit, loses or assets of the company. It is further held that there can be a hypothetical situation in which a guarantee default takes place and therefore the enterprise may have to pay the guarantee amount but such a situation, even if that be so is only a hypothetical situation.

Respectfully following the decision of the Co-ordinate Bench as supra, this ground of appeal of the Revenue is dismissed and part of addition sustained by the ld. CIT(A) is deleted. Accordantly, this ground of appeal of the Revenue is rejected and the ground of appeal of the assessee is allowed.

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ITA No. 2224/Ahd/2015 A.Y. 2009-10 filed by assessee Ground No. 1 (Disallowance u/s. 14A) 29. The similar issue on identical facts was adjudicated for assessment year 2008-09. Therefore, applying the findings on the similar issue adjudicated vide ITA No. 1757/Ahd/2012 for A.Y. 2008-09 as supra, we restrict the disallowance as administrative expenses to the amount of Rs. 15 lacs. Since the assessee itself has made disallowance to the extent of Rs. 8,82,827/-,therefore, disallowance is restricted to the extent of Rs. 6,17,173/- (Rs. 15,00,000- 8,82,827/-). Accordingly, this ground of appeal is partly allowed.

Ground No. 2 (Disallowance u/s. 35D) 30. As the facts and issue involved in ground of appeal no. 2 vide ITA Nos. 1757/Ahd/2012 Assessment Year 2008-09 are similar as in ITA No. 2224/Ahd/2015 Assessment Year 2009-10 therefore after applying the decision adjudicated vide ITA No. 1757/Ahd2014 as supra in this order, this ground of appeal of the assessee stands dismissed.

ITA No. 2343/Ahd/2015 A.Y. 2010-11 filed by revenue

Ground No. 1 (Deleting the addition of Rs. 31,05,06,247/- being taxable income of M/s. Vega Industries (Middle East) FZE, UAE_

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applying the decision adjudicated vide ITA No. 1766/Ahd/2012 as supra in this order, this ground of appeal of the revenue stands dismissed.

Ground No. 2 Deleting the disallowance of excess claim of depreciation of Rs. 15,51,795/- on vehicle u/s. 32 of the Act)

Ground No. 3 (unutilized CENVAT credit of Rs. 16,61,993) 33. During the course of assessment, the Assessing Officer noticed that assessee has shown unutilized CENVAT credit at the end of the year to the amount of Rs. 16,61,993/-. The Assessing Officer further stated that assessee has followed exclusive method for accounting of CENVAT as against inclusive method required u/s. 145A of the Act. On query, the assessee explained that assessee company has been constantly accounting the raw material and other input purchased as per net method and there would not have any impact on the profit of the company. The Assessing Officer had not accepted the submission of the assessee and stated that unutilized CENVAT credit had to be included in closing stock and raw material therefore unutilized CENVAT credit of Rs. 16,61,993/- was added to the total income of the assessee.

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Opening balance of Excise 273900 44843319

MODVATE Credit Availed 20569147 275462556 During the year

MQDVATE Credit Utilised 18907154 281 93577 During the Year

Balance representing *935893 38374298 outstanding Amount as at the End of the year

Note: 1) Purchase valued at exclusive of modvat 2) Balance of modvat credit is shown in Balance sheet as Current -Assets under heading of Loans & Advances I am inclined with contention of appellant about unutilized MODVAT credit for capital goods of Rs. 1661993(1935893-273900) because the same is found correct and duly evidenced by tax auditor in Form 3CD. The appellant's reliance on ratio of Hon'ble ITAT Mumbai order in the case of Navdeep Chemical Pvt. Ltd.(Supra) is also found to be squarely applicable to appellant's facts so far as it relate to unutilized

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MODVAT on capital goods and non applicability of section 145A of the Act on such amount. The A.O, is therefore directed to delete addition so made of Rs. 1661993/-. From the above table it is evident that A0- without appreciating the proper fact, invoked the provision of section 145A of the Act. The A.O. has not considered the negative amount of MODVAT on raw material utilized by appellant for manufacturing as reflected in this "statement no. 6" under the head 'others". Even the reasoning of A.O. for rejection of exclusive method adopted by appellant with a reconciliation of tax neutral effect in respect of inclusive method is not justified as per the provision and legal preposition. The appellant in appeal proceedings relied on my order dt. 09/01/2015 in the case of appellant itself for A.Y. 06-07, where on this issue with similar contention and reasoning, such additions were directed to be deleted. It is therefore, following the ratio of this order, the A.O. is directed to delete the addition so made. In conclusion, appellant gets relief of Rs. 1661993/-. All these grounds are treated as allowed.” 35. Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer added unutilized CENVAT credit of Rs. 16,61,993/- to the total income of the assessee stating that as per section 145A of the act the assessee should have followed inclusive method of accounting. The ld. CIT(A) deleted the said addition and the similar addition was also deleted in the earlier assessment year in the case of the assessee for assessment year 2006-07. The assessee has followed exclusive method of accounting. The ld. counsel has also placed reliance on the decision of Hon’ble Supreme Court in the case of CIT vs. Indo Nippon Chemical Ltd. 261 ITR 275 (SC), decision of Hon’ble Gujarat High Court in the case of ACIT vs. Narmada Chemmatur Petrochemical 327 ITR 369 (Guj) and decision of ITAT Ahmedabad in the case of the assessee itself vide ITA No. 1122/Ahd/2015. With the assistance of ld. authorized representatives, we have gone through the decision of Hon’ble ITAT Ahmedabad in the case of the assessee itself for assessment year 2006-07 vide ITA 1122/Ahd/2015 dated 26-09-2017 wherein similar issue on identical fact has been decided in favour of the assessee. The relevant part of the decision of the ITAT is as under:- “3. At the time of hearing before us, learned representatives fairly agree that the above grievance is covered, in favour jf the assessee, by the decision dated 31.08,2016 of the Co-ordinate Bench of this Tribunal in the

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case of ITO vs. Mamata Brampton Engg. Pvt. Ltd. in ITA No.2387/Ahd/2013 for assessment year 2008-09 wherein the Tribunal has, inter alia, observed as follows:- "5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to the addition of unutilised CENVAT credit to the closing stock. We find that the Id.CIT(A) while deciding the issue in favour of assesses has given a finding that assesses is following exclusive method of accounting whereby the excise duty is not included in the valuation of stock and raw-materials as the excise duty paid and collected is not made part and parcel of the Profit & Loss A/c. He has further given a finding that assesses has complied with the provisions of section 145A of the Act and the effect of including excise duty in valuation of dosing stock does not affect the profit and is Revenue neutral. He has further relied on the decision of Hon'ble Gujarat High Court in the case of Narmada Chematur Petrochemicals Ltd.(supra). Before us. Revenue has neither controverted the finding of Id.CIT(A) nor has placed any contrary binding decision in its support. We further find that the Hon'ble Apex Court in the case oflndo Nippo Chemicals (2003) 261 ITR 375 has held that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. In view of the aforesaid facts, we find no reason to interfere with the order of the ld.CIT(A). Thus, this ground of Revenue is dismissed.' 4. We see no reason to take any other view of the matter than the view so taken by the co-ordinate bench. Respectfully following (he same, we see no reasons to interfere in the conclusions arrived at by the Id. CIT(A). Accordingly, we confirm the order of the learned CIT(A) and dismiss the appeal of the Revenue.” Respectfully following the decision of Co-ordinate Bench as referred above, we do not find any merit in the appeal of the revenue and the same is dismissed.

Ground No. 4 (claim of additional depreciation on electric installation) 36. During the course of assessment, the Assessing Officer noticed that assessee has shown addition of Rs. 10,49,811/- under the head electric installation claiming depreciation @ 15% and additional depreciation @ 20%. On query, the assessee explained that electric installation was part and parcel of the plant and machinery installed during the year under assessment. The Assessing Officer had not accepted the submission of the assessee and he was of the view that the electric fittings was not plant and machinery and entitled for depreciation @ 10%. Consequenlty, excess depreciation of Rs. 67,707 and additional depreciation of Rs. 2,70,826/- totaling to Rs. 3,38,533/- was disallowed and added to the total income of the assessee.

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Ground No. 5 ( Deleting the addition of Rs. 25,22,50,297/- made on account of upward revision of arms length price)

Ground No. 6 (Partly deleting T.P. adjustment in respect of Corporate Guarantee)

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ITA No. 2225/Ahd/2015 filed by assessee A.Y. 2010-11

Ground No. 1 (Disallowance u/s. 14A) 41. The similar issue on identical facts was adjudicated for assessment year 2008-09. Therefore, applying the findings on the similar issue adjudicated vide ITA No. 1757/Ahd/2012 for A.Y. 2008-09 as supra, we restrict the disallowance as administrative expenses to the amount of Rs. 15 lacs. Since the assessee itself has made disallowance to the extent of Rs. 9,94,147/- ,therefore, disallowance is restricted to the extent of Rs. 5,05,853/- (Rs. 15,00,000- 9,94,147/-). Accordingly, this ground of appeal is partly allowed.

Ground No. 2 (Disallowance u/s. 35D) 42. As the facts and issue involved in ground of appeal no. 2 vide ITA No. 1757/Ahd/2012 Assessment Year 2008-09 are similar as in ITA No. 2225/Ahd/2015 Assessment Year 2010-11 therefore after applying the decision adjudicated vide ITA No. 1757/Ahd/2012 as supra in this order, this ground of appeal of the assessee is dismissed.

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Ground No. 3 (T.P. adjustment in respect of corporate guarantee )

ITA No. 1112/Ahd/2017 filed by revenue A.Y. 2011-12

Ground No. A (Deleting the addition of Rs. 34,11,19,295/- treating Vega ME as the assessee’s proprietary concern)

Ground No. B (Deleting disallowance u/s. 14A of assessee vide ITA No. 1028/Ahd/2017 and revenue vide ITA No. 1112/Ahd/2017)

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6,69,616/-,therefore, disallowance is restricted to the extent of Rs. 8,30,384/- (Rs. 15,00,000- 6,69,616/-). Accordingly, this ground of appeal of the assessee is partly allowed and ground of appeal of Revenue for deleting addition of Rs. 61,159/- by ld. CIT(A) is dismissed.

Ground No. C (Deleting disallowance u/s. 35D) 46. As the facts and issue involved in ground of appeal no. 2 vide ITA No. 1766/Ahd/2012 Assessment Year 2008-09 are similar as in ITA No. 1112/Ahd/2017 Assessment Year 2011-12 therefore after applying the decision adjudicated vide ITA No. 1112/Ahd/2017 as supra in this order, this ground of appeal of the revenue stands dismissed.

Ground No. D (Deleting the addition of Rs. 7,75,898/- made on account of disallowance of higher depreciation claim on new commercial vehicle)

Ground No. E (Deleting the addition of Rs. 1,91,49,551/- made u/s. 145A) 48. As the facts and issue involved in ground of appeal no. 3 vide ITA No. 2343/Ahd/2015 Assessment Year 2010-11 are similar as in

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 68 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

ITA No. 1112/Ahd/2017 Assessment Year 2011-12 therefore after applying the decision adjudicated vide ITA No. 2343/Ahd/2015 as supra in this order, this ground of appeal of the revenue stands dismissed.

Ground No. F ( Deleting the addition of Rs. 23,66,015/- made on account of disallowance of higher depreciation claim of Electrical Fittings

Ground No. G ( Deleting TP adjustment of Rs. 15,31,488/- made u/s. 92CA of the I.T. Act in respect of corporate guarantee)

ITA No. 1028/Ahd/2017 A.Y. 2011-12 filed by assessee

Ground No. 2 (Disallowance u/s. 35D of the Act)

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 69 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

Ground No. 3 (Depreciation on electrical fittings) 52. As the facts and issue involved in ground of appeal no. 4 vide ITA No. 2343/Ahd/2012 Assessment Year 2010-11 are similar as in ITA No. 1028/Ahd/2015 Assessment Year 2011-12 therefore after applying the decision adjudicated vide ITA No. 2343/Ahd/2012 as supra in this order, this ground of appeal of the assessee is stands dismissed.

Ground No. 4 (Addition of Rs. 7,00,275/- on account of Corporate Guarantee charges)

ITA No. 1835/Ahd/2017 A.Y. 2012-13 filed by revenue

Ground No. 1 (Deleting the addition of Rs. 31,56,69,000/- being income of Vega Industries ME)

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 70 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

Ground No. 2 (Deleting depreciation of Rs. 1,41,653/- on car) 55. As the facts and issue involved in ground of appeal no. 2 vide ITA No. 2342/Ahd/2015 Assessment Year 2010-11 are similar as in ITA No. 1835/Ahd/2015 Assessment Year 2012-13 therefore after applying the decision adjudicated vide ITA No. 2342/Ahd/2015 as supra in this order, this ground of appeal of the revenue is dismissed.

Ground No. 3 (Deleting disallowance of Rs. 39,04,416/- on electric fittings)

Ground No. 4(Deleting T.P. adjustment of Rs. 25,24,995/- u/s. 92CA in respect of corporate guarantee-)

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 71 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

ITA No. 1850/Ahd/2017 A.Y. 2012-13 filed by assessee

Ground No. 1 (Depreciation on electrical fittings) 58. As the facts and issue involved in ground of appeal no. 4 vide ITA No. 2343/Ahd/2015 Assessment Year 2010-11 are similar as in ITA No. 1850/Ahd/2017 Assessment Year 2012-13 therefore after applying the decision adjudicated vide ITA No. 2343/Ahd/2015 as supra in this order, this ground of appeal of the assessee stands dismissed.

Ground No. 2 (Addition of Rs. 8,01,300/- on account of corporate guarantee)

ITA No. 2805/Ahd/2017 A.Y. 2013-14 filed by revenue

Ground No. 1 (Addition of Rs. 46,19,59,000/- being income of Vega Industries, ME)

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 72 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

Ground No. 2 (Deleting the addition on higher depreciation on electric installation of Rs. 9,52,934/-)

ITA No. 2726/Ahd/2017 A.Y. 2013-14 filed by assessee

Ground No. 1 (Depreciation on electrical fittings)

Ground No. 2 (Levy of interest u/s. 234B)

I.T.A Nos. 1766, 1757/Ahd/2012, 2342, 2343, 2224,2225/Ahd/2015, 1112,1835,2805,1028,1850 & 2726/Ahd/2017 Page No 73 Dy. CIT vs. AIA Engineering Ltd. & AIA Engineering Ltd. vs. DCIT

Order pronounced in the open court on 04-01-2021

Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad : Dated 04/01/2021 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद