M/S TATA GLOBAL BEVERAGES LIMITED,KOLKATA vs. THE DCIT, CIRCLE-4(2), KOLKATA, KOLKATA

आयकर अपीलीय अधिकरण कोलकाता 'सी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA डॉ. मनीष बोरड, लेखा सदस्य एवं श्री संजय शमाा, न्याधयक सदस्य के समक्ष Before DR. MANISH BORAD, ACCOUNTANT MEMBER & SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 M/s. Tata Global Beverages Limited.........................Appellant [PAN: AABCT 0602 K] Vs. DCIT, Circle-4(2), Kolkata.....................................Respondent I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited.........................Appellant [PAN: AABCT 0602 K] Vs. DCIT, Circle-4(2), Kolkata.....................................Respondent Appearances by: Sh. J.P. Khaitan, Sr. Counsel & Sh. P. Jhunjhunwala, Adv., appeared on behalf of the Assessee. Sh. Tushar Dhawal Singh, CIT, D/R, appeared on behalf of the Revenue. Date of concluding the hearing : November 16th, 2022 Date of pronouncing the order : February 13th, 2023 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. ORDER

Per Manish Borad, Accountant Member:

2. The assessee is in appeal before the Tribunal raising the following grounds: “

Assessment Year 2012-2013:

1. On the facts and circumstances of the case & in law, the Learned Assessing Officer (Ld. AO)/ Learned Transfer Pricing Officer (Ld. TPO) (in pursuance to the directions of the Learned Dispute Resolution Panel (Ld. DRP)), erred in not accepting the returned income of the Appellant amounting to Rs. 3,66,17,09,400/- and enhancing the same by Rs. 3,12,83,015/-.

2. On the facts and circumstances of the case & in law, the Ld. AO/TPO grossly erred in making an adjustment of Rs. 1,07,25,333/- to the income of the Appellant on account of corporate guarantee fee and in doing so, the Ld. AO/TPO grossly erred in: 2.1. disregarding the fact that the transaction of corporate guarantee extended by the Appellant to its AE does not fall within the definition of "International transaction" under section 92B of the Income-tax Act, 1961. 2.2. disregarding the fact that the provision of corporate guarantee to the AE was intended to facilitate an acquisition by the Appellant, and consequently the guarantee was in the nature of shareholder services and thus a separate charge is not warranted; 2.3. disregarding the fact that the Appellant had been irrevocably and unconditionally indemnified by TGBIL, being the parent and controlling company of Kahatura Holdings Limited (KHL), for any Page 2 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. liability, arising on execution by the bank through a 'counter guarantee'. 2.4. disregarding the directions of Ld. DRP to reduce the arm’s length price (ALP) adjustment to account for the benefit accruing to the Appellant due to counter corporate guarantee; 2.5. disregarding the fact that the counter corporate guarantee provided by TGBIL and the guarantee provided to KHL by the Appellant are one international transaction and need to be analyzed together; 2.6. disregarding the detailed and proper comparability analysis submitted by the Appellant following the ‘interest saved’ approach; 2.7. making an ad-hoc adjustment of 200 basis points on the loan amount outstanding as corporate guarantee commission without any scientific basis; 2.8. violating the fundamental principles of natural justice by not giving the Appellant an opportunity of being heard before passing the DRP appeal effect Order.

3. On the facts and in the circumstances of the case & in law, the Ld. DRP/AO erred in disallowing Rs. 3,12,83,015/- under section 14A of the Act read with Rule 8D of the Income Tax Rules in computing income under normal provisions of the Act. 3- 1.

1. On the facts and in the circumstances of the case & in law and without prejudice to Grounds taken here-in-above, the Ld. Panel as well as the Ld. AO while computing alleged disallowance under Rule 8D(2)(iii) erred in not excluding strategic investments made in subsidiaries/group companies out of business exigencies. 3.2. On the facts and in the circumstances of the case and in law and without prejudice to Grounds taken herein above, the Ld. AO erred in disregarding the specific directions of the Ld. DRP to re-compute disallowance under section 14A read with Rule 8D(2)(iii) based on the principles laid down in the decisions of the Hon’ble High Court in the case of Cheminvest Limited -vs.- CIT (2015) 61 taxmann.com 118 (Del) and CIT -vs.- Holchim India (P) Ltd (2014) 272 CTR 282 (Del).

4. On the facts and in the circumstances of the case & in law, the Ld. AO grossly erred in making an upward adjustment of Rs.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 3,12,83,015/- computed as per Rule 8D(2)(iii) while arriving at book profit under section 115JB of the Art without appreciating that provisions of subsection (2) & (3) of Section 14A which prescribes for estimated disallowance by the Ld. AO as per Rule 8D did not find place in clause (f) of Section 115JB. 4.1 On the farts and in the circumstances of the case & in law, the Ld. AO has exceeded his jurisdiction in making disallowance while making MAT computation on account of section 14A which was neither subject matter of draft order nor was subject matter of adjudication by Ld. DRP.

5. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting withholding tax credit to the extent of Rs. 4,03,309/- without assigning any reasons.

6. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting foreign tax credit to the extent of Rs. 10,04,025/- without assigning any reasons.

7. That on the facts and in the circumstances of the case and in law the Ld. AO erred in charging interest under section 234C of the Act which is on the basis of returned income.

8. The Ld. AO has grossly erred in initiating penalty under section 271(1)(c) of the Act mechanically and without recording any satisfaction for its initiation. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing. Assessment Year 2013-2014: 1. On the facts and circumstances of the case & in law, the Learned Assessing Officer (Ld. AO)/ Learned Transfer Pricing Officer (Ld. TPO) (in pursuance to the directions of the Learned Dispute Resolution Panel (Ld. DRP), erred in not accepting the returned income of the Appellant under normal provisions of the Income Tax Act, 1961 (‘the Act’) amounting to Rs. 2,21,33,99,386/- and enhancing the same by Rs. 5,80,32,672/- and also erred in enhancing book profits under I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. section 115.JB of the Act by Rs 3,15,04,684/- resulting to assessed book profits of Rs 3,00,24,47,220/-.

2. On the facts and circumstances of the case & in law, the Ld. AO/TPO (in pursuance to the directions of Ld. DRP) grossly erred in making an adjustment of Rs. 2,64,43,540/- to the income of the Appellant on account of corporate guarantee fee and in doing so, the Ld. AO/TPO grossly erred in: 2.1. disregarding the fact that the transaction of corporate guarantee extended by the Appellant to its AE does not fall within the definition of "International transaction" under section 92B of the Act. 2.2. disregarding the fact that the provision of corporate guarantee to the AE was intended to only facilitate an acquisition by the Appellant’s overseas group company Kahatura Holdings Limited (KHL), and consequently the guarantee was in the nature of shareholder services and thus a separate charge is not warranted; 2.3. disregarding the fact that the Appellant had been irrevocably and unconditionally indemnified by Tata Global Beverages Investment Ltd. (‘TGBIL’), being the parent and controlling company of acquirer company KHL, for any liability, arising on execution by the bank through a 'counter guarantee'. 2.4. disregarding the fact that the counter corporate guarantee provided by TGBIL and the guarantee provided to KHL by the Appellant are one international transaction and need to be analyzed together; 2.5. disregarding the detailed and proper comparability analysis submitted by the Appellant following the 'interest saved’ approach for both the corporate guarantee and the counter guarantee; 2.6. making an ad-hoc adjustment of 200 basis points on the loan amount outstanding as corporate guarantee commission without any scientific basis; 3. On the facts and in the circumstances of the case & in law, the Ld. AO erred in disallowing Rs. 3,15,04,684/- under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (‘the Rules') in computing income under normal provisions of the Act.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 3.1. On the facts and in the circumstances of the case & in law, the Ld. DRP as well as the Ld. AO erred in not appreciating that the provisions of section 14A of the Act can be invoked only when the conditions laid down under sub section (1) of section 14A of the Act have been satisfied. 3.2. On the facts and in the circumstances of the case & in law, the Ld. DRP erred in confirming disallowance of Rs. 3,15,04,684/- under section 14A of the Act made by the Ld. AO based on surmises and conjectures without having recorded any reasoned dissatisfaction under section 14A(2) of the Act against the suo-moto disallowance of Rs 58,78,000 made by the assessee. 3.3. Without prejudice to above mentioned grounds of appeal

, the Ld. DRP as well as the Ld. AO grossly erred in making disallowance by applying Rule 8D(2)(iii) of the Rules even on strategic investments made in subsidiaries/group companies, without any intention to earn exempt income, which is pre-requisite for application of section 14A of the Act. 3.4. Without prejudice to above mentioned grounds of appeal, the Ld. DRP as well as the Ld. AO grossly erred in making disallowance by applying Rule 8D(2)(iii) of the Rules even on investments which were patently outside the purview of section 14A of the Act in absence of any exempt income earned during the year under consideration.

4. On the facts and in the circumstances of the case & in law, the Ld. AO grossly erred in enhancing book profits under section 115JB of the Act by Rs. 3,15,04,684/- computed as per section 14A of the Act read with Rule 8D(2)(iii) of the Rules without appreciating that section 14A/Rule 8D(2)(iii) which calls for notional disallowance, does not have any application in computation of book profits under section 115JB of the Act.

5. That on the facts and in the circumstances of the case, the Ld. AO erred in considering capital gains amounting to Rs 1,36,025/- twice in the gross total income of the Appellant.

6. That on the facts and in the circumstances of the case, the Ld. DRP as well as the Ld. AO erred in not allowing deduction of u/s 80G of the Act amounting to Rs. 1,00,00,000/-.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited.

7. That on the facts and in the circumstances of the case, the Ld. AO has erred in not computing the tax liability as per the provisions of the Act.

8. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting withholding tax credit to the extent of Rs. 1,63,582/- without assigning any reasons.

9. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting MAT credit while computing tax liability for the captioned year without assigning any reasons.

10. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting foreign tax credit to the extent of Rs. 1,20,46,207/- without assigning any reasons.

11. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting credit for dividend distribution taxes paid by the Appellant amounting to Rs. 19,65,29,281/- without assigning any reasons.

12. That on the facts and in the circumstances of the case, the Ld. AO has grossly erred in initiating penalty under section 271(1)(c) of the Act mechanically and without recording any satisfaction for its initiation. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing.” Additional Ground for Assessment Year 2013-14: “i. That on the facts and in the circumstances of the case and in law, the appellant is entitled to deduction of education cess and secondary higher education cess liability on income tax and dividend distribution tax during the subject financial year amounting to INR 2,27,83,684/- as a business expenditure under section 37(1) of the Act, not disallowable under section 4O(a)(ii) or section 115-O of the Act.”

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. e. The Ld AR responded to the contentions and his rebuttal is summarized as under: I. M/s TGBIL has sufficient cash flow to offer the linked counter guarantee. Its credit rating is immaterial in view of its capacity to meet the obligations that may arise on this count. II. The corporate guarantee offered by the assessee and the counter guarantee by the AE to offset its obligation are interlinked transactions on similar plane. III. The assessee is duly covered and its liability is covered per this counter guarantee offered by TGBIL. IV. The structuring of the Guarantee conundrum is a function of corporate structuring and no adverse inference is called for. Further. M/s TGBIL has become the direct guarantor in FY 2014-15 onwards. f. The panel has considered the submissions of the Officer & the Ld AR. The activity of Corporate Guarantee is not a shareholder service as it is not an existential service nor is it a mandatory service to help the recipient entity. It is pure commercial transaction which attains nature of International transaction in view of the facts. The issue of Counter Corporate Guarantee helps the assessee mitigate its likely liability that may arise in the event of a default by the recipient subsidiary. It is apparent that the Corporate Guarantee and the related Counter Guarantee are linked set of transactions, though the TPO shall also carry out factual verification towards the valid counter guarantee for the relevant period in respect of this Guarantee by the assessee, Both the Corporate Guarantee (CG) and the Counter Corporate Guarantee (CCG) are combined set of tools created whose actionability is contingent upon some future events that may or may not take place. As both the CG and the CCG are ‘strands of single thread’ for backing up the cushioning to mitigate the obligations arising on account of some unforeseen future default, these constitute singular transaction. These may or may not require separate benchmarking to determine ALP. The assessee has not furnished any study to demonstrate the ALP of the referred CCG. Further, section 92 B defines an International transaction which, read with computation mechanism laid down in section 92, lays down the tests for such class of transactions whereby more than two AEs involved in such ‘transaction set’ constitute eligible transaction. But. the tangible benefit test of the facility or service availed must be unambiguously I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. demonstrated. The assessee has not discharged this onus of establishing the arm's length pricing of the transaction involving the counter guarantee limb, before the panel. The value of any such benefit which accrues to the assessee on account of the corporate counter guarantee is absent hence cannot be factored into the exercise to arrive at the arm's length price of the transaction. Besides, the rate charged by Rabo Bank from the AE was a function of the Corporate Guarantee given by the assessee. The Counter Corporate Guarantee was not factored in by the bank while charging interest from the AE. Further, (i) The lower rating of the AE extending the counter guarantee and (ii) adoption of tedious route of the counter corporate guarantee indicate adoption of a devious route to side track the taxation on this count, further supporting the case pleaded by the TPO. As both these factors sans ‘demonstrable determination of ALP’ indicate that the Counter Corporate Guarantee shall not have enough valuation to completely offset the arm’s length valuation of the Corporate Guarantee determined correctly by the TPO. Any entity independent of a binding influence of the ownership grip, shall make value out of the corporate guarantee extended for any future probable obligation arising out of loan repayment default. In view of the foregoing, the set off cannot be allowed and the action of the TPO is upheld in the specific facts of the case for this assessment period. The objection set 2.6, in respect of the add on of 200 basis points on LIBOR plus charges, will be telescoped in the directions supra. The action of the TPO is, therefore, upheld in the above terms and with the directions as supra. g. This set of objections is disposed of as above.”

7. Ld. Counsel for the assessee vehemently argued referring to the detailed submissions which are reproduced below: “1. The Appellant is engaged in the business of cultivation, manufacture, blending, purchase and sale of tea, manufacturing and exporting of instant tea; purchase and sale of other goods and also deals in other beverages. The Appellant is listed on NSE and BSE and has its registered office in Kolkata. The Appellant is constantly Page 11 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. expanding and growing its portfolio by way of both organic and inorganic growth. 2.1 The second ground and the first issue of Appellant’s appeal common to both the assessment years 2012-13 and 2013-14 is with regard to the transfer pricing adjustment made by the Transfer Pricing Officer (“TPO”) on account of corporate guarantee furnished by the Appellant to a bank on behalf of the Appellant’s step-down subsidiary in Cyprus, Kahutara Holdings Limited (hereinafter referred as “KHL”). The value of the corporate guarantee given by the Appellant was USD 13.5 million. 2.2 The facts pertaining to the corporate guarantee are that the Appellant is constantly expanding and growing its portfolio by way of both organic and inorganic growth and has over the years expanded its footprint across the globe by entering new geographies and launching new products. Keeping this vision in mind, Tata Global Beverages Investment Limited [“TGBIL”], a wholly owned subsidiary of the Appellant, planned an acquisition of Suntyco Holdings Limited in Russia with the intention to make a foothold in Russian market. With the proposed acquisition, the Appellant was eyeing at synergy benefits in the region - both in terms of new business opportunities and regional market. The acquisition was planned through KHL which is a subsidiary of TGBIL and a step-down subsidiary of the Appellant. A chart showing the group structure was submitted in the course of the assessment and the same is represented at page 416 of the paperbook for the assessment year 2012-13. 2.3 To fund the said acquisition in Russia, TGBIL leveraged on Appellant’s long association with RABO Bank as RABO Bank had previously acted as the banker for the Appellant in acquisition of Tetley, UK which had a networth of USD 450 million whereas the Appellant at that time had a networth of only USD 114 million and the said transaction was dubbed as an acquisition of a global shark. (Please refer to Page 592 of the paperbook for AY 2012-13). 2.4 The Appellant states that there was no cost or risk associated with the said acquisition as the Appellant had been indemnified (unconditionally and irrevocably) by TGBIL, being the parent and controlling company of KHL, for any liability, arising on execution by the bank through a counter guarantee. The same has been stated in the counter guarantee agreement entered between the I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. Appellant and TGBIL. (Please refer to page 105 of the paperbook for AY 2012-13 and page 163 for AY 2013-14). TGBIL had adequate cash assets (as depicted below), liquid investments and other securities to provide the said counter guarantee. The cash assets of the company were a significant USD 380 million vis-a-vis the loan amount of USD 13.35 million. Thus, there is no risk involved in providing the guarantee by the Appellant. (Please refer to page 557 of the paperbook for AY 2012-13 and page 138 for AY 2013-14.) The cash and liquid investments available with TGBIL at the time of the guarantee is depicted below (the same has been extracted from the audited financial statements of the company): Cash and liquid Amount in GBP Amount in USD investments 2010 2009 2010 2009 Bank deposits 240,579,000 124,007,000 357,555,000 184,302,549 US dollar money 3,102,000 44,000 4,610,276 65,394 market funds Sterling money 12,000,000 153,000 17,834,724 227,393 market funds Total 255,681,000 124,204,000 380,000,000 184,595,336 The above schedule shows that the cash and liquid investments available with the company in the year 2010 which is the year of the acquisition, amounted to approximately USD 380 million which is multiple times of the counter guarantee value provided to Appellant. Further, such counter guarantee was provided in a capacity of a separate entity. The details of counter guarantee were also provided in the financial statement of TGBIL for the FY 2012-13. (Please refer to page no 207 of the paperbook for AY 2013-14) 2.5 Further, as per the mutual agreement between the Appellant and TGBIL, once the demand is raised by the Bank on the Appellant, the Appellant would raise a similar demand on TGBIL and would receive the payment before making the payment to the Bank. Thus, there is no risk involved in providing the said guarantee nor there is a blockage of capital at any point in time. The Appellant states that from inception, clauses 2.1, 3 and 4.8 of the said deed dated August 24, 2009 were understood by the Appellant and by TGBIL in the manner recorded in a letter dated 23 March 2010, filed through an affidavit before the Hon’ble Income Tax Appellate Tribunal (“Hon’ble Tribunal”) dated June 13, 2022, exchanged between the Appellant and TGBIL. The Appellant also states that in the proceedings for both AY 2012-13 and AY 2013-14 has put forth before the Transfer Pricing Officer I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. (hereinafter referred to as the “TPO”), Assessing Officer and Dispute Resolution Panel (hereinafter referred to as the “DRP”) the above understanding of the deed dated August 24, 2009 read with the said letter dated March 23, 2010. This is evident from the submission filed with the lower authorities dated January 22, 2016 (please see page 543 at 557 q/ the paperbook for AY 2012-13) and June 15, 2016 (please see page 129 at 132 and 137 of the paperbook for AY 2013- 14). Also please refer to the affidavit and the letter dated 23 March 2010 enclosed to the affidavit. 2.6 The Appellant states that the aforesaid corporate guarantee has been released by the Bank with effect from financial year 2014-15 and a fresh corporate guarantee has been provided by TGBIL to Rabo Bank (please see page 421 of the paperbook for the financial year 2012-13). 2.7 Furthermore, without prejudice to the aforesaid submissions, the Appellant submitted that in the event the TPO intended to treat the corporate guarantee as an international transaction then the addition ought to be limited to 0.25%. 2.8 For the assessment year 2012-13, the TPO by his order dated January 29, 2016 held the corporate guarantee to be an international transaction and proposed an adjustment at the rate of 200 bps amounting to Rs. 1,07,25,333/-. The DRP by its order dated May 27, 2016 also held the corporate guarantee to be an international transaction but directed the TPO to make a downward adjustment to the arm’s length price after taking into account the counter guarantee as the same reduces the probable liability of the Appellant (Please refer to page 16 of the Appeal Set). However, the TPO in his give effect order dated June 30, 2016 failed to make any such disallowance and the order dated June 30, 2016 was incorporated by the Assessing Officer in his assessment order dated July 28, 2016. 2.9 For the assessment year 2013-14, the Transfer Pricing Officer by his order dated October 28, 2016 again regarded the corporate guarantee as an international transaction and proposed an adjustment at the rate of 200 bps aggregating to Rs. 2,64,43,540/-. The order of the TPO was confirmed by the DRP by its order dated April 28, 2017 and the adjustment was adopted by the Assessing Officer in his order dated June 15, 2017.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 2.10 The Appellant humbly submits that by giving corporate guarantees on behalf of its Associated Enterprise (hereinafter referred as “AE”), it has performed a shareholder function and the same does not warrant receipt of guarantee fee. The Appellant has been appropriately protected from any kind of risk arising from the guarantee provided by way of the counter guarantee from TGBIL. For the extension of its relationship with RABO Bank for the benefit of TGBIL, the assistance was in the nature of shareholder support (there was no risk attached for TGBL as there was a counter guarantee from an equally strong financially rated company which has USD 380 million of liquid assets for attending the counter guarantee provided for USD 13.35 million. Further, there was no cost to the Appellant for provision of counter guarantee on behalf of KHL. 2.11 Reference is made to section 92B of the Act which states that “For the purposes of this section and sections 92, 92C, 92D and 92E, “international transaction” means a transaction between two or more associated enterprises, 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. ” In the instant case, the corporate guarantee given does not have any bearing on the profits, income, losses or assets of the Appellant. 2.12 Further, the Hon’ble Income Tax Appellate Tribunal in the case of Bharti Airtel vs. ACIT (I.T.A. No.: 5816/Del/2012) (hereinafter referred as “Bharti Airtel’s case”) has also held that a corporate guarantee issued for the benefit of the AEs, which does not involve any costs to the Appellant, does not have any bearing on profits, income, losses or assets of the enterprise and, therefore, it is outside the ambit of ‘international transaction’ to which ALP adjustment can be made." 2.13 Before referring to the judgment of the Hon’ble Madras High Court in PCIT vs. Redington (India) Ltd., (2020) 122 taxmann.com 136 (Madras) (hereinafter referred to as “Redington’s case”) case in detail, Page 15 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. it is pertinent to mention that in Bharti Airtel’s case [page 1 of the said Compendium], in paragraph 33 [pages 23-24 of the said Compendium], it was held on the facts of that case that there was no material on record to indicate that the provision of corporate guarantee had any real impact on profits, income, losses or assets. Bharti Airtel’s case was considered in Prolifics Corporation Ltd. vs. Deputy Commissioner of Income Tax, (2015) 55 taxmann.com 226 (Hyderabad)(hereinafter referred as “Prolifics’ case”) [page 107 at 113 of the said Compendium - paragraph 3.4.11], In paragraph 6 [pages 114-115 of the said Compendium] it was held that whether a charge should be imposed for provision of a guarantee was primarily a factual enquiry. On the facts of Prolifics’ case, it was held that there was an inherent risk in providing the corporate guarantee justifying a transfer pricing adjustment. 2.14 The question relating to corporate guarantee was considered by the Hon'ble Madras High Court in paragraphs 67-76 of the judgment in Redington's case[pages 100-103 of the said Compendium]. It is submitted that a perusal of the said judgment would show that: - a) In paragraph 69, the Hon’ble Madras High Court considered the decision of this Hon’ble Tribunal in Bharti Airtel’s case. The Hon’ble Tribunal’s decision in Redington’s case was criticised by the Hon’ble High Court with the observation that no reason had been given therein as to how the decision in Bharti Airtel’s case would apply to Redington’s case. It was not held by the Hon’ble High Court that Bharti Airtel’s case was wrongly decided. b) In paragraph 75, the Hon’ble High Court considered the decision of this Hon’ble Tribunal in Prolifics’ case. On the facts of Redington’s case, it was found that the decision in Prolifics’ casewas applicable. It was thus held on facts that there may not be an immediate charge on the profit and loss account but inherent risk cannot be ruled out in providing corporate guarantee. c) It is submitted that it would depend upon the facts of a particular case as to whether the provision of a corporate guarantee constitutes a real risk in present or in future and would thus have a real impact on profits, income, losses or assets. In Bharti Airtel’s case there was no such risk whereas in Prolifics’ case there was inherent risk. Both the decisions were considered by the Hon’ble Madras High Court in Redington’s case. Neither decision was held to be wrong. On facts, Redington’s case was found similar to Prolifics’ case. Page 16 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. d) It is also pertinent to mention that in Redington’s case, no record was placed before this Hon’ble Tribunal by the Appellant to show that the Appellant had not incurred any cost for providing the guarantee. Further, the fact that the very same transaction for the previous assessment year was subject matter of transfer pricing adjustment was not dealt with or disputed in the order of the Hon’ble Tribunal rendering the findings perverse [Please see paragraph 69 at page 101-102 of the said Compendium], 2.15 As enumerated above, for a transaction between two associated enterprises to be treated as an international transaction within the meaning of section 92B of the Act, it must have a bearing on the profits, income, losses or assets of such enterprises. Clause (c) of Explanation (i) to section 92B covers, inter alia, “guarantee”. Thus, the provision of a corporate guarantee by an Appellant will be treated as an international transaction if the same has a bearing on the profits, income, losses or assets of the Appellant. In so far as profits/income/losses are concerned, the Appellant did not incur any cost for furnishing the corporate guarantee. The Appellant merely put its signature as a guarantor on the loan documents between KHL and the banks. 2.16 Further, it is not the business of the Appellant to provide guarantee against fees/commission. It is not the case that if the same corporate guarantee was provided by the Appellant to or for any other person, it would have earned income which it gave up by providing the corporate guarantee for KHL. Thus, the Appellant’s profits/income/losses/assets were not in any way affected by furnishing of corporate guarantee. Even a situation of invocation of the corporate guarantee would not have any bearing on the profits/income/losses/assets of the Appellant as it was fully protected by a counter guarantee from TGBIL. The terms of the counter guarantee as mutually agreed between both the parties explicitly records that first TGBIL would pay the Appellant and then only the Appellant would pay the RABO Bank. The provision of corporate guarantee thus did not entail any risk for the Appellant. 2.17 It is submitted that since there is no change in the legal or factual position, this Hon’ble Tribunal may be pleased to follow the order of Hon’ble Tribunal in Bharti Airtel’s case and hold that the furnishing of the corporate guarantee by the Appellant was not an international I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. transaction and that in respect of such transaction no transfer pricing adjustment can be made. 2.18 Without prejudice to the assessee’s contention that furnishing of corporate guarantee was not an international transaction, it is submitted that the TPO was not justified in computing the guarantee commission at the rate of 2% or 200 bps and disregarding the submission of the Appellant that the rate of the guarantee commission should be limited to 0.25%. In most of the cases where this Hon’ble Tribunal has upheld adjustment on account of corporate guarantee, the rate adopted has been between 0.2% to 0.5%. In this regard, reliance is placed on the decisions of the Hon’ble Tribunal in i) Everest Kanto Cyliners Ltd. V DCIT, (2013) 34 taxmann.com 19 (page 176 at pages 188-189 of Transfer Pricing Compendium of Case Laws); (ii) Britannia Industries Ltd. v. DCIT, decided on May 18, 2018 (page 200 at 202-203 of the said Compendium); (iii) Asian Paints Ltd. v. Addl. CIT, (2014) 41 taxmann.com 71 (Mum) (page 205 at 2010-11 of the said Compendium) affirmed by the Hon’ble Bombay High Court in CIT v. Asian Paints (India) Ltd., (2016) 75 taxmann.com 152 (Bom) (page 218 at 219 of the said Compendium); and (iv) ACIT v. Network 18 Media & Investment Ltd. ITA No. 7501/Mum/2018 decided on September 22, 2021 (page 222 at page 223 of the said Compendium).”

8. On the other hand, ld. D/R vehemently argued relying on the finding of both the lower authorities and also took us to the written submissions dated 16.07.2021 stating that there is an international transaction carried out between the assessee and the associate enterprises and since the assessee has not charged the corporate guarantee fee for the guarantee given to a bank for giving loan to one of its step-down subsidiaries, there is a cost to the enterprise and the adjustment for the same has rightly been made by the Transfer Pricing Officer. Ld. D/R also made submissions regarding the charge of guarantee fee, cost to the enterprise, valuation of charge on service, corporate guarantee and the share holder service. He also made submissions regarding the corporate Page 18 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. guarantee upstream theory and stated that a counter guarantee taken by the assessee company is merely an internal arrangement since appellant is the ultimate parent company and therefore upstream guarantee is not valid as they are given to overcome structural subordination by putting the claims of parent company creditors on a pari passu basis with those of subsidiary company creditors. Ld. D/R thus, concluded that this arrangement of counter guarantee is often seen as an example of betting with other people’s money, with the group’s ultimate shareholders realizing the upside benefit so long as the parent entity remains solvent, but losing nothing they would not have lost anyway if the borrower defaults on its debt and liability on the guarantee is triggered and therefore, they are often regarded as fraudulent conveyance and may get voided in Court.

10. A regards the first contention is concerned, we observe that international transaction has been defined in Section 92B(1) of the Act and the same reads as follows: Page 20 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. “92B. (1) For the purposes of this section and sections 92, 92C, 92D and 92E, "international transaction" means a transaction between two or more associated enterprises, 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.”

11. Now, on examining the facts and circumstances of the case under the above extracted definition, we observe that the assessee company is located in India and its wholly-owned subsidiary is located at U.K. and its step-down subsidiaries are located in other parts of the world. Since the assessee company has given a corporate guarantee for one of its step-down subsidiaries i.e. an associate enterprises there is prima facie an international transaction and now to complete the same it has been contended that there has to be a bearing on the profits, income, losses or assets of such enterprise. In our considered view, the counter guarantee taken by the assessee company to cover up the possible cost of giving the guarantee seems to mere formality because ‘TGBIL’, U.K. is a wholly-owned subsidiary of the assessee company and any cost which may arise for the default in the repayment of loan by ‘KHL’ to RABO Bank will ultimately affect the assessee company only. In case of any default by ‘KHL’ regarding repayment of loan to RABO Bank the first/direct impact will be on the assessee and that can end up a cost on the assessee and similarly if there is a gain arising out of the said corporate Page 21 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. guarantee by way of deduction in interest rates, which will thus, increase the profits of the step-down subsidiaries, will have a positive impact on the profits of the assessee company and therefore, in our considered view there is a direct bearing on the profits/losses of the assessee company for the said transaction entered on behalf of its associate enterprises. So far as the effect of counter guarantee by ‘TGBIL’ to ‘TGBL’ is concerned, the same can be examined only after the first impact comes to the assessee and one cannot ignore the fact that ‘TGBIL’ is wholly owned subsidiary of ‘TGBL’. We, therefore, are of the considered view that the said transaction comes under the purview of international transaction and which thus calls for the calculation of upward adjustment towards corporate guarantee fee.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. (i) Providing a Corporate Guarantee to Standard Chartered Bank (SCB) for a term loan/letter of credit facility on behalf of Greenlam Asia Pacific Pvt. Ltd. (“Greenlam Asia”) (referred to pages 446 to 461 of the paper book); (ii) Providing a Corporate Guarantee to United Overseas Bank (UOB) for a commercial property loan on behalf of Greenlam Asia (referred to pages 462 to 471 of the paper book); and (iii) Providing a standby Letter of Credit (SBLC) to City Bank N.A. for on behalf of Greenlam America Inc. (“Greenlam USA”) and Greenlam Asia (referred to pages 478 to 485 of the paper book). Ld. Assessing Officer during the course of assessment proceedings observed that international transaction has taken place and referred the matter to Transfer Pricing Officer, who after considering the submission of the assessee, held that Corporate Guarantee fees @ 1.22%, 1.69% and 1.27% of the respective loan amounts should be treated as income of the assessee. Ld. Assessing Officer accordingly made the addition of Rs.43,67,295/-. Aggrieved, the assessee preferred appeal before the ld. CIT(Appeals) firstly claiming that the said Corporate Guarantee given to the Associated Enterprises do not come under the purview of international transactions and also raising an alternative plea that in view of the settled judicial precedence and looking to the facts of the case, the estimated Corporate Guarantee fees can be charged within the range of 0.3% to 0.5% and the same would meet the arm’s length criteria based on various Tribunal Rulings. However, ld. CIT(Appeals) brushed aside the assessee’s contention that the said transaction does not fall under the purview of international transaction. As regards the quantum of Corporate Guarantee fee is concerned, ld. CIT(Appeals) confirmed the same @ 0.5% taking support from the decision of various Tribunals. Aggrieved, Revenue is in appeal before the Tribunal.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. None of the Hon’ble Guarantee Sr. No. Citation No. Tribunal Ruling fee CIT (LTU) vs Glenmark Pharmaceuticals vs Addl CIT (Refer to page 385 to TS-1268-SC-2018- 1. 0.50% 387 of TP the Legal Compendium to TP) Pr. CIT vs. Couceutrix Services India Pvt. Ltd. TS-960-HC- 2. (refer to page 388 to 396 0.50% 2018(BOM)-TP of the Legal Compendium to TP) Everest Kento Cylinders ltd. (Refer to page 397 to TS-200-HC- 3. 0.50% 408 of the Legal 2015(Mum)-TP Compendium to TP) TS-260-ITAT- Reliance Industries Ltd. 2013(Mum) -TP, (Refer to page 409 to 490 4. 2013-TII-185-ITAT 0.38% of the Legal Mum-TP Compendium to TP) 0.25%, 5. Asian Paints Limited and ITA No. 0.35% 1937/Mum/2010 Everest Kanto Cylinder TS-714-ITAT- 6. 0.50% Limited 2012(Mum)-TP TS-167-ITAT- 2013(Mum)- TP, Nimbus Communication ITA No. 7. 0.50% Limited 6816/Mum/2010 and ITA No. 7105/Mum/2011 ITA No. Glenmark 5013/Mum/2012 8. 0.53% Pharmaceuticals Limited and ITA No. 5488/Mum/2012 TS-330-ITAT- Godrej Household 2013(Mum)-TP 9. Products Ltd. (earlier 0.50% TS-68-ITAT- Godrej Sara Lee Ltd.) 2014(Mum)-TP Mahindra & Mahindra TS-324-ITAT- 0.20% - 10. Limited 2013(Mum)-TP 0.50% 55 taxmann.com Prolifics Corporation 11. 226 (Hyderabad- 0.53% Limited Trib.) Page 24 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. [2015] 56 Aditya Birla Minacs 12. taxmann.com 317 0.50% Worldwide Ltd. (Mumbai Trib.) Cox and Kings Ltd. –vs.- TS-540-ITAT- 13. 0.50% DCIT 2015(Mum)-TP TS-463-ITAT- 14. Manugraph India Ltd. 0.50% 2015(Mum)-TP TS-431-ITAT- 15. Hindalco Industries Ltd. 0.50% 2015(Mum)-TP TS-399-ITAT- 16. Mylan Laboratories Ltd. 0.53% 2015(Hyd)-TP Xchanging Solutions Ltd. TS-910-ITAT- 17. 0.50% 2016(Bang)-TP Laqshya Media Pvt. Ltd. TS-20-ITAT- 18. 0.50% –vs.-ACIT 2018(Bang)-TP Jindal Steel Limited –vs.- TS-1231-ITAT- 19. 0.50% ACIT 2018(Delhi)TP Aster Pvt. Ltd. –vs.- DCIT TS-446-ITAT- 20. 0.25% 2017(HYD)-TP 37. We have heard the rival contentions and perused the relevant records placed before us and carefully gone through the decisions referred and relied upon by the ld. counsel for the assessee. We note that the assessee-company had following inter-company guarantee arrangements for its Associated Enterprises:- (i) Providing a Corporate Guarantee to Standard Chartered Bank (SCB) for a term loan/letter of credit facility on behalf of Greenlam Asia Pacific Pte. Ltd. (“Greenlam Asia”); (ii) Providing a Corporate Guarantee to United Overseas Bank (UOB) for a commercial property loan on behalf of Greenlam Asia; and (iii) Providing a standby Letter of Credit (SBLC) to City Bank N.A. for on behalf of Greenlam America Inc. (“Greenlam USA”) and Greenlam Asia.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 14. As regards the remaining grounds/issues raised in the instant two appeals, ld. Counsel for the assessee vehemently argued referring to the following written submissions:

“3.1 The next issue common for both the assessment years is with regard to invocation of rule 8D for the purpose of making the disallowance under section 14A. 3.2 At the outset it is stated that the aforesaid issue is squarely covered in favour of the Appellant by the order of Tribunal in the Appellant’s own case for AY 2009-10. (Please refer to page no 27-28 of the Corporate Tax Case Law Compendium (‘CTCL’)). The Revenue filed an appeal before the Hon’ble Calcutta High Court against the aforesaid decision, which was dismissed by the Hon’ble Calcutta High Court on the contention that no substantial question of law arises out of the said appeal. Copy of the order of the HC [ITAT 327 of 2018, GA 3524 of 2018 & GA 3526 of 2018 dated 13 December 2017] is enclosed at pages 29-30 of the CTCL. The Appellant has always disallowed the direct expenses incurred by it for the purposes of earning exempt income. Additionally, the Appellant also suo motu disallows a portion of the expenses pertaining to managerial/staff time spent on investments and/or portfolio related work. The computation of the disallowance made by the Appellant is also approved by its auditors. In the aforesaid case pertaining to assessment year 2009-10, the Appellant had made a suo motu disallowance of Rs. 19,82,000/- as expenditure incurred for earning exempt income and the said computation was made by taking into account the salary and other related expenditure pertaining to the managerial staff for investment related work. The Assessing Officer without dealing with the aforesaid suo motu disallowance and the computation, simply adopted the computation in terms of rule 8D by observing that disallowance on the basis of infrastructure used by such should also been made. The Hon’ble Tribunal rejected such arbitrary action on the part of the Assessing Officer and the appeal filed by the revenue was also dismissed by the Hon’ble High Court. The comparison of the observation made by the Assessing Officer in the assessment order for assessment year 2009-10 and the observation made in the assessment orders for assessment years 2012-13 and AY 2013-14 is enclosed as Annexure 1 with this submission.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 3.3 In the instant case, the Appellant has suo motu disallowed Rs. 46,72,000/- and 58,70,000/- for assessment years 2012-13 and 2013-14 respectively, as expenditure incurred for earning exempt income which comprises of direct expenditure and portion of salary of such employees which could at best be attributable to management of these investments, as expenses incurred in earning exempt dividend income. (Please see pages 1110-1112 of the paperbook for the assessment year 2012-13 and pages 846-853 of the paperbook for the assessment year 2013-14). 3.4 It may further be noted that majority of the investments have been made by the assessee in past years and have been carried forward year after year. Most of these investments are strategic investments in group companies for the purpose of expansion of business and not with the objective of earning capital gains or dividend. The time and effort involved in the case of the company was far less in comparison to any other companies engaged in regular investments activities earning exempting income. 3.5 In both the assessment years, the Assessing Officer in the assessment orders has failed to discharge his onus of recording his satisfaction, having regard to the, accounts of the Appellant, that the suo motu disallowance made by the Appellant and the computation with respect to the same is not correct and he rejected the submissions by merely stating that some infrastructure expenses would have been incurred and thereafter by invoking rule 8D made a disallowance of Rs. 3,59,55,015/- and Rs. 3,73,82,684/-, for the assessment years 2012-13 and 2013-14, respectively. Hence, basic conditions for disallowance under section 14A of the Act were not satisfied. Reliance is placed on the aforesaid decision in Appellant’s own case for the assessment year 2009-10 wherein the facts were identical and it was held that the Assessing Officer had failed to record his satisfaction in terms of section 14A of the Act. The Appellant further relied on the following decisions wherein it has been held that where the Assessing Officer did not bring any evidence on record to establish that any expenditure had been incurred by assessee for earning exempt income, disallowance u/s 14A read with Rule 8D could not be made:- Walfort Share and Stock Brokers Pvt. Limited [2010] 326ITR 1 (SC) Godrej & Boyce Manufacturing Company Ltd. -vs.- DCIT [2017] 394 ITR 449 (SC) Page 31 of 41 I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. DCIT -vs.- Allahabad Bank [ITA No. 1282 of 2012 dtd 01-06-2016 (Koi)] ACIT-vs.- Pawan Kumar Jhunjhunwala [2016] 157ITD 667 (Koi) ACIT-vs.- SIL Investment Ltd. [2012] 54 SOT 54 (Delhi) Priya Exhibitors (P.) Ltd. vs. ACIT[2012] 54 SOT356 (Delhi) CIT vs. Hero Cycles Ltd. [2010] 323 ITR 518 (Punj& Har) Triveni Engineering & Industries Ltd. -vs.- Addl. CIT [2020] 118 taxmann.com 301 (Delhi - Trib.) 3.6 As per Section 14A(2), provision of Rule 8D comes in to play only when the AO records a finding that he is not satisfied with the assessee’s method. Reliance in this regard is placed on the decision of the jurisdictional Hon'ble Calcutta High Court in the case of CIT - vs.- REI Agro Ltd. [ITAT 161 of 2013 dated 23-12-03 - Cat HC], wherein the order of Tribunal in DCIT -vs.- R.E.I. Agro Ltd. of for AY 2009-10 dated 14.05.2013 was confirmed which stated that while rejecting the claim of the Appellant with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the Ld. AO has to indicate cogent reasons for the same. Further, reliance is also placed on the following judicial pronouncements - - Maxopp Investment Ltd. -vs.- CIT [2018] 91 taxmann.com 154 (SC) Godrej & Boyce Manufacturing Company Ltd. -vs.- DCIT [2017] 394 ITR 449 (SC) CIT-vs.- Ashish Jhunjhunwala [G.A. No. 2990 of 2013] (Cal. HC) PCIT-vs.- Britannia Industries Limited [ITAT no. 45 of 2017 dated 19 July 2018] H.T. Media -vs.- PCIT (ITA no 548 & 549 of 2015 dtd 23-08-2017 (Del. HC) CIT-vs.- Taikisha Engineering India Ltd [2015] 370 ITR 338 (Del. HC) Integrated Coal Mining Ltd -vs.- DCIT [2016] 67 taxmann.com 260 (Koi) Damodar Valley Corporation -vs.- ACIT [2016] 157ITD 415 (Koi) RatanlalGaggar -vs.- DCIT (ITA no.1512 /Kol/2018 dt. 10 May 2019) Tata Industries Ltd. -vs.- DCIT [2020] 116 taxmann.com 875 (Mumbai -Trib.)

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. ACIT -vs.-Indiabulls Real Estate Ltd. (ITA No. 6602/Del/2016 dated 11 March 2020) 3.7 Further, without prejudice to the above contentions, it is humbly submitted that the Assessing Officer has accepted the assessee’s basis of allocating management cost incurred in earning exempt income for the purpose of disallowance u/s 14A. His limited observation was that some infrastructure costs would have been incurred in earning exempt income. However, the AO failed to substantiate the basis of the same or bring any evidence of incurrence of the said expense for the aforesaid activities. It is humbly submitted that the dividend income earned by the company is not at all significant as compared to the total turnover the company (1.38% for AY 2012-13 and 1.56% for AY 2013-14). As submitted above, the company has voluntarily identified and offered management expenses which at best can be considered as incurred in investment activities. The basis has also been accepted by the Tax Auditors. Hence, any further attribution of expenses is not at all warranted in this case. 3.8 Without prejudice to above, assuming though not admitting that Rule 8D was applicable, the quantum of disallowance made by AO is incorrect as while considering average value of investment in Rule 8D(2)(iii), only those investments from which the appellant earned dividend income was required to be considered and not the total investment at the beginning of the year and at the end of the year. Reliance in this regard is placed on the following judgements - Vireet Investments Private Limited [2017] 82 taxmann.com 415(Special Bench) DCIT-vs.- EIH Ltd. [2018] 89 taxmann.com 417 (Kolkata - Trib.) REI Agro Ltd. -vs.- DCIT [2013] 144ITD141 (Kolkata - Trib.) Usha Martin Ventures Limited -vs.- DCIT [ITA No. 847/Kol/2013] Integrated Coal Mining Ltd -vs.- DCIT [2016] 67 taxmann.com 260 (Koi) Pricewaterhouse Coopers (P.) Ltd. -vs.- ACIT [2020] 183 ITD 354 (Kolkata - Trib.)

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. 4.1 The next common issue is disallowance under section 14A of the Act while computing book profits in accordance with section 115JB of the Act, which is a self contained code. 4.2 Section 115JB of the Act provides that for the purpose of computation of tax on book profit, adjustments as specified in Explanation 1 to section 115JB of the Act are required to be made. Clause (f) of the said Explanation provides that any expenditure incurred for earning dividend income, if debited to the profit & loss account, it to be added back. Further, clause (ii) of the said Explanation provides to reduce any exempt income (other than by virtue of 10(38) or 11 or 12) credited to the profit and loss account. 4.3 The provisions of subsection (2) & (3) of Section 14A which prescribe for estimated disallowance by the Assessing Officer do not find place in clause (f) of Section 115JB. Hence, no estimated disallowance as computed under subsection (2) & (3) for the purpose of Section 14A can be applied while making adjustment under clause (f) of Section 115JB. Reliance in this regard can be placed on the following decisions: Hon’ble Jurisdictional High Court in the case of CIT -vs.- Jayshree Tea & Industries Ltd. [G.A. No. 1501 of 2014 dated 19-11-2014] wherein it has been held that provision of Section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to Section 14A of the Act. [Please refer to pages 36- 39 of the CTCL] Hon’ble Delhi Tribunal (Special Bench) in the case of Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415 (Special Bench) wherein it has been held that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. [Please refer to pages 40-72 of the CTCL] Hon’ble Bombay HC in the case of CIT -vs.- Bengal Finance & Investments Pvt. Ltd. (ITA No. 337 of 2013, vide order dated 10 February 2015). Reliance in this regard is placed on the following jurisdictional Tribunal rulings - I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited. DCIT -vs.-EIH Ltd.[2O18] 89 taxmann.com 417 (Kolkata - Trib.) Britannia Industries Ltd. -vs.- DCIT [2019] 107 taxmann.com 138 (Kolkata - Trib.) Nomura Research Institute Financial Tech (I)(P.) Ltd. -vs.- DCIT [2019] 101 taxmann.com 4 (Kolkata - Trib.) Integrated Coal Mining Ltd. (supra). Bata India Ltd. -vs.- DCIT[2020] 180 ITD 464 (Kolkata - Trib.) Gujarat State Energy Generation Ltd. -vs.- ACIT [2020] 183 ITD 590 (Ahmedabad - Trib.) K.B. Mehta Construction (P.) Ltd. -vs- DCIT [2020] 185 ITD 81 (Ahmedabad - Trib.) Zaveri & Co. (P.) Ltd. -vs.- DCIT [2020] 184 ITD 777 (Ahmedabad - ITAT) 5. The next common issue is the short grant of withholding tax credit. In assessment year 2013-14, the Assessing Officer has rectified the same by his rectification order dated December 29, 2017 and the same is not being pressed with respect to assessment year 2013-14. However, with respect to assessment year 2012-13, it is submitted that the Assessing Officer has not granted credit of withholding tax credit of Rs. 4,03,309/- and in this regard, the Appellant prays that directions may be given to the Assessing Officer to grant the said credit in accordance with law.

6. The Appellant has raised also a common issue, for the assessment years 2012-13 and 2013-14, of denial of foreign tax credit in both the assessment years. However, the said issue has been addressed by the Assessing Officer vide his rectification orders dated August 28, 2019 and December 29, 2017 passed for assessment years 2012-13 and 2013-14, respectively, and as such the same is not being pressed.

I.T.A. No.: 1854/Kol/2016 Assessment Year: 2012-13 I.T.A. No.: 1899/Kol/2017 Assessment Year: 2013-14 M/s. Tata Global Beverages Limited.

9. The next issue pertaining to assessment year 2013-14 is denial of deduction under section 80G of the Act of the donation of Rs. 1,00,00,000/- made by the Appellant to Assam Investment Advisory Society (hereinafter referred to as the “Donee”). The Appellant states that it has been informed by the Donee that the said donation is eligible for deduction u/s 80G of the Act and that the Donee is in the process of getting the required eligibility certificate this regard, the Appellant prays that appropriate directions may kindly be given to the Assessing Officer to allow the deduction on account of donation of Rs. 1,00,00,000/- under section 80G of the Act on verification of the requisite documents by the Assessing Officer.

12. The Appellant has also raised an issue with respect to initiation of penalty proceedings under section 271(1)(c) of the Act in both the assessment years, however, the same is not being pressed as the issue is premature in nature.

13. The additional ground of claim of education cess is not being pressed by the Appellant.”