TAKE SOLUTIONS LIMITED,CHENNAI vs. ACIT CORPORATE CIRCLE 3(1), CHENNAI

आयकर अपीलीय अिधकरण “डी”�ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, CHENNAI

माननीय ,ी वी. दुगा2 राव, �ाियक सद4 एवं माननीय ,ी मनोज कुमार अ9वाल ,लेखा सद4 के सम;। BEFORE HON’BLE SHRI V. DURGA RAO, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./IT(TP)A No.43/Chny/2022 (िनधा2रणवष2 / Assessment Year: 2018-19) M/s Take Solutions Ltd. ACIT बनाम/ 27, Tank Bund Road, Nungambakkam, Corporate Circle-3(1) Vs. Chennai-600 034. Chennai. �थायीलेखासं./जीआइआरसं./PAN/GIR No.AABCT-3684-M (अपीलाथ�/Appellant) : ("#थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri K. Prasanna (C.A) – Ld.AR "#थ�कीओरसे/Respondent by : Dr. S. Palanikumar (CIT) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 06-06-2023 घोषणाकीतारीख/Date of Pronouncement : 06-06-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of final assessment order dated 26-07-2022 passed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 144C(13) pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru (DRP) u/s 144C(5) dated 08-06-2022. Since the assessee carried out certain international transactions with its Associated Enterprises (AE), a draft order was passed u/s.144C on 28-09-2021 and international transactions were subjected to determination of Arm’s Length Price (ALP) before Ld.

2 IT(TP)A No. 43/Chny/2022

Transfer Pricing Officer, Chennai (TPO) vide order dated 25.07.2021. The Ld. DRP rejected objections of the assessee, against which assessee is in further appeal before us with following grounds of appeal: “The grounds of appeal listed below are without prejudice to one another. The assessment order under section 143(3) r.w.s.144C(13) and 144B of the Income tax Act, 1961 ('the Act') passed by the Assessment Unit, Income Tax Department to the extent prejudicial to the Appellant is erroneous, bad in law, and contrary to the facts and circumstances of the case as many of the objections filed by Appellant are not addressed by the income-tax authorities. Transfer Pricing Adjustment in respect of Corporate Guarantee Fee The learned Transfer Pricing Officer ('TPO') and Learned Dispute Resolution- Panel (Ld. DRP) has grossly erred in law and facts in term of the following: 2.1 In characterizing "Corporate Guarantee" given by the appellant to its subsidiary company in the nature of a shareholder's activity as an international transaction. 2.2 Not considering that provision of such guarantee does not involve any cost to the appellant thereby does not have any bearing on the profits, income, losses or assets of the appellant and hence does not fall within the definition of "international transaction" as defined under section 92B of the Act. 2.2 Not considering the fact that there is no service element involved and hence does not warrant any charge in providing such guarantee to its subsidiary company. 2.4 Erred in determining the arm's length price at 1 % arbitrarily without following any of the methods prescribed under Section 92C of the Act. 2.5 Without prejudice to the grounds 2.1 to 2.4, the learned authorities ignored the alternate plea of the Appellant in respecting the arm's length price of 0.5% which has been upheld by coordinate benches. 2.6 Without prejudice to the grounds 2.1 to 2.4, the learned authorities erred in computing the arm's length price on the total amount of guarantee given as against the actual loan taken by the subsidiary company. 3. Disallowance under Section 14A of the Act 3.1 The learned AO has erred in making disallowance under section 14A of the Act invoking Rule 8D without considering the books of account of the appellant and without any basis. 3.2 The learned AO erred in law and on the facts by not recording any reasons as to why he was not satisfied with the appellant's claim that no indirect expenses was incurred in relation to earning exempt income. 3.3 The learned AO has erred in law and on the facts by including the investment in debt oriented mutual funds that cannot yield exempt income in the computation of disallowance under Rule 8D. 3.4 The learned AO has erred in law by not excluding the value of investments; from which no exempt income was received while computing the disallowance as per Rule 8D. 3.5 The learned AO has erred in law by not excluding the value of investments in subsidiary companies which are strategic in nature.”

As is evident two issues fall for our consideration i.e., i) Transfer pricing adjustment in respect of corporate guarantee fee; ii) disallowance

3 IT(TP)A No. 43/Chny/2022

u/s.14A. The undisputed position that emerges is that both these issues have already been decided by this Tribunal in assessee’s own case for AY 2021-13 vide ITA No.175/Mds/2017 order dated 05-12-2017. A copy of the same has been placed on record. In this said background, our adjudication to the impugned issues would be as under. The assessee being resident corporate assessee is stated to be engaged in providing management and consultancy services in different fields. 2. Disallowance u/s.14A:- 2.1 The assessee earned exempt income of Rs.1507.83 Lacs and offered suo-motu disallowance u/s.14A for Rs.4.78 Lacs. The expenses disallowed by the assessee represent time spent by key management persons of the company in decision making process about investment activity. The assessee submitted that it did not incur any indirect expenses and did not borrow any funds to make investments. However, rejecting the same, the Ld. AO applied Rule 8D(ii) and computed aggregate disallowance of Rs.144.53 Lacs computed @ 1% of monthly average of opening and closing balance value of investments. The differential amount of Rs.139.75 Lacs was added to the income of the assessee. The Ld.DRP confirmed the same against which assessee is in further appeal before us. 2.2 The only plea of Ld. AR is that the disallowance should be computed by considering only those investments which have yielded exempt income during the year. We find that this issue has been restored back to the file of Ld. AO for fresh examination. To enable the revenue to take consistent stand in the matter, we remit this issue back

4 IT(TP)A No. 43/Chny/2022

to the file of Ld. AO on similar lines keeping all the issues open. The ground thus raised stand allowed for statistical purposes. 3. Transfer Pricing Adjustment on Corporate Guarantee fee: The assessee provided corporate guarantee to its wholly owned subsidiary Take Solutions Global Holdings Pte. Ltd. (Singapore). The guarantee to the extent of Rs.372.31 Crores was outstanding during the year. The Ld.TPO relied upon Tribunal’s order for AY 2012-13 and computed adjustment of 1% which came to Rs.372.31 Lacs. The Ld. DRP confirmed the same against which the assessee is in further appeal before us. We find that the impugned orders follows the decision of Tribunal in assessee’s own case and accordingly, no interference is called for in the same, facts being remaining the same. The Ld. AR has pleaded that the adjustment should be computed by considering the actual loans availed by the AE. However, we are not convinced with the same since the adjustment has to be computed only on the gross value of corporate guarantee given by the assessee. This ground stand dismissed. 4. The appeal stand partly allowed for statistical purposes. Order pronounced on 06th June, 2023.

Sd/- Sd/- (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) �ाियक सद4/JUDICIAL MEMBER लेखासद4 / ACCOUNTANT MEMBER चे4ईChennai; िदनांकDated : 06-06-2023 DS आदेशकीYितिलिपअ9ेिषत/Copy of the Order forwarded to :

5 IT(TP)A No. 43/Chny/2022