TATA AUTOCOMP SYSTEMS LTD,MUMBAI vs. ASST CIT CIR 2(3), MUMBAI

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ITA 774/MUM/2014Status: DisposedITAT Mumbai18 November 2015AY 2009-1032 pages
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What did the Tribunal hold?

The Tribunal found that the DRP had not properly adjudicated the assessee's grounds regarding transfer pricing adjustments, having relied on previous years' orders without proper consideration of the facts for the current year. The Tribunal also noted that there had been significant judicial development concerning Section 14A disallowances.

What were the facts?

The assessee's appeal concerned adjustments made to international transactions with associated enterprises and disallowances under Section 14A. The Dispute Resolution Panel (DRP) had upheld the Transfer Pricing Officer's (TPO) adjustments based on previous assessment years, which the assessee argued were factually incorrect. The revenue's appeal related to a reduction in risk premium for guarantee fees.

What were the issues?

Whether the DRP erred in confirming transfer pricing adjustments based on incorrect factual premises from prior years, and whether disallowances under Section 14A were correctly computed considering recent judicial pronouncements.

Which sections of the Income-tax Act were involved?

Section 14A,Section 92C

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Income Tax Appellate Tribunal, MUMBAI BENCH “K”, MUMBAI

Before: SHRI AMIT SHUKLA & ASHWANI TANEJA

For Appellant: Shri P.J.Pardiwala, Sr
For Respondent: Shri N.K.Chand (CIT-DR)
Hearing: 28.09.2015Pronounced: 18.11.2015

per law, as and when received by the assessee-company.

1.

(iv) If the assessee is able to demonstrate that a particular amount borrowed by it has been used directly for the purpose of its business and has not been utilized anywhere for earning tax free income, than interest paid on such borrowing should be excluded from the amount of interest paid to be considered for computation of disallowance u/s 14A.

7.7. The AO shall keep in mind the aforesaid directions while re- adjudicating this issue. The assessee shall furnish required details and documents as may be required by the AO, and as may be considered appropriate by the assessee, as per law, for which the AO shall give adequate opportunity of hearing to the assessee. The AO shall take into consideration all the judgments as may be placed before him, by the assessee and as may be available at that time. With these directions, these grounds are sent back to the file of the AO, to be decided afresh.

Thus, these grounds are allowed for statistical purposes.

Now, we take up appeal of the Revenue in ITA No. 1508/Mum/2014:

8.

Ground No. 1 to 4: In these grounds, the revenue is aggrieved with the decision of the DRP in reducing the risk premium charged by the TPO on account of guarantee fees @ 3% to 2%.

8.1. Since, we have adjudicated this issue in detail while deciding ground no. 13 and 14 of the assessee’s appeal, therefore, our order given in assessee’s appeal should be followed for deciding the grounds raised by the revenue. Issues raised in grounds no. 13 & 14 of assessee’s appeal have been sent back to the file of the TPO, and accordingly, the issues raised by the revenue in its ground are also sent back to the file of the TPO. Accordingly, appeal of the revenue is allowed for statistical purposes.

9.

As a result, the appeal of the assessee is partly allowed and appeal of the revenue is allowed for statistical purposes.

Order pronounced in the open court on this 18th November, 2015.

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