VIDEOCON INDUSTRIES LTD, MUMBAI V. ADDL CIT RG 3(3), MUMBAI

ITA 1728/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88228 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 16-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDE
• Keywords: Bogus purchase; Business income; Depreciation; Transfer pricing; Opportunity of cross examination; Peak credit; International transaction; Rule of consistency; Bonafide belief; Earning of tax free income; Retrospective amendment; Question of law; Accommodation entries; Notional interest; Commercial expediency; Capital expenditure
• Section: 92B; 133A; 234B; 14A; 115JB; 69; 10; 92

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.6145/MUM/2012 ( ! ! ! ! ' ' ' ' / ASSESSMENT YEAR : 2008-09 ./ I.T.A. NO.1728/MUM/2014 ( ! ! ! ! ' ' ' ' / ASSESSMENT YEAR : 2009-10 ./ I.T.A. NO.1729/MUM/2014 ( ! ! ! ! ' ' ' ' / ASSESSMENT YEAR : 2010-11 M/S. VIDEOCON INDUSTRIES LTD., 171-C, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. ! ! ! ! / VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 3(3), MUMBAI. # ./ $ ./ PAN/GIR NO. : AABCV 4012H ( #% / APPELLANT ) .. ( &'#% / RESPONDENT ) ./ I.T.A. NO.6662/MUM/2012 ( ! ! ! ! ' ' ' ' / ASSESSMENT YEAR : 2008-09 THE ASSTT. COMMISSIONER OF INCOME TAX, CIR.3(3), ROOM NO.609, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ! ! ! ! / VS. M/S. VIDEOCON INDUSTRIES LTD., 171-C, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. # ./ $ ./ PAN/GIR NO. : AABCV 4012H ( #% / APPELLANT ) .. ( &'#% / RESPONDENT ) ASSESSEET BY SHRI ARVIND SONDE RESPONDENT BY SHRI N.K.CHAND M/S. VIDEOCON INDUSTRIES LTD. , 2 ! ) *+ / DATE OF HEARING : 15/01/2015 ,-' ) *+ / DATE OF PRONOUNCEMENT : 06./02/2015 . / O R D E R PER BENCH: ITA NO.6145/MUM/2012 & ITA NO.6662/MUM/2012 ARE C ROSS APPEAL AND ARE DIRECTED AGAINST ORDER OF LD. CIT(A)-15, M UMBAI DATED 06.08.2012 FOR ASSESSMENT YEAR 2008-09. ITA NO.1728/MUM/2014 AND I TA NO.1729/MUM/2014 ARE APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS OF CIT(A) DATED 20.01.2014 FOR ASSESSMENT Y EARS 2009-10 AND 2010-11. GROUNDS OF APPEAL IN ALL THE APPEALS READ AS UNDER : GROUNDS OF APPEAL ITA NO.6145/M/2012-ASSESSEES AP PEAL : A.Y. 2008-09 1 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,13,74,920/- OUT OF TOTAL INTEREST CLAIMED U/S.36(1)(III) BY HOLDING THAT / THERE IS NO BUSINESS PURPOSE OR COMMERCIAL E XPEDIENCY IN MONEY ADVANCED TO VIDEOCON ENERGY HOLDINGS LTD. AND THE R EASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACT S OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULE S MADE THERE UNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE HAS NOT PROVED THAT THE AMOUNT ADVANCED TO VIDEOCON ENERGY HOLDINGS LTD. IS FROM ITS OWN FUNDS AND HENCE THE D ISALLOWANCE IS JUSTIFIED WHICH IS WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 196 1 AND THE RULES MADE THERE UNDER. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE M/S. VIDEOCON INDUSTRIES LTD. , 3 CONSEQUENT INCOME, IN THE SHAPE OF DIVIDEND WOULD B E EXEMPT INCOME IN VIEW OF THE INTENDED PURPOSE AND THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 WOULD APPLY WITHOUT APPRECIATI NG THAT THE SAID PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO ADV ANCE GIVEN IN FORM OF SHARE APPLICATION MONEY AS NO EXEMPT INCOME CAN ARI SE THEREFROM. (D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REFERRING TO THE PROVISIONS OF COMPANIES ACT, 1956 AND SEBI REGULATI ONS RELATING TO INTEREST ON SHARE APPLICATION MONEY EVEN THOUGH THE SAME ARC NOT APPLICABLE TO THE FACTS OF THE CASE. (E) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) F OR EARLIER YEARS ARE DISTINGUISHABLE EVEN THOUGH THERE IS NO CHANGE IN T HE FACTS OF THE CASE AS COMPARED TO THOSE EARLIER YEARS, WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULE S MADE THERE UNDER. 2. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 OF RS.14,55,0 2,872/- AS AGAINST THE AMOUNT OF RS.4,72,922/- WORKED OUT BY THE APPEL LANT BEING EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME, AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF INCOME TAX ACT, 1961, AND RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUND S, RESERVES AND INTERNAL ACCRUALS WHICH ARE MUCH MORE THAN THE INVE STMENTS YIELDING EXEMPT INCOME AND HENCE NO DISALLOWANCE OF PROPORTI ONATE INTEREST CAN BE MADE U/S. 14A OF THE INCOME TAX ACT, 1961. GROUNDS OF APPEAL ITA NO.6662/M/2012-REVENUES APP EAL: (A.Y.2008-09) 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDIT ION MADE BY THE AO OF RS.14,55,02,872/- [ON ACCOUNT OF DISALLOWANCE U/S. 14A OF I.T.ACT , 1961 TO THE BOOK PROFIT U/S. 115JB] WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE MADE U/S. 14A CLEAR4 APPLIES TO CLAUS E OF EXPLANATION TO SECTION 115JB OF THE ACT. M/S. VIDEOCON INDUSTRIES LTD. , 4 2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON MADE BY THE A 0 OF RS. 14,55,02,872/- [ON ACCOUNT OF DISALLOWANCE U/C. 14A OF I.T.ACT, 1961] TO THE BOOK PROFIT U/S. I15JB WITHOUT APPRECIATING THE FACT THAT AS PER CLAUSE (F) OF EXPLANATION TO SECTION 115JB THE AMOU NT OR AMOUNTS RELATABLE TO ANY INCOME TO WHICH SECTION 10 APPLY H AS TO BE ADDED TO THE BOOK PROFIT AND SECTION 14A APPLIES TO DIVIDEND INC OME WHICH IS EXEMPT U/S. 10(34). 3 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETION OF ADJUST MENT OF RS. 17,47,750/- MADE BY THE AO U/S. 92CA (3) OF (LIE ACT WITHOUT AP PRECIATING THE FACT THAT EXPORT INCENTIVES NEED TO BE EXCLUDED FROM THE EXPORT PRICE OF THE TRANSACTION FOR DETERMINATION OF ALP. 4 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETION OF ADJUST MENT OF RS. 17,47,750/- MADE BY THE AO U/S. 92CA(3)RELYING ON THE DECISION OF MUMBAI ITAT IN THE CASE OF ARVIVA INDUSTRIES LTD. VS. ACIT [IT A NO. 5152/MUM/2009] WITHOUT APPRECIATING THE FACT THAT T HE IN THE SAID CASE TPO HAD ADOPTED THE RATE ON WHICH THE SAME FABRIC W AS SOLD IN THE DOMESTIC MARKET, WHEREAS IN THE INSTANT CASE, THE T PO HAS CONSIDERED THE ACTUAL EXPORT PRICE CHARGED TO M/S. VDC TECHNOLOGIE S SPA VIS--VIS THE OTHER AES. 5 THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORE D GROUNDS OF APPEAL ITA NO.1728/M/2014-ASSESSEES AP PEAL: (A.Y.2009-10) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [OR CI T(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,27,65,036/- OU T OF TOTAL INTEREST CLAIMED U/S.36(1)(III) BY HOLDING THAT THE ADVANCES GIVEN TO VIDEOCON ENERGY HOLDINGS LIMITED IS NOT FOR THE PURPOSE OF B USINESS WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PR OVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THERE UNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT HAS GIVEN THE SAID ADVANCE OUT OF COM MERCIAL EXPEDIENCY AND WHOLLY AND EXCLUSIVELY FOR FURTHERANCE OF APPEL LANTS BUSINESS M/S. VIDEOCON INDUSTRIES LTD. , 5 PURPOSES, AND HENCE NO AMOUNT IS DISALLOWABLE OUT O F THE CLAIM OF INTEREST U/S.36(1)(III) OF THE INCOME TAX ACT, 1961. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF HIT CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REFERRING TO THE PROVISIONS OF COMPANIES ACT, 1956 AND SEBI REGULATI ONS RELATING TO INTEREST ON SHARE APPLICATION MONEY EVEN THOUGH THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE CASE. (D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT TAKING INTO CONSIDERATION THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS) FOR AY 2005-06, AY 2006-07 AND AY 2007-08, WHEREIN DISA LLOWANCE OF INTEREST MADE U/S 36(1) (III) WERE DELETED, WHICH I S WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THERE UNDER. 2.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.12,05,11,644/- BY CONSIDERING TH E SAME AS INCURRED FOR EARNING EXEMPT INCOME BY INVOKING THE PROVISION S OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE I NCOME TAX RULES, 1962, BY REJECTING THE EXPLANATION GIVEN BY THE APP ELLANT WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT, 1 961, AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUND S, RESERVES AND INTERNAL ACCRUALS WHICH ARE MUCH MORE THAN THE INVE STMENTS YIELDING EXEMPT INCOME AND HENCE NO DISALLOWANCE OF PROPORTI ONATE INTEREST CAN BE MADE U/S. 14A OF THE INCOME TAX ACT, 1961. 3. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 12,05,11,644/- BEING THE AMOUNT DISALLOWED BY LD. ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 14A READ WITH RULE 8D, TO THE BOOK PROFIT FOR THE PURPOSE OF SECT ION 115JB OF THE INCOME TAX ACT, 1961 WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RULES MADE THEREU NDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT M/S. VIDEOCON INDUSTRIES LTD. , 6 THE PROVISIONS OF SECTION 14A(2), 14(A)(3) AND RULE 8D ARE DEEMING PROVISIONS AND THE SAME CANNOT BE EXTENDED TO PROVI SIONS OF SECTION 1 15JB OF THE ACT. 4. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS.97,55,83,142/- U/ S.92CA OF THE I.T. ACT. 1961 ON ACCOUNT OF INTEREST ON LOANS/ ADVANCES GIVE N TO ITS ASSOCIATED ENTERPRISES BY DETERMINING THE ARMS LENGTH INTERE ST RATE AT 9.44% AS AGAINST 4.68% DETERMINED AND CHARGED BY THE APPE LLANT AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRAR Y TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE MID IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ARMS LENGTH INTEREST RATE BASED ON THE AVERAGE RATE OF I NTEREST OF BORROWINGS IN RESPECT OF INDIAN RUPEES WITHOUT APPRECIATING THAT THE RATE OF INTEREST IN RESPECT OF INTERNATIONAL TRANSACTION IN FOREIGN CUR RENCY HAS TO BE IN ACCORDANCE WITH LIBOR. (C) WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEAL NO .4(A) AND 4(B), THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING GROUND RELATING TO ADDITION OF RS.97,5 5,83,742/-INSTEAD OF RS. 94,88,67,655/- BEING DIFFERENCE BETWEEN INTERES T DETERMINED BY TPO AT 9.44 % AND INTEREST DETERMINED BY APPELLANT AT 4 .68% AND THUS MAKING HIGHER ADDITION/ADJUSTMENT OF RS. 2,67,16,087/-. 5. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING UPWARD TRANSFER PRICING ADJUSTMENT OF RS.560,03,793/- U/S. 92CA OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF INTEREST ON SHARE APPLI CATION MONEY PENDING ALLOTMENT WITH M/S. VIDEOCON GLOBAL LIMITED (ASSOCIATED ENTERPRISES OF APPELLANT) BY DETERMINING THE ARMS LENGTH INTEREST RATE AT 12% AS AGAINST RATE OF 4.66% DETERMINED AND CHARGED BY THE APPELLANT AS THE BALANCE IN SHARE APPLICATION MONEY OF VIDEOCON GLOBAL LIMITED WAS TRANSFERRED TO LOANS AND ADVANCES GIVEN ACCOUNT A ND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND T HE RULES MADE THEREUNDER. M/S. VIDEOCON INDUSTRIES LTD. , 7 (B) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ARMS LENGTH PRICE OF INTEREST CHARGEABLE ON TH E SHARE APPLICATION MONEY PENDING ALLOTMENT WITH ITS AES BASED ON INTER EST RATES SPECIFIED BY MCA (MINISTRY OF COMPANY AFFAIRS) NOTIFICATION WITH OUT APPRECIATING THE FACT THAT SHARE APPLICATION MONEY WAS GIVEN TO THE FOREIGN ASSOCIATE ENTERPRISES IN FOREIGN CURRENCIES AND THE SAME WAS TRANSFERRED TO LOANS AND ADVANCES GIVEN AND AS SUCH THE PRICE CHARGEABL E AS INTEREST ON SUCH MONEY HAS TO BE BASED ON LIBOR RATE AND ALSO THAT T HE SAID NOTIFICATION WAS NOT RELEVANT OR APPLICABLE TO THE PRESENT CASE. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS.15 64,368 (WRONGL Y MENTIONED AT RS.954265/- U/S. 92CA OF THE INCOME TAX ACT, 1961 O N ACCOUNT OF INTEREST CHARGEABLE ON SHARE APPLICATION MONEY PEN DING ALLOTMENT WITH M/S. GLOBAL ENERGY INC. USA (ASSOCIATED ENTERPRISES OF APPELLANT) BY DETERMINING THE ARMS LENGTH INTEREST RATE AT 12% A ND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND T HE RULES MADE THEREUNDER. (D) WITHOUT PREJUDICE TO GROUND OF APPEAL NO.6(C) A BOVE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ARMS LENGTH PRICE CHARGEABLE AS INTEREST ON THE SHARE AP PLICATION MONEY PENDING ALLOTMENT WITH ITS AES BASED ON INTEREST R ATES SPECIFIED BY MCA (MINISTRY OF COMPANY AFFAIRS) NOTIFICATION WITHOUT APPRECIATING THE FACT THAT SHARE APPLICATION MONEY HAS BEEN GIVEN TO THE FOREIGN ASSOCIATE ENTERPRISES IN FOREIGN CURRENCIES, THE PRICE CHARGE ABLE AS INTEREST ON SUCH MONEY HAS TO BE BASED ON LIBOR RATE. (E) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS.37,49,108/- U/S 9 2CA OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF INTEREST CHARGEABLE ON SHARE APPLICATION MONEY PENDING ALLOTMENT WITH SAPPHIRE OVERSEAS INC. WITHOUT APPRECIATING THE FACT THAT THE SAID COMPANY IS NOT AN ASSOCIATED ENTERPRISES OF THE APPELLANT AND HENCE DOING SO IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961. AND THE RULES MADE THEREUNDER. 6.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE TRANSACTION OF CORPORATE GUARANTEE EXTENDED BY THE APPELLANT TO ITS AE AS M/S. VIDEOCON INDUSTRIES LTD. , 8 INTERNATIONAL TRANSACTION WITHOUT APPRECIATING THAT IT DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION U/S.9 2B PRIOR TO AMENDMENT BY FINANCE ACT, 2012 AND THEREBY ERRED IN DETERMINI NG THE ALP IN RESPECT OF SUCH TRANSACTION. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ALP OF THE CORPORATE GUARANTEES EXTENDED BY THE APPELLANT TO B ANKS ON BEHALF OF ITS AES AND THEREBY ERRED IN MAKING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS. 57,90,80,866/- U/S.92CA OF THE I.T. ACT, 196 1 IN RESPECT OF GUARANTEE COMMISSION. (C) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE CREDIT RATING OF AES AT CCC FOR THE PURPOSE O F BENCHMARKING GUARANTEE FEE WITHOUT APPRECIATING THAT AES CREDIT RATING EQUALLED ITS PARENTS RATING. (D) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ARMS LENGTH CORPORATE GUARANTEE FEE AT 3.247% P.A., AT 4.688%, P.A. AND AT 3.097% P.A. ON CORPORATE GUARANTEES PROVIDED BY THE APPELLANTS ON BEHALF OF ITS AES AT HIGH END WITHOUT CONSIDERING T HE FOLLOWING FACTORS: (I) CHARGING OF GUARANTEE FEE IS A FACT - SPECIFIC EXERCISE AND VARY UPON THE FACTS OF EACH INDIVIDUAL CASE. (II) THE LOANS WERE FULLY SECURED BY PRIMARY SECURI TIES AND ALSO COVERED BY RECEIVABLES OF OTHER GROUP CONCERNS WHICH WERE I NSURED. (III) EXTENSION OF CORPORATE GUARANTEE WAS A SHAREH OLDER FUNCTION AND FURTHERANCE OF APPELLANTS GLOBAL EXPANSION OF BUSI NESS. (E) WITHOUT PREJUDICE TO THE ABOVE GROUND, ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ARMS LEN GTH GUARANTEE FEES @ 4.688% P. A. AND @ 3.097% P.A. IN RESPECT OF GUARAN TEE GIVEN FOR VIDEOCON GLOBAL LTD. AND VIDEOCON GLOBAL ENERGY HOL DINGS LTD. BVI RESPECTIVELY ON ENTIRE AMOUNT OF GUARANTEES OUTSTAN DING WITHOUT REDUCING THE MARGIN MONEY KEPT IN THE FORM OF FIXED DEPOSITS BY ASSOCIATED ENTERPRISES THEMSELVES (USD 20 MILLIONS IN CASE OF VIDEOCON GLOBAL LTD. AND USD 30 MILLIONS IN CASE OF VIDEOCON GLOBAL ENER GY HOLDINGS LTD.) 7. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING M/S. VIDEOCON INDUSTRIES LTD. , 9 ADDITION OF RS.4,85,11,463/- MADE BY LD. ASSESSING OFFICER BASED ON AGGREGATE PEAK CREDIT BALANCE IN THE COMBINED ACCOU NTS OF M/S. SAI ENTERPRISES AND M/S. TRISHUL ENTERPRISES AS BOGUS PURCHASES BY TREATING THE SAME AS CASH HELD OUTSIDE THE BOOK TO FINANCE P URCHASE OF RAW MATERIALS FROM UNDISCLOSED PARTIES WHICH IS WRONG A ND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RUL ES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF RS. 4,85,11,463/- WITHOUT APPRECIATING FOLLOWING FACTS: I) THAT THE RELEVANT BILLS WERE PAID BY ACCOUNT PAY EE CHEQUES/ RTGS IN FAVOUR OF SAID PARTIES. II) THAT CONFIRMATION FROM SHRI. SURESH PAREKH DATE D 9TH FEBRUARY 2013 TO THE EFFECT THAT HE HAS ACTUALLY SUPPLIED MATERIALS TO APPELLANT WAS SUBMITTED TO ASSESSING OFFICER. III) THAT SHRI. SURESH PAREKH HAS WELL ESTABLISHED BUSINESS IN LINES WITH LARGE TURNOVER IV) THAT THE UTILIZATION OF MATERIAL PURCHASED FROM SAID PARTIES HAS BEEN EXPLAINED TO THE ID. AO (C) WITHOUT PREJUDICE TO ABOVE GROUND NO.8(A) TO 8 (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE CONFIRM THE DISALL OWANCE OF RS.2,98,48,578/- BEING RAW MATERIAL AND CONSUMABLE S AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT IN RESPECT OF PURCHASES MADE FROM SAID SUPPLIERS INSTEAD OF RS. 4,85,11,463/- WHICH IS WRO NG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RUL ES MADE THEREUNDER. (D) WITHOUT PREJUDICE TO ABOVE GROUND NO. 8(A) TO 8 (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE CONSIDERED RS. 323 ,11,371/- AS PEAK CREDIT BALANCE IN THE COMBINED ACCOUNTS OF M/S. SAI ENTERPRISES AND M/S. TRISHUL ENTERPRISES UPTO 151H MAY 2008 (I.E. BEFORE MAKING ANY PAYMENT TO SAID PARTIES BY APPELLANT) INSTEAD OF RS. 4,85,1 1,463/- CONSIDERED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS W RONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. M/S. VIDEOCON INDUSTRIES LTD. , 10 (E) WITHOUT PREJUDICE TO THE ABOVE GROUND NO 8(A) T O (D). THE ID. COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE CO NSIDERED THE NORMAL CREDIT PERIOD AVAILABLE IN THE TRADE WHILE W ORKING OUT THE PEAK CREDIT. (F) (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING ID. AO TO CARRY OUT EXERCISE FOR WORKING OUT THE FURTHER A DDITIONS TO BE MADE IN THE YEAR IF ANY ON THE BASIS OF METHODOLOGY ADOPTED IN AY 2010-1 1, WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF TH E INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE DIRECTIONS OF THE CIT(A) AMOUNTS TO ENHANCEMENT AND THE SAME IS DONE WITHOUT GIVING ANY SHOW CAUSE NOTICE FOR DOING THE SAME, WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX AC T, 1961, AND THE RULES MADE THEREUNDER. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES ERRED IN NOT GRANTING CREDIT FOR TAX DE DUCTED AT SOURCE OF RS.3,54,69,129/- CLAIMED BY THE APPELLANT, WITHOUT ASSIGNING ANY REASONS FOR DOING SO, WHICH IS WRONG AND CONTRARY TO THE F ACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THEREUNDER. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES ERRED IN CHARGING INTEREST U/S 234A OF RS.5 1.20,249 /- WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, PRO VISIONS OF INCOME TAX ACT 1961 AND RULES MADE THEREUNDER. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW LOWER AUTHORITIES ERRED IN CHARGING INTEREST U/S 234B OF RS.23,63,77,293 /- WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CAS E, PROVISIONS OF INCOME TAX ACT 1961 AND RULES MADE THEREUNDER. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW LOWER AUTHORITIES ERRED IN CHARGING INTEREST U/S 234C OF RS.44,41,103/- WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, PROVIS IONS OF INCOME TAX ACT 1961 AND RULES MADE THEREUNDER. M/S. VIDEOCON INDUSTRIES LTD. , 11 GROUNDS OF APPEAL ITA NO.1729/M/2014-ASSESSEES AP PEAL: (A.Y.2010-11) THE GROUNDS OF APPEAL SET OUT BELOW ARE WITHOUT PRE JUDICE TO EACH OTHER: 1 .(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [OR CI T(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,15,48,094/- OU T OF TOTAL INTEREST CLAIMED U/S.36(1)(III) BY HOLDING THAT THE ADVANCES GIVEN TO VIDEOCON ENERGY HOLDINGS LIMITED IS NOT FOR THE PURPOSE OF B USINESS WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PR OVISIONS OF THE INCOME TAX ACT,1961 AND THE RULES MADE THERE UNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT HAS GIVEN THE SAID ADVANCE OUT OF COM MERCIAL EXPEDIENCY AND WHOLLY AND EXCLUSIVELY FOR FURTHERANCE OF APPEL LANTS BUSINESS PURPOSES, AND HENCE NO AMOUNT IS DISALLOWABLE OUT O F THE CLAIM OF INTEREST U/S.36(1)(III) OF THE INCOME TAX ACT, 1961. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REFERRING TO THE PROVISIONS OF COMPANIES ACT, 1956 AND SEBI REGULATI ONS RELATING TO INTEREST ON SHARE APPLICATION MONEY EVEN THOUGH THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE CASE. (D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT TAKING INTO CONSIDERATION THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS) FOR AY 2005-06, AY 2006-07 AND AY 2007-08, WHEREIN DISALLOWANCE OF INT EREST MADE U/S 3 6(1) (III) WERE DELETED, WHICH IS WRONG AND CONTRAR Y TO THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THERE U NDER. 2.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.62,20,32,998/- BY CONSIDERING TH E SAME AS INCURRED FOR EARNING EXEMPT INCOME BY INVOKING THE PROVISION S OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE I NCOME TAX RULES, 1962, BY REJECTING THE EXPLANATION GIVEN BY THE APP ELLANT WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT, 1 961, AND THE RULES MADE THEREUNDER. M/S. VIDEOCON INDUSTRIES LTD. , 12 (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUND S, RESERVES AND INTERNAL ACCRUALS WHICH ARE MUCH MORE THAN THE INVE STMENTS YIELDING EXEMPT INCOME AND HENCE NO DISALLOWANCE OF PROPORTI ONATE INTEREST CAN BE MADE U/S. 14A OF THE INCOME TAX ACT, 1961. 3. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.62,20,32,998/- BEING THE AMOUNT DISALLOWED BY ID. ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 14A READ WITH RULE 8D, TO THE BOOK PROFIT FOR THE PURPOSE OF SECT ION 11 5JB OF THE INCOME TAX ACT. 1961 WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RULES MADE THEREU NDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 14A(2), L4(A)(3) AND RULE 8D ARE DEEMING PROVISIONS AND THE SAME CANNOT BE EXTENDED TO PROVI SIONS OF SECTION 115JB OF THE ACT. 4. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS.1,33,08,85,699/- U/S.92CA OF THE I.T. ACT, 1961 ON ACCOUNT OF INTEREST ON LOANS/ ADVANCES GIVEN TO ITS ASSOCIATED ENTERPRISES (AE) BY CONFIRMING THE ARMS LENGTH INTEREST RATE AT 8.43% AS AGAINST 4.75 % DETERMINED AND CHARGED BY T HE APPELLANT AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961 , AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ARMS LENGTH INTEREST RATE BASED ON THE AVERAGE RATE OF I NTEREST OF BORROWINGS IN RESPECT OF INDIAN RUPEES WITHOUT APPRECIATING THAT THE RATE OF INTEREST IN RESPECT OF INTERNATIONAL TRANSACTION IN FOREIGN CUR RENCY HAS TO BE IN ACCORDANCE WITH LIBOR. (C) WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEAL NO . 4(A) AND 4(B), THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING GROUND RELATING TO ADDITION OF RS.100, 17,77,023/-INSTEAD OF RS. 98,71,06,952/- BEING DIFFERENCE BETWEEN INTERES T DETERMINED BY IPO M/S. VIDEOCON INDUSTRIES LTD. , 13 AT 8.43% AND INTEREST DETERMINED BY APPELLANT AT 4. 75% AND THUS MAKING HIGHER ADDITION/ADJUSTMENT OF RS.146,70,071. 5. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING UPWARD TRANSFER PRICING ADJUSTMENT OF RS.4,68,685/- U/S. 9 2CA OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF INTEREST ON SHARE APPLICATI ON MONEY PENDING ALLOTMENT WITH AN ASSOCIATED ENTERPRISE BY DETERMIN ING THE ARMS LENGTH INTEREST RATE AT 12% AS AGAINST RATE OF 4.75% DETER MINED AND CHARGED BY THE APPELLANT AS THE BALANCE IN SHARE APPLICATION M ONEY ACCOUNT OF THE AE WAS TRANSFERRED TO LOANS AND ADVANCES ACCOUNT AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE F ACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES M ADE THEREUNDER. (B) THE LD. COMMISSIONER OF IN COME TAX (APPEALS) E RRED IN CONFIRMING THE ARMS LENGTH PRICE OF INTEREST CHARGEABLE ON TH E SHARE APPLICATION MONEY PENDING ALLOTMENT WITH ITS AES BASED ON INTER EST RATES SPECIFIED BY MCA (MINISTRY OF COMPANY AFFAIRS) NOTIFICATION WITH OUT APPRECIATING THE FACT THAT SHARE APPLICATION MONEY WAS GIVEN TO THE FOREIGN ASSOCIATE ENTERPRISES IN FOREIGN CURRENCIES AND THE SAME WAS TRANSFERRED TO LOANS AND ADVANCES GIVEN AND AS SUCH THE PRICE CHARGEABL E AS INTEREST ON SUCH MONEY HAS TO BE BASED ON LIBOR RATE AND ALSO THAT T HE SAID NOTIFICATION WAS NOT RELEVANT OR APPLICABLE TO THE PRESENT CASE. 6.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE TRANSACTION OF CORPORATE GUARANTEE EXTENDED BY THE APPELLANT TO ITS AE AS INTERNATIONAL TRANSACTION WITHOUT APPRECIATING THAT IT DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION U/S.9 2B PRIOR TO AMENDMENT BY FINANCE ACT, 2012 AND THEREBY ERRED IN DETERMINI NG THE ALP IN RESPECT OF SUCH TRANSACTION. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ALP OF THE CORPORATE GUARANTEES EXTENDED BY THE APPELLANT TO B ANKS ON BEHALF OF ITS AES AND THEREBY ERRED IN MAKING AN UPWARD TRANSFER PRICING ADJUSTMENT OF RS.35,31,93,341 (RS.10,94,62,847/- +RS.2,82,06,822/ - +RS.2 1,55,23,672/- U/S.92CA OF THE I.T.ACT, 1961 IN RESP ECT OF GUARANTEE COMMISSION (C) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE CREDIT RATING OF AES AT CCC FOR THE PURPOSE O F BENCHMARKING M/S. VIDEOCON INDUSTRIES LTD. , 14 GUARANTEE FEE WITHOUT APPRECIATING THAT AES CREDIT RATING EQUALLED ITS PARENTS RATING. (D) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ARMS LENGTH CORPORATE GUARANTEE FEE AT 3.2537% P.A., AT 3.8037% P.A. AND AT 3.0364% P.A. ON CORPORATE GUARANTEES PROVIDE D BY THE APPELLANTS FOR SKY BILLION TRADING LTD., VIDEOCON GLOBAL LTD. AND VIDEOCON GLOBAL ENERGY HOLDINGS LTD. RESPECTIVELY AT HIGH END WITHO UT CONSIDERING THE FOLLOWING FACTORS: (I) CHARGING OF GUARANTEE FEE IS A FACT SPECIFIC EXERCISE AND VARY UPON THE FACTS OF EACH INDIVIDUAL CASE. (II) THE LOANS WERE FULLY SECURED BY PRIMARY SECURI TIES AND ALSO COVERED BY RECEIVABLES OF OTHER GROUP CONCERNS WHICH WERE I NSURED. (III) EXTENSION OF CORPORATE GUARANTEE WAS A SHAREH OLDER FUNCTION AND FURTHERANCE OF APPELLANTS GLOBAL EXPANSION OF BUSI NESS. (E) WITHOUT PREJUDICE TO THE ABOVE GROUND, ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ARMS LEN GTH GUARANTEE FEES @ 3.8037 % P. A. AND @ 3.0364% P.A. IN RESPECT OF GUA RANTEE GIVEN FOR VIDEOCON GLOBAL LTD. AND VIDEOCON GLOBAL ENERGY HOL DINGS LTD. BVI RESPECTIVELY ON ENTIRE AMOUNT OF GUARANTEES OUTSTAN DING WITHOUT REDUCING THE MARGIN MONEY KEPT IN THE FORM OF FIXED DEPOSITS BY ASSOCIATED ENTERPRISES THEMSELVES (USD 20 MILLIONS IN CASE OF VIDEOCON GLOBAL LTD. AND USD 30 MILLIONS IN CASE OF VIDEOCON GLOBAL ENER GY HOLDINGS LTD.) 7. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LOWER AUTHORITIES ERRED IN MAKING DISALLOWANCE OF R S.1,70,26,380/- BEING DEPRECIATION ON PLANT AND MACHINERY AND MOULDS BY A LLEGING THAT AS THE SAID PLANT AND MACHINERY WERE PURCHASED FROM HAWALA DEALERS, DEDUCTION CLAIMED ON ACCOUNT OF DEPRECIATION ON SAID BOGUS PU RCHASE IS NOT MAINTAINABLE WHICH IS WRONG AND CONTRARY TO THE FAC TS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES M ADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LOWER AUTHORITIES ERRED IN REDUCING THE WRITTEN DOWN VALU E OF PLANT AND MACHINERY AND MOULDS BY RS.470,51,020/- AND RS.399, 26,540/- RESPECTIVELY BY HOLDING THAT THE APPELLANT HAS NO E VIDENCE IN RESPECT OF M/S. VIDEOCON INDUSTRIES LTD. , 15 PURCHASES OF SAID PLANT AND MACHINERY AND MOULDS AN D APPELLANT HAS NEVER PROCURED AND PUT TO USE THE SAID ASSETS, WHIC H IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS O F INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LOWER AUTHORITIES ERRED IN CONFIRMING OF REDUCTION OF THE BOOK VALUE OF CAPITAL WORK IN PROGRESS BY RS.2,38,28,727/- BY HOLDING THA T THE APPELLANT COULD NOT PRODUCE ANY COGENT EVIDENCES TO SUBSTANTIATE TH E CLAIM OF PURCHASES ACCOUNTED UNDER CAPITAL WORK IN PROGRESS ON ACCOUNT OF TRIAL RUN AND TRIAL PRODUCTIONS, WHICH IS WRONG AND CONTRARY TO T HE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES M ADE THEREUNDER. (D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LOWER AUTHORITIES ERRED IN MAKING ADDITION OF RS.1,77,54, 674/- BEING PURCHASES ACCOUNTED UNDER RAW MATERIAL AND CONSUMABLES BY HOL DING THAT APPELLANT COULD NOT PRODUCE ANY IOTA OF EVIDENCE TO SUBSTANTI ATE THE CLAIM OF PURCHASES OF RAW MATERIAL AND CONSUMABLES FROM ALLE GED HAWALA DEALERS WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CAS E, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER . (E) (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING ID. AO TO CARRY OUT EXERCISE FOR WORKING OUT THE FURTHER A DDITIONS TO BE MADE IN THE YEAR IF ANY ON THE BASIS OF METHODOLOGY ADOPTED IN AY 2009-10 , WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF TH E INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE DIRECTIONS OF THE CIT(A) AMOUNTS TO ENHANCEMENT AND THE SAME IS DONE WITHOUT GIVING ANY SHOW CAUSE NOTICE FOR DOING THE SAME, WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX AC T, 1961, AND THE RULES MADE THEREUNDER. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES ERRED IN NOT GRANTING CREDIT FOR TAX DE DUCTED AT SOURCE OF RS.1,35,69,513/- CLAIMED BY THE APPELLANT, WITHOUT ASSIGNING ANY REASONS FOR DOING SO, WHICH IS WRONG AND CONTRARY TO THE FA CTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THEREUNDER. M/S. VIDEOCON INDUSTRIES LTD. , 16 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES OUGHT TO HAVE NOTIFIED THE APPELLANT BY AN ORDER IN WRITING U/S. 157 OF THE ACT ALLOWING THE LONG TERM CAPITAL LOSS TO BE CARRIED FORWARD, AND NOT DOING SO IS WRONG AND CONTRARY TO THE PROVI SIONS OF INCOME TAX ACT 1961 AND RULES MADE THEREUNDER. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW LOWER AUTHORITIES ERRED IN CHARGING INTEREST U/S 234C OF RS.1,92,69,913/- WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, PRO VISIONS OF INCOME TAX ACT 1961 AND RULES MADE THEREUNDER. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW LOWER AUTHORITIES ERRED IN CHARGING INTEREST U/S 234B OF RS.53,75,78,715/- WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, PRO VISIONS OF INCOME TAX ACT,1961 AND RULES MADE THEREUNDER. 2. IN THESE APPEALS, AS IT CAN BE SEEN FROM THE GRO UNDS OF APPEAL AS WELL AS CHARTS FILED BY THE A.R, GROUNDS IN RESPECT OF IMPU GNED ASSESSMENT YEARS ARE COMMON. THEREFORE, ALL THESE APPEALS WERE ARGUED TOGETHER AND FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS ARE DISPOSED OF BY TH IS CONSOLIDATED ORDER. IT MAY ALSO BE MENTIONED HERE THAT GROUNDS OF APPEAL FILED BY THE ASSESSEE WERE LENGTHY, NARRATIVE AND ARGUMENTATIVE RAISING BASIC ISSUE AND ALTERNATIVE ISSUES WITH REGARD TO IMPUGNED ADDITIONS. IT WAS SUBMITTE D BY LD. AR THAT CHARTS FILED IN RESPECT OF EACH OF THE APPEAL MAY BE REFER RED WHILE DISPOSING OF THE GROUNDS OF APPEAL FILED BY THE ASSESSEE. IT IS IN THESE CIRCUMSTANCES WE HAVE PROCEEDED TO DECIDE THESE APPEALS. 3. GROUND NO.1 RAISED BY THE ASSESSEE FOR ALL THE THREE ASSESSMENT YEARS RAISES COMMON ISSUE WHICH RELATES TO DISALLOWANCE O F INTEREST CLAIMED UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (THE ACT) IN RESPECT OF ADVANCES MADE TO SUBSIDIARY OF THE ASSESSEE COMPANY NAMELY VIDEOCON ENERGY HOLDING LTD. THE FACTS RELATING TO THIS GROUND IN EACH OF THE YEAR ARE SAME EXCEPT DIFFERENCE OF FIGURES. DISCUSSION ON FACTS, DURING THE COURSE OF HEARING WAS M/S. VIDEOCON INDUSTRIES LTD. , 17 MADE TO THE FACTS RELATING TO ASSESSMENT YEAR 2008- 09. THEREFORE, FOR THE SAKE OF CONVENIENCE WE WILL REFER TO THE FACTS RELATING TO A.Y. 2008-09 AND THE DECISION TAKEN IN RESPECT OF FACTS AND LAW IN RESP ECT OF A.Y 2008-09 WITH REGARD TO FIRST GROUND WILL BE APPLICABLE TO THE OT HER YEARS. 3.1 DURING THE ASSESSMENT YEAR 2008-09 THE ASSESSE E HAS ADVANCED LOAN TO THE FOLLOWING SUBSIDIARIES AGGREGATING TO A SUM OF RS.69,08,67,170/-. THE DETAIL IS AS UNDER: 1. EVANS FRAZER & CO. LTD. RS. 1,99,55,210/- 2. HOLZMAN VIDEOCON ENGINEERING LTD. RS. 33,15 ,595/- 3. VIDEOCON ENERGY HOLDINGS LTD. RS. 66,75,96,365/ - TOTAL RS. 69,08,67,170/- 3.2 THE AO REQUIRED THE ASSESSEE TO EXPLAIN THAT AS TO WHY THE AFOREMENTIONED INTEREST FREE AMOUNTS WERE ADVANCED TO THESE CONCERNS. IT WAS THE MAIN CONTENTION OF THE ASSESSEE THAT THESE ADVA NCES WERE MADE OUT OF COMMERCIAL EXPEDIENCY AND COMMERCIAL CONSIDERATION , THEREFORE, NO DISALLOWANCE UNDER SECTION 36(1)(III) COULD BE MADE . FROM THE BALANCE SHEET AO OBSERVED THAT OUT OF TOTAL FUNDS OF RS.13,870.75 CRORES, THE BORROWED FUNDS WERE TO THE TUNE OF RS.7,696.72 CRORES AND ASSESSEE S OWN FUNDS WERE RS.6174.03 CRORES AND PROPORTIONATELY THE OWN FUNDS OF THE ASSESSEE WERE 44.51% AGAINST THE BORROWED FUNDS OF 55.49%. THE T OTAL INTEREST PAID BY THE ASSESSEE WAS RS.444.07 CRORES AND INTEREST RATE WA S COMPUTED AT 5.77% AND APPLYING THAT RATIO, THE TOTAL INTEREST ON LOAN AM OUNT OF RS.69,08,67,170/- WAS COMPUTED AT RS.3,98,63,035/- AND FURTHER CONSIDERIN G THAT ONLY 55.49% OF THE TOTAL FUNDS, PROPORTIONATE DISALLOWANCE UNDER SECTI ON 36(1)(III) WAS COMPUTED AT RS.2,21,19,998/- WHICH WAS ADDED TO THE INCOME OF T HE ASSESSEE(ALL THESE FACTS ARE SUMMARIZED BY LD. CIT(A) IN PARA 4.2 OF THE IM PUGNED ORDER AND WERE NOT DISPUTED BY THE REVENUE). M/S. VIDEOCON INDUSTRIES LTD. , 18 3.3 ON APPEAL FILED BEFORE LD. CIT(A), LD. CIT(A) A CCEPTED THE CLAIM OF THE ASSESSEE WITH REGARD TO ADVANCES MADE TO EVANS FRA ZER & CO. LTD. AND HOLZMAN VIDEOCON ENGINEERING LTD. ON THE GROUND THA T ADVANCE MADE TO THESE CONCERNS RELATES TO BUSINESS ACTIVITY OF THE ASSESS EE, THEREFORE, NO INTEREST PERTAINING THERE TO COULD BE DISALLOWED. HOWEVER, WITH REGARD TO ADVANCE TO VIDEOCON ENERGY HOLDINGS LTD., LD. CIT(A) FOUND THA T THE SAID AMOUNT GIVEN BY THE ASSESSEE WAS IN THE SHAPE OF SHARE APPLICATI ON MONEY FOR THE PURPOSE OF INVESTMENT IN VIDEOCON GLOBAL LTD. VIDEOCON ENE RGY HOLDINGS LIMITED HOLD 99,99,900 CONVERTIBLE PREFERENCE SHARES AND 300 OUT OF 740 EQUITY SHARES OF VIDEOCON POWER LTD., WHICH WAS ENGAGED IN THE PROJ ECT OF SETTING UP 1050 MW ELECTRIC POWER GENERATING FACILITY IN TAMIL NAD U. LD. CIT(A) FURTHER NOTICED THAT ASSESSEE COMPANY WAS ENGAGED IN THE BU SINESS OF INVESTMENT IN SHARES, SECURITIES, PROPERTIES ALONGWITH OTHER ACTI VITIES. TAKING INTO ACCOUNT ALL THESE FACTS LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO WITH REGARD TO DISALLOWANCE OF INTEREST ON ADVANCES MADE TO VIDEOC ON ENERGY HOLDING LTD. AMOUNTING TO RS.66,75,96,365/-. WHILE UPHOLDING TH E DISALLOWANCE LD. CIT(A) HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT IN RESPECT OF ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 SIMILAR DISALLOWANCE W AS DELETED BY LD. CIT(A) ON THE GROUND THAT: (I) THE COMPANY TO WHOM ADVANCE WAS MADE IS DIFFER ENT LEGAL ENTITY AND MONEY ADVANCED IS IN THE SHAPE OF SHARE APPLICATIO N MONEY KEPT IN THE SAME SHAPE FOR MORE THAN THREE/FOUR YEARS WHICH CAN HARD LY BE CALLED AS THE STATED INDENTED BUSINESS PURPOSE OF THE ASSESSEE. (II) AS PER SUB-SECTION (2) OF SECTION 73 AND SUB- SECTION (2A) OF COMPANIES ACT, WHEN MONEY RECEIVED FROM THE APPLICANTS IS NOT REFUNDED WITHIN EIGHT DAYS THEN THE COMPANY WOULD BE LIABLE TO REPAY THAT MONEY WITH INTEREST @15% PER ANNUM. M/S. VIDEOCON INDUSTRIES LTD. , 19 (III) REGULATION 18 OF SEBI (ICDR) REGULATION LAYS DOWN SIMILAR PROVISION TO ISSUE REFUND OF SHARE APPLICATION MONEY WITHIN 15 DAYS AND IN DEFAULT THE REFUND MONEY WOULD BE ELIGIBLE FOR INTEREST @15% AS PER REGULATION 99 OF SEBI(ICDR). 3.4 THEREFORE, INTER-ALIA RELYING ON OTHER SIMILAR PROVISIONS LD. CIT(A) HAS COME TO A CONCLUSION THAT INTEREST WITH REGARD TO ADVANCES MADE TO VIDEOCON ENERGY HOLDINGS LTD., HAS RIGHTLY BEEN DISALLOWED B Y THE AO. LD. CIT(A) HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT AS P ER DECISION OF ITAT IN THE CASE OF TATA FINANCE LTD., VS. ACIT, 20 SOT 47 (MUM), IN A CASE WHERE MAXIMUM FUNDS ARE DEPLOYED BY THE ASSESSEE AND ASSESSEE IS ABLE TO SHOW THAT INVESTMENT IN SHARES WAS MADE OUT OF OWN FUNDS AND BORROWED FUNDS WERE INVESTED IN BUSINESS ASSETS, THE AO WAS NOT JUSTIFI ED IN MAKING PROPORTIONATE DISALLOWANCE ON THE BORROWED FUNDS ON THE GROUND TH AT SAME WAS RELATABLE TO FUNDS UTILIZED FOR NON-BUSINESS PURPOSES. THEREFOR E, LD. CIT(A) HAS MENTIONED THAT ACCORDING TO THE FACTS OF THE CASE ASSESSEE DI D NOT PROVE THAT THE INVESTMENT HAS BEEN MADE FROM ITS OWN FUNDS AND DISALLOWANCE W AS JUSTIFIED. IT IS IN THIS MANNER THE DISALLOWANCE HAS BEEN UPHELD BY LD. CIT( A) TO THE EXTENT OF ADVANCES MADE BY THE ASSESSEE TO VIDEOCON ENERGY HO LDINGS LTD. 3.5 THOUGH DEPARTMENT HAS FILED CROSS APPEAL IN RES PECT OF A.Y 2008-09 BUT IT IS NOT CONTESTING THE DELETION MADE WITH REGARD TO OTHER TWO CONCERNS FOR WHICH RELIEF HAS BEEN GRANTED BY LD. CIT(A). 3.6 ON THE ABOVE MENTIONED FACTS, IT WAS THE FOREMO ST CONTENTION OF LD. AR THAT FIRSTLY; NO DISALLOWANCE COULD HAVE BEEN MADE AS THE ADVANCE WAS GIVEN OUT OF COMMERCIAL EXPEDIENCY AND REFERENCE IN THIS REG ARD WAS MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S .A. BUILDERS VS. CIT, 288 ITR 1. , WHEREIN IT HAS BEEN HELD THAT INTEREST ON BORROWED FUNDS CANNOT BE M/S. VIDEOCON INDUSTRIES LTD. , 20 DISALLOWED IF THE ASSESSEE HAS ADVANCED INTEREST FR EE LOANS TO A SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY; WHAT HAS TO BE SEEN BUSINESS PURPOSE AND WHAT THE SISTER CONCERN DID WITH THE MONEY ADV ANCED. SECONDLY; IT WAS THE ARGUMENT OF LD. AR THAT ASSESSEE COMPANY HAS ITS OW N CAPITAL RESERVES AMOUNTING TO RS.6,174.03 CRORES AS ON 31/03/2008 AN D ADVANCES ARE ONLY TO THE TUNE OF RS.66.76 CRORES. BY MAKING REFERENCE TO TH E DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES & POWER LTD., 313 ITR 340 (MUM), IT WAS SUBMITTED BY LD. AR THAT WHER E OWN FUNDS OF THE ASSESSEE IN THE SHAPE OF SHARE CAPITAL AND RESERVE AND SURPLUS EXCEEDS THE AMOUNT OF INTEREST FREE ADVANCES THEN IN THAT CASE IT WILL BE PRESUMED THAT THE INTEREST FREE ADVANCES WERE MADE OUT OF OWN CAPITAL . IT WAS SUBMITTED THAT THIS PROPOSITION HAS AGAIN BEEN CONFIRMED BY HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD., 366 ITR 505 (BOM) B Y FOLLOWING THE AFOREMENTIONED DECISION IN THE CASE OF RELIANCE UT ILITIES & POWER LTD. (SUPRA) THAT WHERE ASSESSEES CAPITAL, PROFIT RESERVES, SUR PLUS AND CURRENT ACCOUNT DEPOSITS ARE HIGHER THAN THE INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WO ULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND NO DISALLOWAN CE WAS WARRANTED. IT WAS SUBMITTED BY LD. AR THAT THOUGH THE DECISION IN THE CASE OF CIT VS. HDFC BANK LTD.,(SUPRA) WAS RENDERED IN RESPECT OF DISAL LOWANCE MADE UNDER SECTION 14A WITH REGARD TO INTEREST PORTION BUT THE SAME PR INCIPLE WOULD EQUALLY BE APPLICABLE TO DISALLOWANCE MADE UNDER SECTION 36( 1)(III) OF THE ACT AS THEIR LORDSHIPS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC(SUPRA) WHILE HOLDING SO HAVE FOLLOWED THE DECISION RENDER ED IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA), WHICH WAS IN RESPEC T OF DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. THUS, IT WAS PLEADED BY LD. AR THAT LD. CIT(A) HAS COMMITTED AN ERROR IN NOT ACCEPTING THE CLAIM OF THE ASSESSEE. THIRDLY; IT WAS SUBMITTED BY LD. AR THAT THIS ISS UE WAS ACCEPTED IN EARLIER YEARS BY THE ITAT IN RESPECT OF A.Y 2005-06, 2006-0 7 AND 2007-08. M/S. VIDEOCON INDUSTRIES LTD. , 21 REFERENCE IN THIS REGARD WAS MADE TO THE CONSOLIDAT ED ORDER OF THE TRIBUNAL DATED 14/11/2014 PASSED IN RESPECT OF A.Y 2005-06, 2006-07 AND 2007-08, COPY OF THIS ORDER IS FILED A PAGES 60 TO 76 OF THE PAPE R BOOK AND BY FOLLOWING EARLIER ORDER OF THE TRIBUNAL RENDERED IN RESPECT OF ASSES SMENT YEAR 2003-04 AND 2004-05 ON SIMILAR FACTS THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. IT MAY BE MENTIONED HERE THAT IN EARLIER YEARS ALSO, T HE ADVANCES WERE SIMILAR TO THOSE VERY THREE CONCERNS AND FOR THE SAKE OF CO MPLETENESS THE DISALLOWANCE WAS MADE IN RESPECT OF A.Y 2007-08 WITH REGARD TO THIS ISSUE AND THE ADVANCES WERE MADE TO THESE THREE CONCERNS AS LISTED IN THE ORDER OF LD. CIT(A) IN RESPECT OF 2007-08, ( COPY FILED AT PAGES 77 TO 104 OF THE PAPER BOOK) AT PAGE-4 ARE AS UNDER: SR.NO. NAME OF THE PARTY AMOUNT (IN RS.) 1. LOANS/ADVANCES TO CONCERNS: (I) EVANS FRAZER & CO. LTD. 7,48,59,420 (II) HOLZMAN VIDEOCON ENERGY HOLDINGS 33,15, 595 (III) VIDEOCON ENERGY HOLDINGS LTD. 66,38,77,364/- TOTAL 74,20,52,378/- 3.7 THUS, IT WAS PLEADED BY LD. AR THAT DISALLOWANC E HAS WRONGLY BEEN UPHELD BY LD. CIT(A) AND THE SAME SHOULD BE DELETED . 3.8 AS AGAINST THE AFOREMENTIONED ARGUMENTS OF LD. AR, IT WAS SUBMITTED BY LD. DR THAT THE ORDER OF TRIBUNAL IN EARLIER YEA RS SHOULD NOT BE FOLLOWED AS LD. CIT(A) HAS DESCRIBED THE REASONS FOR THE SAME. HE SUBMITTED THAT IN VIEW OF VARIOUS OTHER PROVISIONS OF LAW THE ASSESSEE WAS ENTITLED TO RECEIVE INTEREST ON THE ADVANCES MADE BY IT TO VIDEOCON ENERGY HOLD INGS LTD., AS THE ADVANCE WAS IN THE NATURE OF SHARE APPLICATION MONEY. THUS , IT WAS PLEADED BY LD. DR THAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWA NCE AND HIS ORDER ON THIS ISSUE SHOULD BE CONFIRMED. M/S. VIDEOCON INDUSTRIES LTD. , 22 3.9 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. IN THE PRESENT CASE, THE FACTS RELATIN G TO OWN CAPITAL OF THE ASSESSEE ARE UNDISPUTED. THESE FACTS HAVE CLEARLY BEEN BROU GHT OUT IN THE IMPUGNED ORDER PASSED BY LD. CIT(A) IN RESPECT OF ASSESSMENT YEAR 2008-09, WHERE LD. CIT(A) AFTER GOING THROUGH THE ASSESSMENT ORDER HAS SUMMARIZED THE FACTS. EVEN THE BASIS OF THE CALCULATION MADE BY THE AO CL EARLY DEPICTS THAT OWN FUNDS OF THE ASSESSEE ARE TO THE TUNE OF RS.6174.03 CRORE S AGAINST WHICH INTEREST FREE ADVANCES MADE TO SISTER CONCERN ARE ONLY TO THE TUN E OF RS.66,75,96,375/-, WHICH IS FAR LESS THAN THE OWN FUNDS OF THE ASSESSE E. THE LAW HAS BEEN CLEARLY LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT REGA RDING DISALLOWANCE TO BE MADE UNDER SECTION 36(1)(III) IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD.(SUPRA) IN WHICH IT WAS LAID DOWN THAT IF THE P ROFITS OF THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR, COUPLED WITH SUBSTANTIAL SHAREHOLDER FUNDS, ARE SUFFICIENT TO MEET THE INTEREST FEE ADVANCE TO SIST ER CONCERN THEN PRESUMPTION WOULD BE THAT INVESTMENT IN SISTER CONCERNS WERE MA DE BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AND NO PART OF INTEREST ON BORR OWING COULD BE DISALLOWED ON THE BASIS THAT INVESTMENT WERE MADE OUT OF INTEREST BEARING FUNDS. AGAIN THIS PROPOSITION WAS CONTESTED BY THE REVENUE BEFORE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD.(SUPRA). THE S AID DECISION RELATES TO DISALLOWANCE UNDER SECTION 14A BUT APPLYING THE DEC ISION OF CIT VS. RELIANCE UTILITIES & POWER LTD. (SUPRA) THEIR LORDSHIPS HAVE REJECTED THE CONTENTION OF THE REVENUE THAT ITAT HAD COMMITTED AN ERROR IN HO LDING THAT THE INVESTMENT OF THE ASSESSEE IN TAX FREE SECURITIES / INVESTMENT S WERE FROM THE ASSESSEES OWN FUNDS FOR THE REASON THAT ASSESSEE HAD PAID INTERES T ON BORROWED FUNDS AND ASSESSEES OWN FUNDS WERE NOT SEPARATELY IDENTIFIED; THE INVESTMEN T IN GOVERNMENT SECURITIES WAS MADE BY THE ASSESSEE BANK FROM COMMON POOL FUNDS AVAILABLE WITH IT. IT WAS CONTENDED ON BEHALF OF REVENUE THAT IN ABSENCE OF DIRECT NEXUS BETWEEN AS SESSEES OWN FUNDS AND THE INVESTMENT MADE BY IT, THE INVESTMENT OUGHT TO BE TREATED FRO M THE COMMON POOL HAVING BOTH BORROWED AS WELL AS OWN FUNDS OF THE ASSESSEE AN D, THEREFORE, PROPORTIONATE DISALLOWANCE OF M/S. VIDEOCON INDUSTRIES LTD. , 23 INTEREST BY THE AO WAS FULLY JUSTIFIED. SUCH CONTE NTION OF THE REVENUE WAS REJECTED BY THEIR LORDSHIPS. FOR THE SAKE OF COMPL ETENESS, RELEVANT OBSERVATION OF THEIR LORDSHIPS REGARDING SUCH CONTENTION RAISED BY THE REVENUE AND REJECTION THERE OF ARE REPRODUCED BELOW: 3. WITH REFERENCE TO QUESTION (A), MR SURESH KUMAR SUBMITTED THAT THE ITAT ERRED IN HOLDING THAT THE INVESTMENTS OF THE A SSESSEE IN TAX FREE SECURITIES / INVESTMENTS WERE FROM THE ASSESSEES O WN FUNDS. SINCE THE ASSESSEE HAD PAID INTEREST ON BORROWED FUNDS AND AN D THE ASSESSEES OWN FUNDS WERE NOT SEPARATELY IDENTIFIED, THE INVES TMENT IN GOVERNMENT SECURITIES HAD BEEN MADE BY THE ASSESSEE BANK FROM COMMON POOL OF FUNDS AVAILABLE WITH IT. ACCORDING TO MR SURESH KUM AR, AS PER THE PROVISIONS OF SECTION 1 4A, NO DEDUCTION COULD BE A LLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE AGAINST THE IN COME CLAIMED AS EXEMPT FROM TAX, AS APPORTIONMENT OF EXPENDITURE WA S AN INHERENT PART OF SECTION 14A. HE SUBMITTED THAT IN THE ABSENCE OF A DIRECT NEXUS BETWEEN ASSESSEES OWN FUNDS AND THE INVESTMENT MADE BY IT, THE INVESTMENT OUGHT TO BE TREATED FROM THE COMMON POOL HAVING BOTH BORR OWED AS WELL AS OWN FUNDS OF THE ASSESSEE AND THEREFORE, PROPORTIONATE DISALLOWANCE OF INTEREST BY THE ASSESSING OFFICER WAS FULLY JUSTIFI ED. HE THEREFORE SUBMITTED THAT THE CIT (APPEALS) & THE ITAT HAD GON E WRONG ON THIS COUNT THAT REQUIRED INTERFERENCE BY THIS COURT. 4. WE DO NOT AGREE. IN THE CASE AT HAND, AS RECORDE D BY THE ITAT, UNDISPUTEDLY THE ASSESSEES OWN FUNDS AND OTHER NON -INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX FREE SECURITIES. THE ITAT THEREFORE HELD THAT THERE WAS NO BASIS FOR DEEMING THAT THE ASSESSEE HAD USED THE BORROWED FUNDS FOR INVESTMENT IN TAX FREE SECURITIES. ON THIS FACTUAL ASPECT, THE ITAT DID NOT FIND ANY MERIT IN THE CONTENTION RAISED BY THE REVENUE AND THEREFORE, ACCORDINGLY ANSWERED THE QUESTION IN FAVOUR OF THE ASSESSEE. ON GOING THROUGH THE ORDER OF THE CIT (APPEALS) DA TED 28TH MARCH 2005 AS WELL AS THE IMPUGNED ORDER, WE D O NOT FIND THAT THE CIT (APPEALS) OR THE ITAT ERRED IN HOLDING IN FAVOU R OF THE ASSESSEE. IN THIS REGARD, THE SUBMISSION OF MR MISTRY, THE LEARN ED SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE, THAT THIS ISSU E IS SQUARELY COVERED BY A JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONE R OF INCOME TAX V/S RELIANCE UTILITIES AND POWER LTD., REPORTED IN (200 9) 313 ITR 340 (BORN) IS WELL FOUNDED. THE FACTS OF THAT CASE WERE THAT T HE ASSESSEE VIZ. M/S RELIANCE UTILITIES AND POWER LTD. HAD INVESTED CERT AIN AMOUNTS IN RELIANCE GAS LTD. AND RELIANCE STRATEGIC INVESTMENT S LTD. IT WAS THE CASE M/S. VIDEOCON INDUSTRIES LTD. , 24 OF THE ASSESSEE THAT THEY THEMSELVES WERE IN THE BU SINESS OF GENERATION OF POWER AND THEY HAD EARNED REGULAR BUSINESS INCOME T HEREFROM. THE INVESTMENTS MADE BY THE ASSESSEE IN M/S RELIANCE GA S LTD. AND M/S RELIANCE STRATEGIC INVESTMENTS LTD. WERE DONE OUT O F THEIR OWN FUNDS AND WERE IN THE REGULAR COURSE OF BUSINESS AND THEREFOR E NO PART OF THE INTEREST COULD BE DISALLOWED. IT WAS ALSO POINTED O UT THAT THE ASSESSEE HAD BORROWED RS.43.62 CRORES BY WAY OF ISSUE OF DEBENTU RES AND THE SAID AMOUNT WAS UTILISED AS CAPITAL EXPENDITURE AND INTE R-CORPORATE DEPOSIT. IT WAS THE ASSESSEES SUBMISSION THAT NO PART OF THE I NTEREST BEARING FUNDS (VIZ. ISSUE OF DEBENTURES) HAD GONE INTO MAKING INV ESTMENTS IN THE SAID TWO COMPANIES. IT WAS POINTED OUT THAT THE INCOME F ROM THE OPERATIONS OF THE ASSESSEE WAS RS.3 13.53 CRORES AND WITH THE AVA ILABILITY OF OTHER INTEREST FREE FUNDS WITH THE ASSESSEE THE AMOUNT AV AILABLE FOR INVESTMENTS OUT OF ITS OWN FUNDS WERE TO THE TUNE OF RS.398.19 CRORES. IN VIEW THEREOF, IT WAS SUBMITTED THAT FROM THE ANALYSIS OF THE BALA NCE-SHEET, THE ASSESSEE HAD ENOUGH INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING THE INVESTMENTS. THE CIT (APPEALS) ON EXAMINING THE SAID MATERIAL, A GREED WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND DIRECTED HIM TO ALLOW THE SAME UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE REVENUE BEING AGGRIEVED BY THE ORDER PREFERRED AN APPEAL BEFORE THE ITAT WHO U PHELD THE ORDER OF THE CIT (APPEALS) AND DISMISSED THE APPEAL OF THE R EVENUE. FROM THE ORDER OF THE ITAT, THE REVENUE APPROACHED THIS COUR T BY WAY OF AN APPEAL. AFTER EXAMINING THE ENTIRE FACTUAL MATRIX O F THE MATTER AND THE LAW ON THE SUBJECT, THIS COURT HELD AS UNDER :- IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN AS SESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSES SEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE F ROM THE INTEREST-FREE FUNDS AVAILABLE. IN OUR OPINION, THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT (1997) 224 ITR 627 HAD THE OCCASION TO CONSIDER THE DECISION OF THE CA LCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. (1982) 134 ITR 2 19 WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE A ND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNIN G OF THE BUSINESS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITL ED TO CLAIM THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUME NT HAD CONSIDERABLE FORCE, BUT CONSIDERING THE FACT THAT T HE CONTENTION HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS OF INDIA LTD.S CASE (198 2) 134 ITR 219 M/S. VIDEOCON INDUSTRIES LTD. , 25 THE CALCUTTA HIGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY A ND THE PROFITS WERE DEPOSITED IN THE OVER DRAFT ACCOUNT OF THE ASS ESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT THE TAXES WE RE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAF T ACCOUNT FOR THE RUNNING OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE, TH EREFORE, WOULD BE THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST -FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST-FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENT. IN THIS CASE THIS PRESUMPTI ON IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISS IONER OF INCOME-TAX (APPEALS) AND THE INCOME-TAX APPELLATE T RIBUNAL. 5. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE S QUARELY COVERED BY THE JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWE R LTD. (SUPRA). THE FINDING OF FACT GIVEN BY THE ITAT IN THE PRESENT CA SE IS THAT THE ASSESSEES OWN FUNDS AND OTHER NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. THIS FACTUAL POSITION IS NOT ONE THAT IS DISPUTED. IN THE PRESENT CASE, UNDISPUTEDLY THE ASSESSEES CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. IN VIEW OF T HIS FACTUAL POSITION, AS PER THE JUDGMENT OF THIS COURT IN THE CASE OF RELIA NCE UTILITIES AND POWER LTD. (SUPRA), IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST-FREE FUND S AVAILABLE WITH THE ASSESSEE. WE THEREFORE, ARE UNABLE TO AGREE WITH TH E SUBMISSION OF MR SURESH KUMAR THAT THE TRIBUNAL HAD ERRED IN DISMISS ING THE APPEAL OF THE REVENUE ON THIS GROUND. WE DO NOT FIND THAT QUESTION (A) GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS THEREFORE REJECT ED. (EMPHASIS OURS) 3.10. APPLYING AFOREMENTIONED PROPOSITION OF LAW LA ID DOWN HONBLE JURISDICTIONAL HIGH COURT TO THE FACTS OF THE PRESE NT CASE, IN VIEW OF AVAILABILITY OF OWN FUNDS OF THE ASSESSEE OF RS.6174.03 CRORES, NO INTEREST COULD BE DISALLOWED ON THE INTEREST FREE ADVANCES MADE TO TH E SISTER CONCERN WHICH ARE TO THE TUNE OF RS.66.75 CRORES. THE IMPUGNED ADDITI ON LIABLE TO BE DELETED ON THIS GROUND ALONE. M/S. VIDEOCON INDUSTRIES LTD. , 26 3.11 NOT ONLY THE ASSESSEE IS ALSO ENTITLED TO GET THIS RELIEF ON THE BASIS OF ABOVE DISCUSSIONS BUT ASSESSEE IS ALSO ENTITLED TO GET THIS RELIEF ON THE BASIS OF EARLIER DECISIONS OF TRIBUNAL ON SIMILAR ISSUE. T HE REFERENCE TO THE EARLIER ORDERS OF THE TRIBUNAL HAS ALREADY BEEN MADE. THER E IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ONLY NEW REASONS HA VE BEEN ASSIGNED JUST TO MAKE THE DISALLOWANCE. THE ADDITION IS MAINLY BA SED ON THE FACT THAT ASSESSEE IS ENTITLED TO RECEIVE INTEREST AS THE MONEY ADVANC ED WAS IN THE NATURE OF SHARE CAPITAL AND SINCE IT WAS NOT REFUNDED TO THE ASSESS EE WITHIN STIPULATED TIME, THE ASSESSEE WAS ENTITLED TO GET INTEREST. THIS CONTEN TION OF REVENUE DOES NOT HAVE ANY FORCE AS IF THE ASSESSEE IS ENTITLED TO GET INT EREST ON THIS ADVANCE, THEN IN ABSENCE OF ANY ACTUAL RECEIPT OF THE INTEREST, THE COMPUTATION OF INTEREST WILL BE NOTIONAL. HOWEVER, IT IS NOT EVEN THE CASE OF REV ENUE THAT ANY NOTIONAL INTEREST INCOME IS ASSESSABLE IN THE HANDS OF THE A SSESSEE. WHAT IS THE CASE OF THE REVENUE IS THAT DISALLOWANCE OF INTEREST CLAI MED BY THE ASSESSEE ON BORROWED FUNDS. IN VIEW OF SUFFICIENT OWN FUNDS A VAILABLE WITH THE ASSESSEE, ACCORDING TO AFOREMENTIONED DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD.(SUP RA) AND HDFC BANK LTD. (SUPRA) NO SUCH DISALLOWANCE UNDER SECTION 36(1)(I II) COULD BE MADE. FOR THE SAKE OF COMPLETENESS OF FACTS IN RESPECT OF OTHER A SSESSMENT YEARS, THE FIGURES ARE AS UNDER: ASSESSMENT YEAR AMOUNT ADVANCED TO VIDEOCON ENERGY HOLDINGS LTD.(RS. IN CRORES) ASSESSEES OWN CAPITAL AND RESERVES. (RS. IN CRORES) 2009-10 . 66.75 . 5875.50 2010-11 67.66 6385.90 IN VIEW OF THE ABOVE DISCUSSIONS, GROUND NO.1 OF TH E ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09, 2009-10 & 2010-11 IS ALLOW ED AND ADDITIONS CONFIRMED BY LTD. CIT(A) ARE DELETED. M/S. VIDEOCON INDUSTRIES LTD. , 27 4. GROUND NO.2 OF ASSESSEES APPEAL FOR A.Y 2008-09 , 2009-10 AND 2010-11 ARE COMMON AND RELATE TO ONE ISSUE I.E. DISALLOWANC E MADE UNDER SECTION 14A R.W. RULE 8D. WE WILL DISCUSS FACTS RELATING TO A. Y 2008-09 AND AS THE FACTS FOR REMAINING TWO YEARS ARE IDENTICAL EXCEPT DIFFERENCE IN FIGURES, THE DECISION TAKEN IN RESPECT OF 2008-09 WILL BE APPLICABLE TO OTHER YEARS ALSO. IT MAY ALSO BE MENTIONED HERE THAT THE FACT REGARDING AVAILABIL ITY OF ASSESSEES OWN FUNDS HAVE BEEN DISCUSSED IN GROUND NO.1. FOR THE SAKE O F BREVITY THE SAME ARE NOT DISCUSSED AGAIN FOR THE PURPOSE OF DECIDING THE PRE SENT ISSUE. IT IS FOREMOST CASE OF THE ASSESSEE THAT IN VIEW OF AVAILABILITY O F SUFFICIENT OWN FUNDS TO COVER THE INVESTMENT IN SHARES AND SECURITIES FROM WHERE THE TAX FREE INCOME HAS BEEN EARNED NO DISALLOWANCE OF COMPONENT OF INTEREST SH OULD BE MADE IN VIEW OF TWO DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT NAMELY CIT VS. RELIANCE UTILITIES & POWER LTD. (SUPRA) AND CIT VS. HDFC BAN K LTD. (SUPRA). 4.1 FOR ASSESSMENT YEAR 2008-09 ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1,61,85,985/- AND LONG TERM CAPITAL GAIN OF RS.2 8,76,48,000/- WHICH WERE CLAIM EXEMPT UNDER SECTION 10(34) AND 10(38) OF THE ACT RESPECTIVELY. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLO WANCE UNDER SECTION 14A SHOULD NOT BE CALCULATED WITH REFERENCE TO RULE 8D. THE ASSESSEE SUBMITTED THAT IT DID NOT INVEST INTEREST BEARING FUNDS IN THE SH ARE AND SECURITIES FROM WHERE TAX FREE INCOME HAS BEEN EARNED AND THUS, IT WAS PL EADED THAT DISALLOWANCE ON ACCOUNT OF INTEREST SHOULD NOT BE MADE. 4.2 IT WAS FURTHER SUBMITTED BEFORE AO THAT SINCE NO DIRECT EXPENSES WERE INCURRED NO DISALLOWANCE WAS CALLED FOR ON ACCOUNT OF EXPENSES ALSO. HOWEVER, AO DID NOT ACCEPT THESE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO MAKE THE DISALLOWANCE WITH REFERENCE TO RULE 8D. A SUM OF RS.12,61,00,030/- WAS DISALLOWED ON ACCOUNT OF INTEREST AND % OF AVERAG E VALUE OF INVESTMENT WAS COMPUTED ON RS.1,94,02,842/-, THUS, TOTAL DISALLO WANCE IS MADE AT M/S. VIDEOCON INDUSTRIES LTD. , 28 RS.14,55,02,872/-. SIMILAR DISALLOWANCE WAS MADE F OR OTHER YEARS AND FOR THE SAKE OF COMPLETENESS THE DISALLOWANCE ON ACCOUNT OF INTEREST AND EXPENSES IS MENTIONED BELOW: ASSESSMENT YEAR DISALLOWANCE OF INTEREST DISALLOWANCE ON ACCOUNT OF EXPENSES TOTAL 2009-10 10,56,61,019 1,48,50,625 12,05,11,64 4 2010-11 54,79,30,196 8,35,72,106 63,15,02,30 2 4.3 BEFORE LD. CIT(A) THE ASSESSEE HAS SUBMITTED A CHART OF CALCULATION OF DISALLOWANCE UNDER SECTION 14A IN RESPECT OF A.Y 20 08-09 DESCRIBING THE BASIS UPON WHICH, IT WAS CLAIMED THAT DISALLOWANCE, IF AN Y, WAS TO BE RESTRICTED TO RS.4,72,922/-. THE SAID CHART IS PLACED AT PAGES 4 5 TO 46 OF THE PAPER BOOK AND FOR THE SAKE OF COMPLETENESS, THE SAME IS REPRODUCE D BELOW: SALARY A)100% OF THE SALARY COST OF INVESTMENTS DEPT. I. SANJAY CHUDNAIK II.DEEPAK PEDNEKAR III.C.R GIRTAP B)10% OF THE SALARY COSTS OF V.N.DHOOT, CHAIRMAN & MANAGING DIRECTOR C)10% OF THE SALARY COSTS OF SENIOR MANAGEMENT (1 PERSON) TOTAL TOTAL SALARY DEBITED TO P&L RATIO OF SALARIES TOTAL SALARY TO DISALLOWED 8,73,867 3,03,646 3,54,643 - 80,000 16,12,156 98,93,60,491 0.0016 16,12,156 M/S. VIDEOCON INDUSTRIES LTD. , 29 DIRECT EXPENSES: DMAT A/C. MAINTENANCE CHARGES, DMAT TRANSFER CHARGES, ETC. INDIRECT EXPENSES: RATIO OF SALARY IS APPLIED TO OTHER INDIRECT EXPENSES: (OTHER THAN THOSE DIRECTLY RELATED TO MANUFACTURING, SELLING AND DISTRIBUTION EXPENSES) RENT RATES & TAXES REPAIRS TO BUILDING REPAIRS TO OTHERS INSURANCE EXPENSES AUDITORS REMUNERATION DIRECTORS SITTING FEES PRINTING AND STATIONERY MISCELLANEOUS EXPENSES TOTAL RATIO DISALLOWANCE 12,81,90,051 4,91,32,042 3,03,29,848 4,25,18,892 10,17,53,889 83,26,100 12,20,000 2,34,66,656 29,79,64,212 68,29,01,690 0.0016 ________________ 80,000 11,12,784 EXPENSES PERTAINING TO INVESTMENT DEPARTMENT 28,04,939.53 VIDEOCON INDUSTRIES LTD. (F. Y.2007-08; A.Y.2008-09) WORKING OF TAXFREE AND TAXABLE BONDS FOR THE YEAR E NDED 31.03.2008: PARTICULARS AMOUNT (RS. IN LACS) AS ON 31.03.08 CLOSING INVESTMENTS YIELDING TAXFREE INCOME GOVERNMENT AND TRUST SECURITIES 4,08,445 MUTUAL FUND 81,93,99,417 EQUITY SHARES 4,77,56,65,888 (A) 5,59,54,73,750 INVESTMENTS YIELDING TAXABLE INCOME (B) 21,75,51,27,329 TOTAL INVESTMENTS AS ON 31.03.08 CLOSING (C) = [(A) + (B)] 27,35,06,01,079 M/S. VIDEOCON INDUSTRIES LTD. , 30 AS ON 31.03.2007 INVESTMENTS YIELDING TAXFREE INCOME GOVERNMENT AND TRUST SECURITIES 4,08,445 MUTUAL FUND 16,17,07,000 EQUITY SHARES 2,00,35,47,487 (D) 2,16,56,62,932 INVESTMENT YIELDING TAXABLE INCOME (E) 16,51,56,35,383 TOTAL INVESTMENTS AS ON 31.03.07(F)+ [(D) + (E)] 18,68,12,98,315 AVERAGE TAXFREE INVESTMENTS [(D) +(D)]/2 3,88,05,68,341 AVERAGE TAXABLE INVESTMENTS [(B) + (E)]/2 19,13,53,81,356 AVERAGE TOTAL INVESTMENTS [(C)+ (F)]/2 23,01,59,49,697 %AVERAGE TAXFREE INVESTMENT TO TOTAL INVESTMENTS 16.86 EXPENSES PERTAINING TO INVESTMENT DEPARTMENT 28,04,940 EXPENSES DISALLOWED UNDER SECTION14A 4,72,992 4.4 IT WAS SUBMITTED BEFORE LD. CIT(A) THAT THE INV ESTMENT OF THE ASSESSEE FROM WHERE TAX FREE INCOME HAS BEEN EARNED IS A SUM OF RS.559.55 CRORES AS AGAINST PAID UP CAPITAL AND RESERVES OF RS.5567.44 CRORES. THEREFORE, NO DISALLOWANCE WAS CALLED FOR IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) AND IN RESPECT OF OTHER EXPENSES THE DISALLOWANCE, IF ANY, WAS REQUIR ED TO BE RESTRICTED TO RS.4,72,922/- AS PER AFOREMENTIONED CHART. HOWEVER , LD. CIT(A) DID NOT ACCEPT ANY OF SUCH SUBMISSIONS AND HAS DISMISSED THE GROU ND OF THE ASSESSEE. THE ASSESSEE IS AGGRIEVED AND HAS RAISED GROUND NO.2 IN RESPECT OF ALL THE ASSESSMENT YEARS SUBJECT TO APPEAL. THE SUBMISSION S MADE BEFORE AO AND LD. M/S. VIDEOCON INDUSTRIES LTD. , 31 CIT(A) HAVE BEEN REITERATED BEFORE US AND ON THE O THERHAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 4.5 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. THE SUBMISSIONS OF THE ASSESSEE THAT I T HAS SUFFICIENT OWN FUNDS HAS NOT BEEN CONTROVERTED BY REVENUE IN RESPECT OF EACH ASSESSMENT YEARS INVOLVED IN THE PRESENT APPEALS. THE FIGURES IN RESPECT OF A.Y. 2008-09 HAVE BEEN DESCRIBED IN THE ABOVE PART OF THIS ORDER WHILE DE CIDING GROUND NO.1. FOR OTHER ASSESSMENT YEARS ALSO INVESTMENT OF THE ASSES SEE IN THE SHARE AND SECURITIES FROM WHERE TAX FREE INCOME HAS BEEN EAR NED DOES NOT EXCEED THE OWN FUNDS OF THE ASSESSEE. THEREFORE, IN VIEW OF DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIE S & POWER LTD. VS. CIT AND CIT VS. HDFC BANK LTD. (SUPRA), WE HOLD THAT DISALL OWANCE ON ACCOUNT OF INTEREST WAS NOT WARRANTED AND, THUS, DISALLOWAN CE ON ACCOUNT OF INTEREST AMOUNTING TO RS. RS.12,61,00,030/-, RS. 10,56,61,0 19/- & RS. 54,79,30,196/- IN RESPECT OF ASSESSMENT YEARS 2008-09, 2009-10 AND 20 10-11 RESPECTIVELY UNDER SECTION 14A R.W. RULE 8D ARE DELETED. 4.6 NOW COMING TO THE REMAINING DISALLOWANCE OF RS. 1,94,02,842/-, RS. 1,48,50,625 AND RS. 8,35,72,106/- IN RESPECT OF ASS ESSMENT YEARS 2008-09, 2009-10 AND 2010-11 RESPECTIVELY MADE ON ACCOUNT OF OTHER EXPENSES. IT IS THE CASE OF THE ASSESSEE THAT THIS DISALLOWANCE IS ALSO NOT CALLED FOR PARTICULARLY IN VIEW OF THE FACT THAT NO REASON HAS BEEN GIVEN TO R EJECT THE ALLOCATION OF THE ASSESSEE TOWARDS EXPENSES INCURRED FOR EARNING TAX FREE INCOME. IT IS THE CASE OF THE ASSESSEE THAT UNLESS THE ALLOCATION OF EXPENSE S AS DONE BY THE ASSESSEE IS REJECTED BY WAY OF SPEAKING ORDER, THE DISALLOWAN CE TO THE EXTENT IT HAS BEEN DONE AS PER FORMULA LAID DOWN IN RULE 8D IS UNJUSTI FIED, THE DISALLOWANCE CANNOT BE CALCULATED UNDER SECTION14A R.W.RULE 8D UNLESS THE AO RECORDED HIS NON- M/S. VIDEOCON INDUSTRIES LTD. , 32 SATISFACTION TO THE CORRECTNESS OF THE CLAIM OF TH E ASSESSEE. REFERENCE IN THIS REGARD WAS MADE TO THE PROVISIONS OF SECTION 14A(2) AND CASE LAW TO CONTEND THAT UNLESS NON-SATISFACTION IS RECORDED BY THE AO REGARDING THE CLAIM OF THE ASSESSEE, NO DISALLOWANCE UNDER SECTION 14A WOULD B E MADE. 4.7 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. AS PER REQUIREMENT OF SECTION 14A(2), THE AO IS UNDER AN OBLIGATION TO D ETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO AN INCOME WHIC H IS NOT INCLUDED IN THE TOTAL INCOME WITH THE METHOD PRESCRIBED UNDER RULE 8D IN A CASE WHERE AO, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATI SFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDI TURE INCURRED BY IT IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. THEREFORE, WE ARE OF THE OPINION THAT IT WOULD SERVE THE INTER EST OF JUSTICE IF THE ISSUE RELATING TO THESE ADMINISTRATIVE EXPENSES IS RESTO RED BACK TO THE FILE OF AO WITH A DIRECTION TO READJUDICATE THIS ISSUES AS PER PROV ISIONS OF LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF PLACING ALL THE MATERIAL ON RECORD TO SUPPORT ITS CONTENTION AND THEN AFTER CONSIDERING A LL THE MATERIALS, IF AO ARRIVE AT A CONCLUSION THAT DISALLOWANCE CALCULATED BY TH E ASSESSEE IS INCORRECT THEN HE WILL RECORD SUCH NON-SATISFACTION AND THEREAFTER H E WILL PROCEED TO MAKE DISALLOWANCE WITH REGARD TO COMPONENT OF EXPENSES AS PER PROVISIONS OF LAW. 4.8 IN VIEW OF ABOVE DISCUSSION, SINCE ADDITION OF COMPONENT OF INTEREST DISALLOWANCE IS DELETED AS PER PARA 4.5, THIS GRO UND OF THE ASSESSEE FOR A.Y 2008-09, 2009-10 AND 2010-11 IS CONSIDERED TO BE P ARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 5. GROUND NO.1 & 2 OF DEPARTMENTAL APPEAL FOR ASSE SSMENT YEAR 2008-09 AND GROUND NO.3 FOR ASSESSEES APPEAL FOR A.Y 2009- 10 AND A.Y 2010-11 RAISES IDENTICAL ISSUE I.E. REGARDING INCLUSION /EX CLUSION OF DISALLOWANCE MADE M/S. VIDEOCON INDUSTRIES LTD. , 33 UNDER SECTION 14A FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY LD. AR THAT INCLUSION OF DISALLOWANCE UNDER SECTION 14A MAY BE TREATED AS CONSEQUENTIAL. ACCORDINGLY, HE SUBMITTED THAT AFTER DETERMINING TH E DISALLOWANCE UNDER SECTION 14A WHICH IS SUBJECT MATTER OF GROUND NO.2 OF ASSES SEES APPEAL FOR ALL THE IMPUGNED ASSESSMENT YEARS, DIRECTIONS MAY BE GIVEN TO THE AO TO ADD THE SAID AMOUNT TO THE BOOK PROFIT COMPUTED UNDER SECTION 11 5JB OF THE ACT. LD. DR DID NOT HAVE ANY OBJECTION TO SUCH SUBMISSION OF L D. AR. ACCORDINGLY, WE DECIDE THIS GROUND IN FAVOUR OF DEPARTMENT SUBJECT TO THE CONDITION THAT THE AO WILL INCLUDE THE AMOUNT OF DISALLOWANCE FOR THE P URPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT, AS HE WILL RE-COMPUTE AS PER DIRECTION GIVEN IN RESPECT OF GROUND NO.2 OF ASSESSEES APPEA L IN RESPECT OF ALL THE IMPUGNED ASSESSMENT YEARS. 5.1 IN VIEW OF ABOVE DISCUSSIONS THESE GROUNDS AR E CONSIDERED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFOR ESAID. 6. GROUND NO.3 & 4 OF DEPARTMENTAL APPEAL. THE ASS ESSEE HAS EXPORTED MANUFACTURED FINISHED GOODS AND COMPONENTS OF RS.8. 81 CRORES OF ITS AES. WHILE COMPUTING MARGIN OF THE ASSESSEE THE TPO DID NOT INCLUDE EXPORT INCENTIVE RECEIVED BY THE ASSESSEE AS PART OF THE P RICE AND ACCORDINGLY, CORRESPONDING ADJUSTMENT OF RS.17,44,750/- WAS MADE . BEFORE LD. CIT(A) THE ASSESSEE RELIED UPON THE DECISION OF MUMBAI ITAT IN THE CASE OF ARVIVA INDUSTRIES P. LTD. VS. ACIT, 48 SOT 418 TO CONTEND THAT SUCH EXCLUSION BY THE TPO WAS NOT PERMISSIBLE. LD. CIT(A), RELYING UPON THE SAID ORDER HAS HELD THAT THE ACTION OF TPO IN EXCLUDING EXPORT INCENTIVE REC EIVED BY THE ASSESSEE ON ACCOUNT OF EXPORTS TO THE AE WHILE DOING THE BENCH MARKING WAS NOT PROPER. THE REVENUE IS AGGRIEVED AND HAS RAISED AFOREMENTI ONED GROUNDS. M/S. VIDEOCON INDUSTRIES LTD. , 34 6.1 LD. DR RELIED UPON THE ORDER PASSED BY TPO AND ON OTHER THE OTHER HAND, LD. AR RELIED UPON THE AFOREMENTIONED DECISION OF I TAT IN THE CASE OF ARVIVA INDUSTRIES P. LTD. VS. ACIT (SUPRA). 6.2 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. IN THE AFOREMENTIONED DECISION OF MUMB AI TRIBUNAL IN THE CASE OF ARVIVA INDUSTRIES P. LTD. VS. ACIT (SUPRA) IT HAS B EEN HELD THAT THERE CANNOT INDEED BE ANY RATIONAL IN COMPARING DOMESTIC INVOIC E PRICE OF THE GOODS WITH EXPORT INVOICE PRICE OF THE GOODS WITHOUT TAKING IN TO ACCOUNT NEITHER THE EXPORT INCENTIVE WHICH FORM PART OF THE NET REALIZATION O N ACCOUNT OF EXPORTS NOR FOR THE EXPENSES, SUCH AS DISCOUNT AND DOMESTIC SALES PROMOTION EXPENSES, WHICH ARE INCURRED FOR THE SOLE PURPOSE OF DOMESTIC SALE S AND THE TPO WAS CLEARLY IN ERROR IN NOT TAKING INTO ACCOUNT THESE FACTS WHILE COMPARING THE PRICE IN DOMESTIC UNCONTROLLED TRANSACTIONS AND INTERNATIONA L CONTROLLED TRANSACTIONS. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE, T HEREFORE, AFTER CAREFUL CONSIDERATION, THE MATTER IS CONSIDERED TO BE COVE RED BY AFOREMENTIONED DECISION OF MUMBAI TRIBUNAL AND WE DECLINE TO INTER FERE IN THE RELIEF GRANTED BY LD. CIT(A) AND THESE GROUNDS OF THE REVENUE ARE DIS MISSED. 7. NOW COMING TO GROUND NO.4 OF ASSESSEES APPEAL F OR A.Y 2009-10 AND 2010-11 WHICH RELATES TO TP ADJUSTMENT MADE ON ACCO UNT OF LOANS/ADVANCES GIVEN BY THE ASSESSEE TO ITS AE. THIS ADDITION REL ATES TO INTERNATIONAL TRANSACTION IN RESPECT OF INTEREST ON AMOUNTS ADVANCED BY THE A SSESSEE TO ITS AES AS SHARE APPLICATION MONEY WHICH WAS A SUM OF RS.102,15,55,5 72/-, THE PARTICULARS FOR ADVANCES MADE FOR ASSESSMENT YEAR 2009-10 ARE AS U NDER:- SL.NO. NAME OF THE AES OPENING BALANCES AS ON 01-04-2008(RS.) OUTSTANDING AS ON 31- 03-2009(RS.) 1. PARAMOUNT GLOBAL LTD., HONG KONG 228,85,11,0 71 909,07,34,504 2. POWERKING CORPORATION, CAYMAN ISLANDS NIL 343,60,40,000 3. VENUS CORPORATION LTD., CAYMAN ISLANDS NIL 229,91,15,000 M/S. VIDEOCON INDUSTRIES LTD. , 35 4. EAGLE CORPORATION LTD., CAYMAN ISLANDS 1460,4 0,35,535 1362,61,78,745 5. VIDEOCON GLOBAL LTD., BRITISH VIRGIN ISLANDS NIL 152,59,77,500 6. VIDEOCON GLOBAL ENERGY HOLDINGS LTD., BRITISH VIRGIN ISLANDS NIL 42,45,120 TOTAL 16,89,25,46,605 29,98,22,9 0,869 ON THE ABOVE ADVANCES THE ASSESSEE HAD CHARGED INTE REST @LIBOR + 350 BPS (6.48% PER ANNUM) FOR WHICH CUP METHOD WAS ADOPTED AND IT WAS STATED THAT THESE TRANSACTIONS OF THE ASSESSEE ARE AT ARMS LE NGTH. IT WAS SUBMITTED THAT LIBOR + 350 BPS IS NORMAL INTERNATIONAL FINANCE MAR GIN. IN SUPPORT THE ASSESSEE HAS SUBMITTED A COPY OF TERM SHEET OF FUND S RAISED THROUGH ECB OF WHICH THE RATE OF INTEREST WAS LIBOR + 150 BPS AND IT WAS CLAIMED THAT IN VIEW OF THE EVIDENCE SUBMITTED IN THE SHAPE OF TERM SHEE T OF FUNDS THE INTEREST CHARGED BY THE ASSESSEE FROM ITS AE IS AN INTEREST MORE THAN CHARGED BY THIRD PARTY. HOWEVER, TPO DID NOT ACCEPT SUCH SUBMISSION AND AFTER ANALYZING THE SECURED LOAN FINANCES OF THE ASSESSEE HE HAS WORKED OUT THE AVERAGE RATE OF INTEREST OR COST OF BORROWING AT 6.44% PER ANNUM. ADDING 3% PER ANNUM TO THE SAID RATE ON ACCOUNT OF RISK INVOLVED THE TPO ARRIVED AT INTEREST RATE OF RS.9.44% PER ANNUM AND ARRIVED AT A CONCLUSION THA T THE SAID RATE SHOULD HAVE BEEN CHARGED BY THE ASSESSEE. IN THIS MANNER THE A RMS LENGTH PRICE OF THE IMPUGNED TRANSACTION WAS COMPUTED AND TPO ARRIVED A T A FIGURE OF RS.97,55,83,142/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. 7.1 BEFORE LD. CIT(A) IT WAS SUBMITTED THAT ACCORDI NG TO VARIOUS DECISIONS LIBOR HAS BEEN ACCEPTED AS MOST SUITABLE BENCH MARK , THEREFORE, THE IMPUGNED TRANSACTION OF THE ASSESSEE IS AT ARMS LENGTH AND A DDITION IS LIABLE TO DELETED. HOWEVER, LD. CIT(A) DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE AND RELYING UPON SOME DECISIONS OF ITAT HE HAS HELD THA T FD RATE IS ALSO ONE OF THE METHODS OF BENCH MARKING OF INTERNATIONAL TRANSACTI ONS RELATING TO INTEREST M/S. VIDEOCON INDUSTRIES LTD. , 36 RECEIVED AND FURTHER RISK FACTOR HAS ALSO TO BE LO OKED INTO. THEREFORE, LD. CIT(A) HAS HELD THAT TP ADJUSTMENT WAS RIGHTLY MADE . 7.2 SIMILARLY FOR ASSESSMENT YEAR 2010-11 AN ADJUST MENT OF RS.1,33,08,85,699/- IS MADE. THE ASSESSEE HAD CHAR GED INTEREST @LIBOR 0.55 +420 BPS I.E. 4.75%. HOWEVER, TPO ARRIVED AT ARMS LENGTH INTEREST RATE OF 8.43% (5.43% OF AVERAGE COST OF OPERATING COST + 3% FOR RISK) AND ACCORDINGLY ADDITION OF RS.133.08 CRORES WAS MADE. LD. CIT(A) UPHELD THIS ADDITION RELYING UPON HIS ORDER FOR A.Y 2009-10. 7.3 THE ASSESSEE IS AGGRIEVED BY THE DECISION REN DERED BY LD. CIT(A) ON THE IMPUGNED ADDITION IN RESPECT OF ASSESSMENT YEARS 2 009-10 AND 2010-11. 7.4 THE SUBMISSIONS MADE BEFORE TPO AND LD. CIT(A) WERE REITERATED BEFORE US AND RELYING UPON THE FOLLOWING DECISIONS, IT WAS CONTENDED THAT LD. CIT(A) HAS COMMITTED AN ERROR IN CONFIRMING THE ADDITION WHICH IS LIABLE TO BE DELETED. (I) SHIVA INDUSTRIES & HOLDINGS LTD., VS. ACIT, 14 5 TTJ 497 (CHENNAI), WHEREIN THE TRIBUNAL IN PARA-11 HAS HELD THAT ON TH E TRANSACTIONS BETWEEN THE ASSESSEEE AND ITS AE ARE IN FOREIGN CURRENCY, THEN TRANSACTION IS AN INTERNATIONAL TRANSACTION WHICH HAS TO BE LOOKED UPON BY APPLYI NG THE COMMERCIAL PRINCIPLES INCURRED TO INTERNATIONAL TRANSACTIONS. THUS, THE DOMESTIC PRIME LENDING RATE WOULD HAVE NO APPLICABILITY AND THE IN TERNATIONAL RATE FIXED BEING LIBOR WOULD COME INTO PLAY. THUS, IT WAS HELD THAT LIBOR RATE WAS TO BE CONSIDERED WHILE DETERMINING THE ALP OF INTEREST IN THE TRANSACTIONS BETWEEN THE ASSESSEE AND ITS AE. SINCE THE INTEREST RATE CHARGED BY THE ASSESSEE WAS MORE THAN THE APPLICABLE LIBOR RATE, NO ADDITION WA S CALLED FOR. M/S. VIDEOCON INDUSTRIES LTD. , 37 (II) AURIONPRO SOLUTIONS LTD. VS. ADDL. CIT, ( 2013) 33 TAXMAN.COM 187 (MUM)(TRIB), WHEREIN REFERRING TO VARIOUS DECI SIONS RENDERED BY ITAT IN WHICH LIBOR WAS ACCEPTED AS CORRECT BENCH MARKING, THE TRIBUNAL FOLLOWING THE RULE OF CONSISTENCY HAS ACCEPTED THE LIBOR + 2 % WHICH WAS APPLICABLE DURING THE RELEVANT YEAR. (III) PMP AUTO COMPONENTS (P). LTD. VS. DCIT,(2 014) 50 TAXMAN.COM 272 (MUMBAI TRIB), IN WHICH THE DISALLOWANCE WAS UPHEL D BY THE REVENUE AUTHORITIES ON ALMOST SIMILAR CONTENTION; IT WAS H ELD BY THE TRIBUNAL THAT IN VIEW OF PRINCIPLE OF CONSISTENCY THE ADDITION MADE BY THE DEPARTMENT WAS NOT CALLED FOR AND TPO WAS DIRECTED TO COMPUTE ALP BY C ONSIDERING THE LIBOR + 2% ON LOANS GIVEN BY THE ASSESSEE TO ITS AE. (IV) TATA AUTOCOMP SYSTEMS LTD., VS. ACIT (2012) 5 2 SOT 48 (MUM) IN THIS CASE FOR THE PURPOSE OF DETERMINING ALP IN CASE OF LOAN ADVANCED BY THE ASSESSEE TO ITS AE, WHICH WAS LOCATED IN GERMANY, I T WAS HELD THAT EURIBOR BASED INTEREST RATE WAS MOST APPROPRIATE COMPARABL E UNCONTROLLED RATE. 7.5 RELIANCE WAS ALSO PLACED ON FOLLOWING DECISIONS IN WHICH SIMILAR PROPOSITION HAS BEEN UPHELD. (1) FOUR SOFT LIMITED V. DCIT, 142 TTJ 358. (2) DCIT VS. TECH MAHINDRA (2011) 46 SOT 141 (3) COTTON NATURAL (I) PVT. LTD. VS. DCIT (2013) 32 TAX MAN.COM 219. (4) M/S. AITHENT TECHNOLOGIES PVT. LTD., DELHI ITAT. 7.6 ON THE OTHER HAND, LD. DR PLACED RELIANCE ON PA RA 5.2 OF THE ORDER OF THE TPO. HE ALSO PLACED RELIANCE UPON THE ORDER PASSED BY LD. CIT(A) IN WHICH REFERENCE HAS BEEN MADE TO THE DECISION OF ITAT IN THE CASE OF WIPRO WHICH REPORTED AS 33 TAXMAN.COM 263, WHEREIN FD RATE HAS BEEN CONSIDERED TO BE ONE M/S. VIDEOCON INDUSTRIES LTD. , 38 OF THE METHODS FOR BENCH MARKING SUCH INTERNATIONAL TRANSACTIONS. THUS, IT WAS PLEADED BY LD. DR THAT ADDITION UPHELD BY LD. CIT(A ) SHOULD BE MAINTAINED. 7.7 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. TO CONTEND THAT IMPUGNED TRANSACTIONS OF THE ASSESSEE WITH ITS AES ARE AT ARMS LENGTH, IN VIEW OF THE FACT THAT INTE REST CHARGED BY THE ASSESSEE IS IN ACCORDANCE WITH THE LIBOR WHICH IS AN ACCEPTED BENC H MARKING FOR SUCH TRANSACTION, THE ASSESSEE HAS PLACED RELIANCE ON VA RIOUS DECISIONS WHICH HAVE BEEN REFERRED TO IN EARLIER PART OF THIS ORDER. FO R THE SAKE OF BREVITY REFERENCE IS NOT AGAIN MADE TO THOSE DECISIONS. AS AGAINST T HAT LD. CIT(A) HAS UPHELD THE ADDITION MADE BY TPO ON THE BASIS OF CERTAIN OBS ERVATIONS MADE IN THE CASE OF AURIONPRO SOLUTIONS LTD. VS. ADDL. CIT (SUPRA) IN WHICH THOUGH THE OBSERVATION REFERRED TO BY LD. CIT(A) ARE THERE B UT ULTIMATELY IN PARA 8.13 THE TRIBUNAL HAS ACCEPTED THE APPLICABILITY OF LIBOR AS PER FOLLOWING OBSERVATIONS: 8.13 THOUGH IN PRINCIPLE WE DO CONCUR WITH THE VIE W OF I )RP ON THIS ISSUE, HOWEVER, SINCE (LIE ISSUE OF LI BOR HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN VARIOUS CASES AS RELIED UPON BY THE ASSESSEE (SUPRA ) THEREFORE, TO MAINTAIN THE RULE OF CONSISTENCY, WE FOLLOW THE DECISION OF (HE COORDINA TE BENCHES OF THIS TRIBUNAL, AND ACCEPT LIBOR FOR BENCHMARKING INTEREST ON INTEREST FREE LOANS TO AES. SINCE THE LIBOR IS A RATE APPLICABLE IN THE TRANSACTIONS BETW EEN THE BANKS AND FURTHER THE LOANS ADVANCED BY THE BANK TO CLIENTS ARE SECURE BY SECURITY AND GUARANTEE; THEREFORE, A LOAN WHICH HAS BEEN ADVANCED WITHOUT ANY SECURITY OR GUARANTEE AS IN THE CASE OF THE ASSESSEE HAS TO BE BENCHMARK BY TAKING THE ARM S LENGTH INTEREST RATE AS LIBOR PLUS. THOUGH THE TPO TOOK ALP AS LIBOR + 3%; HOWEVE R. IN OUR VIEW, THE APPROPRIATE I-ATE WOULD HE LIBOR PLUS 2%. WE ACCOR DINGLY, DIRECT THE AO/TPO TO DETERMINE THE ARMS LENGTH INTEREST BY CONSIDERING THE LIBOR PLUS 2% ON THE MONTHLY CLOSING BALANCE OF ADVANCES DURING THE FIN ANCIAL YEAR RELEVANT TO THE AY UNDER CONSIDERATION. 7.8 AFTER REFERRING TO THE OBSERVATIONS OF THE TRI BUNAL UPTO PARA 8.12 LD. CIT(A) HAS FURTHER REFERRED TO THE DECISION IN THE CASE OF WIPRO LTD. VS. DCIT (SUPRA), WHICH IS NOT A DECISION RENDERED IN RESPEC T OF TP ADJUSTMENT. THUS, THE BASIS ADOPTED BY LD. CIT(A) TO UPHOLD THE ADDITION IS INCORRECT. THE TRIBUNAL M/S. VIDEOCON INDUSTRIES LTD. , 39 IN ALL THE DECISIONS RELIED UPON BY LD. AR HAS ADOP TED THE RULE OF CONSISTENCY AND HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE TH AT BENCH MARKING OF ALP OF SUCH TYPE OF TRANSACTIONS SHOULD BE IN ACCORDANCE WITH LIBOR RATES. 7.9 REFERENCE CAN ALSO BE MADE TO THE LATEST DECISI ON OF ITAT MUMBAI, WHICH IS DATED 22/8/2014 IN THE CASE OF AURIONPRO SOLUTIONS LTD. VS. ADDL. CIT(SUPRA) IN WHICH APPLICABILITY OF LIBOR HAS BEEN ACCEPTED BY THE TRIBUNAL AS PER FOLLOWING OBSERVATIONS: 9. ON PRINCIPLE, WE DO CONCUR WITH THE VIEW OF TH E CO-ORDINATE BENCH IN THE ABOVE SAID DECISION THAT THE ASSESSEE IS A TESTED PARTY AND EC ONOMIC/COMMERCIAL AS WELL AS GEOGRAPHICAL CONDITION IN WHICH THE ASSESSEE IS DOING BUSINESS A RE RELEVANT TO HE CONSIDERED FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE. HOWE VER, THE TRIBUNAL HAS FOLLOWED THE EARLIER DECISION OF THE CO-ORDINATE BENCH TO MAINTA IN THE RULE OF CONSISTENCY AND ACCORDINGLY DIRECTED THE TPO/ASSESSING OFFICER TO DETERMINED TH E ARMS LENGTH PRICE BY CONSIDERING THE LIBOR + 2% ON THE LOAN GIVEN TO THE AE. ACCORDINGLY , TO MAINTAIN THE CONSISTENCY ON THE POINT, WE DIRECT THE ASSESSING OFFICER/TPO TO DETER MINE THE ARMS LENGTH INTEREST BY CONSIDERING THE LIBOR + 2% ON THE TRANSACTION OF LO AN GIVEN TO THE AE. IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE OPINION THAT SINCE ASSESSEE IS CHARGING INTEREST FROM ITS AE AT LIBOR STANDARDS, T HEREFORE, THE IMPUGNED ADDITION FOR BOTH THE YEARS IS LIABLE TO BE DELETED AND THE SAME IS DELETED. GROUND NO.4 FOR A.Y 2009-10 AND GROUND NO.4 FOR A.Y 2010-11 ARE ALLOWED AND IMPUGNED ADDITIONS ARE DELETED. 8. GROUND NO.5 FOR ASSESSMENT YEAR 2009-10 AND 2010 -11 ARE COMMON. IN RESPECT OF ASSESSMENT YEAR 2009-10 THE AGGREGATE AD DITION OF RS.6,07,07,166/- IS MADE ON ACCOUNT OF TP ADJUSTMENT IN RESPECT OF SHAR E APPLICATION MONEY. IT HAS THREE COMPONENTS AS UNDER: (I) IN RESPECT OF SHARE APPLICATION MONEY ADVANCED TO VIDEOCON GLOBAL LTD. ON WHICH ASSESSEE HAS CHARGED INTEREST @ 4.68% (LIBOR 1.18% + 350BPS ) ADDITION OF RS.5,60,03,793/- HAS BEEN MADE. M/S. VIDEOCON INDUSTRIES LTD. , 40 (II) SHARE APPLICATION MONEY TO GLOBAL ENERGY INC. WHICH IS RE-CHARACTERIZED AS LOAN ADDITION OF RS.15,64,368/-*( WRONGLY MENTIONED AS RS.9,54,265/-) HAS BEEN MADE. (III) SHARE APPLICATION MONEY TO SAPPHIRE OVERSEAS INC., WHICH IS ALSO RE- CHARACTERIZED AS LOAN ADDITION OF RS.37,49,108/- IS MADE. 8.1 IN RESPECT OF A.Y 2010-11 THE IMPUGNED ADDITION IS ONLY WITH RESPECT TO GLOBAL ENERGY INC., CAYMAN ISLAND WHICH IS A SUM O F RS.4,68,685/-. THIS YEAR THE ASSESSEE HAS RECEIVED INTERSEST @ 4.75%. BY AP PLYING INTEREST @12% AN AMOUNT OF RS.7,75,755/- IS COMPUTED OUT OF WHICH A SUM OF RS.3,07,070/- RECEIVED BY THE ASSESSEE AS INTEREST ON SHARE APPL ICATION MONEY WAS REDUCED AND NET ADDITION OF RS.4,68,685/- IS MADE. 8.2 SO AS IT RELATES TO ADDITION MADE WITH REGARD T O VIDEOCON GLOBAL LTD. IN VIEW OF THE SUBMISSIONS MADE IN RESPECT OF GROUND NO.4, IT IS THE CONTENTION OF THE ASSESSEE THAT SINCE ASSESSEE HAS APPLIED LIB OR RATES FOR BENCH MARKING THE TRANSACTIONS, NO ADDITION IS CALLED FOR. 8.3 IN RESPECT OF SHARE APPLICATION MONEY ADVANCED TO VIDEOCON GLOBAL LTD.(COMMON ADDITION IN RESPECT OF BOTH THE ASSESSM ENT YEARS) IT IS THE CASE OF THE REVENUE THAT AS PER MCA REGULATIONS, IF SAME IS NOT REFUNDED WITHIN PRESCRIBED TIME, THEN THE APPLICANT WOULD BE ENTITL ED TO GET INTEREST @12%. REFERRING TO THE SAID REGULATION TPO APPLIED INTER EST @12% AND AFTER GIVING SET OFF OF INTEREST CHARGED BY THE ASSESSEE BALANCE A MOUNT WAS ADDED AS TP ADJUSTMENT. LD. CIT(A) HAS UPHELD SUCH ADDITION A GAINST WHICH THE ASSESSEE IS AGGRIEVED. IT IS THE CASE OF THE ASSESSEE THAT MC A REGULATION COULD NOT BE APPLIED IN RELATION TO TRANSACTION OF THE ASSESSEE WITH ITS AE, WHICH IS IN FOREIGN CURRENCY AND ITS ALP SHOULD BE EVALUATED AS PER LIBOR RATES. COPY OF THESE REGULATIONS IS PLACED IN THE PAPER BOOK AT PA GES 156 TO 159. THE M/S. VIDEOCON INDUSTRIES LTD. , 41 NOTIFICATION IS ISSUED ON 14/12/2011 AND IN RULE 8 SUB-RULE(4) HAS BEEN INCORPORATED, WHICH READ AS UNDER: (4) ANY ALLOTMENT OF SECURITIES SHALL BE COMPLETED WITHIN SIXTY DAYS FROM THE RECEIPT OF APPLICATION MONEY AND IN CASE THE COMPANY IS NOT ABLE TO ALLOT THE SECURITIES WITHIN THE SAID PERIOD OF SIXTY DAYS, IT SHALL REPAY THE A PPLICATION MONEY WITHIN FIFTEEN DAYS THEREAFTER, FAILING WHICH IT WILL BE REQUIRED TO BE RE-PAID WITH INTEREST AT THE RATE OF TWELVE PERCENT PER ANNUM: PROVIDED THAT THE MONIES RECEIVED ON SUCH APPLICATI ON SHALL BE KEPT IN A SEPARATE BANK ACCOUNT AND SHALL NOT BE UTILIZED FOR ANY PURP OSE OTHER THAN- (I) FOR ADJUSTMENT AGAINST ALLOTMENT OF SECURITIES; OR (II) FOR THE REPAYMENT OF MONIES WHERE THE COMPANY IS UN ABLE TO ALLOT SECURITIES. 8.4 THE CONTENTION OF THE ASSESSEE THAT APPLYING A FOREMENTIONED RULES NO TP ADJUSTMENT CAN BE MADE IS CORRECT FOR MORE THAN O NE REASON. FIRSTLY; THE SAID NOTIFICATION IS ISSUED ON 14/12/2011 AND WILL NOT BE APPLICABLE EITHER TO ASSESSMENT YEAR 2009-10 OR ASSESSMENT YEAR 2010-11. SECONDLY; IT IS NOT DESCRIBED THAT THE SIMILAR RULE WOULD BE APPLICABLE TO THE ASSESSEE WHERE SUCH APPLICATION IS MADE TO FOREIGN ENTITY I.E. AES OF THE ASSESSEE. THEREFORE, THE BASIS ADOPTED BY TPO IN THE SHAPE OF MCA REGULATIO N CANNOT BE APPLIED TO THE PRESENT CASE. THUS, ADDITION ON THE BASIS OF AFORE MENTIONED MCA REGULATION CANNOT BE MADE. IF THE VERY BASIS ADOPTED BY TPO A ND UPHELD BY LD. CIT(A) IS INCORRECT THEN THE TRANSACTION OF THE ASSESSEE W ITH ITS FOREIGN AE HAS TO BE EVALUATED AS PER INTERNATIONAL STANDARDS WHICH IS L IBOR RATES. IT IS NOT DISPUTED BY THE REVENUE THAT THE INTEREST RATE CHARGED BY TH E ASSESSEE TO ITS AE IS NOT IN ACCORDANCE WITH THE LIBOR RATES. IN VIEW OF ALL TH ESE FACTS AND ABOVE POSITION OF LAW, WE ARE OF THE OPINION THAT THE INTEREST CHA RGED BY THE ASSESSEE BEING IN ACCORDANCE WITH LIBOR STANDARDS, NO FURTHER ADDITIO N IS CALLED FOR. THE IMPUGNED ADDITION MADE IN RESPECT OF SHARE APPLICAT ION ADVANCED BY THE ASSESSEE TO ITS AE NAMELY VIDEOCON GLOBAL LTD. FOR BOTH THE YEARS IS DELETED. M/S. VIDEOCON INDUSTRIES LTD. , 42 SO FAR AS IT RELATES TO SHARE APPLICATION MONEY ADV ANCED BY THE ASSESSEE TO GLOBAL ENERGY INC., IN RESPECT OF A.Y 2009-10 THOUG H IT IS THE CONTENTION OF THE ASSESSEE THAT NO ADDITION COULD BE MADE AS THIS IS IN THE NATURE OF CAPITAL ACCOUNT TRANSACTION AND RELIANCE IN THIS REGARD IS PLACED ON THE RECENT DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES VS. DCIT,WRIT PETITION NO.871/2014. HOWEVER, NO MATERI AL HAS BEEN PLACED ON RECORD TO SHOW THAT THE TRANSACTION OF THE ASSESSEE IS IN THE NATURE OF CAPITAL. MOREOVER, WITH REGARD TO TRANSACTION WITH VIDEOCON GLOBAL LTD., IT IS THE CASE OF THE ASSESSEE THAT THE SAME IS ALSO ON ACCOUNT OF CAPITAL BUT WITHOUT SUPPORTING MATERIAL HAVING BEEN FILED, THE CONTENTION OF THE A SSESSEE CANNOT BE ACCEPTED. IT IS ALSO A MATTER OF FACT THAT IN A.Y 2010-11, TH E ASSESSEE HAS RECEIVED INTEREST ON SUCH MONEY AT LIBOR RATES. THEREFORE, KEEPING I N VIEW OUR DECISION RENDERED IN RESPECT OF ADVANCE MADE TO VIDEOCON GLO BAL LTD., WE HOLD THAT INTEREST ACCORDING TO LIBOR STANDARDS SHOULD HAVE B EEN CHARGED BY THE ASSESSEE AND ADDITION TO THAT EXTENT WILL BE LIABLE FOR UPHOLDING. THEREFORE, WE DIRECT THE AO TO RE-COMPUTE THE AMOUNT OF INTEREST APPLYING LIBOR RATES IN RESPECT OF SHARE APPLICATION MONEY ADVANCED TO M/S. GLOBAL ENERGY INC. AND TP ADJUSTMENT SHOULD BE MADE ACCORDINGLY. 8.5 SO FAR AS IT RELATES TO ADDITION MADE IN RESPEC T OF SHARE APPLICATION MONEY TO SAFFAIR OVERSEAS INC., IT IS THE CASE OF THE AS SESSEE THAT THE SAID CONCERN IS NOT AE OF THE ASSESSEE AND SUCH FACT HAS BEEN ACCEPTED BY TPO IN SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2010-11. LD. CIT(A) DID NOT A CCEPT SUCH SUBMISSION OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO MATERIAL T O SUPPORT SUCH CONTENTION. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT IT WILL SERVE THE INTEREST OF JUSTICE IF THIS ISSUE TO THIS EXTENT IS VERIFIED BY THE AO THAT WHETHER OR NOT THE SAID CONCERN IS AE O F THE ASSESSEE. THEREFORE, THE ISSUE IS RESTORED BACK TO THE FILE OF AO FOR RE-EXAMINATION IN THE MANNER AFORESAID. THIS IS BEING DONE IN VIEW OF THE FACT THAT NO SUCH TP ADJUSTMENT M/S. VIDEOCON INDUSTRIES LTD. , 43 HAS BEEN MADE IN RESPECT OF A.Y 2010-11. THEREFORE , TO THIS EXTENT THE MATTER IS RESTORED BACK TO THE FILE OF AO AND IF IT IS FOU ND THAT SAPPHIRE OVERSEAS INC. IS NOT AN AE OF THE ASSESSEE THEN NO TP ADDITION W ILL BE MADE WITH REGARD TO THE SAID AMOUNT. 8.6 SO FAR AS IT RELATES TO ADDITION MADE IN RESPEC T OF A.Y 2010-11, THE INTEREST CHARGED BY THE ASSESSEE IS @4.75% WHICH IS IN ACCORDANCE WITH LIBOR RATES, WHICH IS 4.68%. THE ADDITION HAS BEEN MADE BY THE TPO ACCORDING TO THE AFOREMENTIONED MCA REGULATION, WHICH WE HAVE HELD T HAT THE SAME WOULD NOT BE APPLICABLE TO IMPUGNED TRANSACTION. THEREFORE, THE IMPUGNED ADDITION FOR A.Y 2010-11 IS LIABLE FOR DELETION AND IS DELETED. 8.7 IN VIEW OF ABOVE DISCUSSIONS GROUND NO.5 OF THE ASSESSEES APPEAL FOR A.Y 2009-10 IS PARTLY ALLOWED AND FOR A.Y 2010-11 I T IS ALLOWED. 9. GROUND NO.6 OF ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 AND 2010-11 RAISES A COMMON ISSUE I.E. TP ADJUSTMENT ON ACCOUNT CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE TO ITS AE. THE ASSESSEE PROVIDED GUARANTEE TO ITS THREE AES NAMELY SKY BILLION TRADING LTD.,(S BTL), VIDECON GLOBAL LTD. (VGL)AND VIEDEOCON GLOBAL ENGINEERING HOLDING LTD., (VGEHL) AND ARMS LENGTH PRICE OF SUCH GUARANTEE WAS TAKEN AT NIL. THE TPO EVALUATED THE ALP OF GUARANTEE GIVEN TO EACH AE SEPARATELY. THE TPO AR RIVED AT A CONCLUSION THAT ALP OF THE GUARANTEE PROVIDED BY THE ASSESSEE TO I TS AES WOULD BE 3.247%, 4.688% AND RS.3.097% IN RESPECT OF SBTL, VGL AND V GEHL RESPECTIVELY. ACCORDINGLY, THE AMOUNT OF RS.11,52,36,030/-, RS.24 ,40,19,776/- AND RS.21,98,25,060/- WAS ADDED AS TP ADJUSTMENT IN THE HANDS OF SBTL, VGL AND VGEHL RESPECTIVELY. M/S. VIDEOCON INDUSTRIES LTD. , 44 9.1 SIMILARLY FOR ASSESSMENT YEAR 2010-11 THE GUARA NTEE RATE WAS FIXED @ 3.253%, 3.8037% AND 3.0364% FOR GIVING CORPORATE G UARANTEE TO SBTL, VGL AND VGEHL RESPECTIVELY AND ADDITION OF RS.10,94,6 2,847/-, RS.2,82,06,822/- AND RS.21,55,23,672/- WAS MADE FOR GIVING CORPORAT E GUARANTEE TO SBTL, VGL AND VGEHL RESPECTIVELY. 9.2 THE ADDITION HAS BEEN UPHELD BY LD. CIT(A) ON T HE BASIS OF DECISION OF ITAT IN THE CASE OF M/S. MAHINDRA & MAHINDRA LTD., ORDER DATED 6/6/2012 IN ITA NOS. 8597/MUM/10 AND 7999/MUM/2011, WHEREIN MUM BAI BENCH HAS HELD THAT GUARANTEE FEE OF 3% WOULD REPRESENT THE ALP. LD. CIT(A) HAS DISCARDED THE SUBMISSION OF THE ASSESSEE THAT THE IMPUGNED T RANSACTIONS ENTERED INTO BY THE ASSESSEE DO NOT COME WITHIN THE PURVIEW OF I NTERNATIONAL TRANSACTION AND VARIOUS DECISIONS RELIED UPON BY THE ASESSEE HAVE A LSO BEEN DISTINGUISHED BY LD. CIT(A). LD. CIT(A) HAS ALSO DISCARDED THE CONTENT ION OF THE ASSESSEE THAT (I) PROVIDING CORPORATE GUARANTEE BY THE ASSESSEE TO IT S AE IS JUST A PROCEDURAL REQUIREMENT OF THE BANKS/LENDERS AS THE PRIMAR Y SECURITY AGAINST CREDIT FACILITY AND MARGIN IS PROVIDED BY THE AE THEMSELV ES;(II) THE AE HAD OBTAINED THE LOANS AS PER THE PREVAILING MARKET RATE IN THE AES COUNTRY(III) THERE WAS NO BENEFIT OF LOWER INTEREST RATE DERIVED BY THE AE DU E TO CORPORATE GUARANTEE, FURNISHED BY THE ASSESSEE; (IV) THE FACT THAT LOANS FOR WHICH ASSESSEE HAS GIVEN GUARANTEE WERE PRIMARILY COVERED BY PLEDGED SECURIT IES, HYPOTHECATION OF DEBTORS BALANCES AND OTHER ASSETS OF THE ASSESSEE A S IS EVIDENT FROM THE DETAILS OF LOANS VIZ-A-VIZ SECURITIES THERE APART FROM CORPORA TE GUARANTEE PROVIDED BY THE ASSESSEE; (V) DETAILS FURNISHED IN TABLE DESCRIBE D THAT THE VALUE OF SECURITIES PROVIDED BY THE AES TO OBTAIN LOANS FROM BANKS/LEND ERS WAS MUCH MORE THAN THE LOANS OBTAINED. IN THE CASE OF SBTL IT WAS 2. 27 TIMES. IN THE CASE OF VGL IT WAS 3.61 TIMES AND IN THE CASE OF VGEHL IT WAS 1 .35 TIMES. ALL THESE SUBMISSIONS OF THE ASSESSEE AND TABLE ARE RECORDED AT PAGES 104 AND 105 OF THE ORDER PASSED BY LD. CIT(A). HOWEVER, LD. CIT(A) DI D NOT ACCEPT ANY OF SUCH M/S. VIDEOCON INDUSTRIES LTD. , 45 SUBMISSION AND REFERRING TO THE AFOREMENTIONED DECI SION OF MUMBAI ITAT IN THE CASE OF MAHINDRA & MAHINDRA(SUPRA), HE HAS UPH ELD THE ADDITION AGAINST WHICH THE ASSESSEE IS AGGRIEVED AND HAS RAISED GROU ND NO.6. 9.3 SIMILARLY, FOR ASSESSMENT YEAR 2010-11 LD. CIT( A) HAS FOLLOWED HIS ORDER FOR A.Y 2009-10 AND HAS UPHELD THE ADDITION. THE A SSESSEE IS AGGRIEVED. 9.4 AFTER NARRATING THE FACT, IT WAS SUBMITTED BY L D. AR THAT THE ADDITION IS NOT WARRANTED AND HAS WRONGLY BEEN UPHELD BY LD . CIT(A). HE SUBMITTED THAT GIVING CORPORATE GUARANTEE IS NOT AN INTERNAT IONAL TRANSACTION AS PER DECISION OF DELHI ITAT IN THE CASE OF BHARATI AIRTE L LTD. VS. ADDL.CIT (2004) 43 TAXAMAN.COM 150 (DELHI-TRIB). IT WAS SUBMITTED THAT IN THE SAID DECISION TRIBUNAL HAS ANALYZED THE PROVISIONS OF SECTION 92B R.W. EXPLANATION INSERTED WITH RETROSPECTIVE EFFECT FROM 1/4/2002 VIDE FINANC E ACT 2012 AND AFTER ANALYZING THE PROVISIONS, THE TRIBUNAL HAS RULED T HAT SINCE CORPORATE GUARANTEES DO NOT HAVE ANY IMPACT ON INCOME, PROFIT, LOSSES OR THE ASSETS OF THE ASSESEE, THEREFORE, THEY WILL NOT FALL WITHIN THE AMBIT OF INTERNATIONAL TRANSACTION DEFINED UNDER SECTION 92B. FOR RAISING SIMILAR PR OPOSITION RELIANCE IS ALSO PLACED ON THE DECISION OF CHENNAI ITAT IN THE CASE OF REDINGTON (INDIA) LTD. VS. JCIT (2014) 49 TAXAMAN.COM, 146 (CHENNAI-TRIB). 9.5 WITHOUT PREJUDICE TO THE ABOVE CONTENTION IT WA S SUBMITTED BY LD. AR THAT IF THE AFOREMENTIONED CONTENTION OF THE ASSESS EE IS NOT ACCEPTED THEN ACCORDING TO THE FOLLOWING DECISIONS BENCH MARK OF GUARANTEE RATE SHOULD BE RESTRICTED TO 0.20% TO 0.50%. (I) EVEREST KANTO CYLINDER LTD. VS. DCIT (LTU), (2013) 34 TAXMAN.COM 19(MUMBAI TRIB.) (ALP GUARANTEE COMMISSION 0.50%) M/S. VIDEOCON INDUSTRIES LTD. , 46 (II) ASIAN PAINTS LTD. VS. ADDL. CIT,ITA NO.7801/MUM/201 0, A.Y.2006-07 ORDER DATED 29/10/2013 (ALP GUARANTEE COMMISSION 0. 20%) (III) ACIT VS. NIMBUS COMMUNICATION LTD. , (2013) 34 TAXM ANN.COM 298 (MUMBAI TRIB.)(ALP GUARATEE COMMISSION 0.50%) IN THE ALTERNATIVE IT WAS SUBMITTED THAT THE ARMS L ENGTH GUARANTEE FEE SHOULD HAVE BEEN CONSIDERED AS AMOUNT OF MARGIN MONEY KEPT IN THE FORM OF FIXED DEPOSIT BY THE AE. REFERENCE IN THIS REGARD WAS M ADE TO PAGE 129 OF THE PAPER BOOK. 9.6 ON THE OTHER HAND, IT WAS SUBMITTED BY LD. DR T HAT TPO HAS DISCUSSED THIS ISSUE AT LENGTH AND HAS EVALUATED THE ALP OF T HE CORPORATE GUARANTEE GIVEN BY THE ASSESSEE AND THE SAME BEING BASED UPON CORRE CT FACTORS, NO RELIEF SHOULD BE GRANTED TO THE ASSESSEE. HE SUBMITTED THAT LD. CIT(A) AFTER CONSIDERING THE ORDER OF TPO AND SUBMISSIONS OF THE ASSESSEE HAS RI GHTLY UPHELD THE ADDITION AND THESE GROUNDS OF THE ASSESSEE SHOULD BE DISMISS ED. 9.7 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. IT IS FOREMOST CASE OF THE ASSESSEE T HAT EVEN AFTER THE AMENDMENT IN SECTION 92B BY AMENDING EXPLANATION TO SECTION 9 2B, A CORPORATE GUARANTEE ISSUED FOR THE BENEFIT OF THE AE WHICH DOES NOT INV OLVE ANY COST TO THE ASSESSEE AND WHICH DOES NOT HAVE ANY BEARING ON PROFITS, INC OME, LOSSES OR ASSETS OF THE ENTERPRISE, WILL NOT FALL WITHIN THE AMBIT OF INT ERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B OF THE ACT. FOR THIS PURPOS E RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF BHARATI AIRTEL LTD. VS. ACIT (SUPRA), WHICH IS LATER ON FOLLOWED BY CHENNAI ITAT IN THE CASE OF REDINGTON I NDIA LTD. VS. JCIT (SUPRA). IN THE ALTERNATIVE IT IS THE CONTENTION OF THE ASSE SSEE THAT IF ABOVE ARGUMENT IS NOT ACCEPTED THEN BENCH MARK OF THE GUARANTEE RATE SHOULD BE RESTRICTED TO M/S. VIDEOCON INDUSTRIES LTD. , 47 0.20% TO 0.50% FOR WHICH ALSO ASSESSEE HAS RELIED U PON THE DECISIONS OF THE TRIBUNAL WHICH HAVE BEEN MENTIONED IN THE EARLIER PART OF THIS ORDER. 9.8 WE HAVE ALSO CAREFULLY CONSIDERED SUCH SUBMISSI ONS OF LD.AR AND WE HAVE CAREFULLY GONE THROUGH THE DECISION OF CO-ORD INATE BENCH IN THE CASE OF BHARATI AIRTEL LTD. VS. ACIT (SUPRA), COPY OF WHIC H IS FILED IN THE PAPER BOOK AT PAGES 289 TO 326. IN THE SAID CASE THE ASSESSEE HAD ISSUED CORPORATE GUARANTEE TO DEUTSCH BANK, NEW DELHI BRANCH. THIS CORPORATE GUARANTEE WAS ISSUED ON BEHALF OF ITS AE AND HAD GUARANTEED REPAY MENT FOR WORKING CAPITAL FACILITY NOT EXCEEDING EURO 3.6 MILLION. IT WAS TH E CONTENTION OF THE ASSESSEE THAT SINCE IT DID NOT INCUR ANY COST OR EXPENSES ON ACCOUNT OF ISSUE OF SUCH GUARANTEE AND THE GUARANTEE WAS ISSUED AS PART OF S HAREHOLDER ACTIVITY, THE SAME WAS ISSUED FOR NIL CONSIDERATION. BASED ON MARKET QUOTE OF SUCH CORPORATE GUARANTEE, THE ASSESSEE IN ITS TRANSFER PRICING ST UDY DETERMINED ALP @ 0.65% PER ANNUM. HOWEVER, TPO WHILE BENCH MARKING THE IN TERNATIONAL TRANSACTION RELYING UPON PARA 7.13 OF OECD GUIDELINES APPLYIN G CUP METHOD DETERMINED THE ALP OF GUARANTEE COMMISSION INCOME @ 2.68% PLUS MARK UP OF 200 BASIS POINT ON THE BASIS OF DATA OBTAINED FROM VARIOUS BA NKS. ACCORDINGLY, ALP ADJUSTMENT OF RS.33,10,161 WAS MADE. 9.9 IN THE SAID DECISION TRIBUNAL HAS CONSIDERED TH E SCOPE OF SECTION 92B. REFERRING TO SECTION 92B(1). IT HAS BEEN DESCRIBED THAT INTERNATIONAL TRANSACTIONS CAN BE OF FOLLOWING TYPES: (A) IN THE NATURE OF PURCHASE, SALE OR LEASE OF T ANGIBLE OR INTANGIBLE PROPERTY. (B) IN THE NATURE OF PROVISION OF SERVICES, (C) IN THE NATURE OF LENDING OR BORROWING MONEY,, OR M/S. VIDEOCON INDUSTRIES LTD. , 48 (D) IN THE NATURE OF ANY OTHER TRANSACTION HAVING A BEA RING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRIS E. 9.10 FURTHER DISCUSSING THE SCOPE OF EXPLANATION WH ICH IS INSERTED IN SECTION 92B BY FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT F ROM 1/4/2012, IT IS OBSERVED THAT RESIDUAL TRANSACTION AS MENTIONED IN (D) TYPE OF TRANSACTIONS REFERRED TO IN SECTION 92B WILL BE COVERED BY CLAUSE (C). IN A SITUATION IN WHICH TRANSACTION HAS NO BEARING ON PROFITS, INCOMES, LOSSES OR ASSET S OF SUCH ENTERPRISES, THE TRANSACTION WILL BE OUTSIDE THE AMBIT OF EXPRESSION INTERNATIONAL TRANSACTIONS AND THUS AFTER ELABORATE DISCUSSION OF THE PROVISIO NS OF SECTION 92B(1) AND EXPLANATION THERE TO, IT HAS BEEN HELD THAT A COR PORATE GUARANTEE ISSUED FOR THE BENEFITS OF THE AE WHICH DOES NOT INVOLVE ANY COST TO THE ASSESSEE AND WHICH DOES NOT HAVE ANY BEARING ON PROFIT, INCOMES, LOSSE S OR ASSETS OF ENTERPRISES, WILL BE OUTSIDE THE AMBIT OF INTERNATIONAL TRANS ACTION. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE SAID DECISION A RE REPRODUCED BELOW. 31. IN THIS LIGHT NOW, LET US REVERT TO THE PROVIS IONS OF CLAUSE (C) OF EXPLANATION TO SECTION 92 [3 WHICH PROVIDES THAT THE EXPRESSION INTERNATIONAL TRANSACTION SHALL INCLUDE CAPITAL FINANCING, INCLUDING ANY TYPE OF L ONG-TERM OR SHORT-TERM BORROWING, LENDING OR GUARANTEE, PURCHASE OR SALE OF MARKETABL E SECURITIES OR ANY TYPE OF ADVANCE, PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS. IN VIEW OF THE DISC USSIONS ABOVE, THE SCOPE OF THESE TRANSACTIONS, AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92 B READ WITH SECTION 92B(L), IS RESTRICTED TO SUCH CAPITAL FINAN CING TRANSACTIONS, INCLUDING INTER ALIA ANY GUARANTEE, DEFERRED PAYMENT OR RECEIVABLE OR AN Y OTHER DEBT DURING THE COURSE OF BUSINESS, AS WILL HAVE A BEARING ON THE PROFITS, I NCOME , LOSSES OR ASSETS OR SUCH ENTERPRISE. THIS PRE-CONDITION ABOUT IMPACT ON PRO FITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES IS A PRE-CONDITION EMBEDDED IN SEC TION 92B(L) 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. THE CONTENTS OF THE EXPLANATION FORTIFIES, RATHER THAN MITIIGATES, THE SIGNIFICANCE OF EXPRESSION HAVING A BEARING ON PROFITS, INCOME, LOSSES OR ASSETS APPEARING IN SECTION 92 B(L). 32. THERE CAN BE NUMBER OF SITUATIONS IN WHICH AN ITEM MAY FALL WITHIN THE DESCRIPTION SET OUT IN CLAUSE (C) OF EXPLANATION TO SECTION 92 B, AND YET IT MAY NOT M/S. VIDEOCON INDUSTRIES LTD. , 49 CONSTITUTE AN INTERNATIONAL TRANSACTION AS THE COND ITION PRECEDENT WITH REGARD TO THE BEARING ON PROFIT, INCOME, LOSSES OR ASSETS SET O UT IN SECTION 92B(L) MAY NOT BE FULFILLED. FOR EXAMPLE, AN ENTERPRISE MAY EXTEND GUARANTEES FOR PERFORMANCE OF FINANCIAL OBLIGATIONS BY ITS ASSOCIATED ENTERPRISES . THESE GUARANTEES DO NOT COST ANYTHING TO THE ENTERPRISE ISSUING THE GUARANTEES A ND YET THEY PROVIDE CERTAIN COMFORT LEVELS TO THE PARTIES DOING DEALINGS WITH THE ASSOC IATED ENTERPRISE. THESE GUARANTEES THUS DO NOT HAVE ANY IMPACT ON INCOME, PROFITS, LOS SES OR ASSETS OF THE ASSESSEE. THERE CAN BE A HYPOTHETICAL SITUATION IN WHICH A GUARANTE E DEFAULT TAKES PLACE AND, THEREFORE, THE ENTERPRISE MAY HAVE TO PAY THE GUARA NTEE AMOUNTS BUT SUCH A SITUATION, EVEN IF THAT BE SO, IS ONLY A HYPOTHETICAL SITUATIO N, WHICH ARE, AS DISCUSSED ABOVE, EXCLUDED . ONE MAY HAVE ALSO HAVE A SITUATION IN WH ICH THERE IS A RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS AND YET TH ESE RECEIVABLES MAY NOT HAVE ANY BEARING ON ITS PROFITS, INCOME, LOSSES OR ASSETS, F OR EXAMPLE, WHEN THESE RECEIVABLES ARE OUT OF COST FREE FUNDS AND THESE DEBIT BALANCES DO NOT COST ANYTHING TO THE PERSON ALLOWING SUCH USE OF FUNDS. THE SITUATIONS CAN BE E NDLESS, BUT THE COMMON THREAD IS THAT 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 DU RING 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 TINDER SECTION 92B (1) OF THE ACT. 33. IN ANY EVENT, THE ONUS IS ON THE REVENUE AUTHOR ITIES TO DEMONSTRATE THAT THE TRANSACTION IS OF SUCH A NATURE AS TO HAVE BEARING ON PROFITS, INCOME, LOSSES OR ASSETS OF THE ENTERPRISE, AND THERE WAS NOT EVEN A N EFFORT TO DISCHARGE THIS ONUS. SUCH AN IMPACT ON PROFITS, INCOME, LOSSES OR ASSETS HAS TO BE ON REAL BASIS, EVEN IF IN PRESENT OR IN FUTURE, AND NOT ON CONTINGENT OR HYPO THETICAL BASIS, AND THERE HAS TO BE SOME MATERIAL ON RECORD TO INDICATE, EVEN IF NOT TO ESTABLISH IT TO HILT, THAT AN INTRA AE INTERNATIONAL TRANSACTION HAS SOME IMPACT ON PROFIT S, INCOME, LOSSES OR ASSETS. CLEARLY, THESE CONDITIONS ARE NOT SATISFIED ON THE FACTS OF THIS CASE. 34. THERE IS ONE MORE ASPECT OF THE MATTER. THE EXP LANATION TO SECTION 92 B HAS BEEN BROUGHT ON THE STATUTE BY THE FINANCE ACT 2012. IF ONE IS TO PROCEED ON THE BASIS THAT THE PROVISIONS OF EXPLANATION TO SECTION 92 B ENLAR GE THE SCOPE OF SECTION 92 B ITSELF, EVEN AS IT IS MODESTLY DESCRIBED AS CLARIFICATORY IN NATURE, IT IS AN ISSUE TO BE EXAMINED WHETHER AN ENHANCEMENT OF SCOPE OF THIS AN TI AVOIDANCE PROVISION CAN BE IMPLEMENTED WITH RETROSPECTIVE EFFECT. UNDOUBTEDLY, THE SCOPE OF A CHARGING PROVISION CAN BE ENLARGED WITH RETROSPECTIVE EFFECT, BUT AN A NTI-AVOIDANCE MEASURE, THAT THE TRANSFER PRICING LEGISLATION INHERENTLY IS, IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY SEEKS COMPLIANT BEHAVIOUR FROM THE ASSESSEE VIS--VIS CERTAIN NORMS, AND THESE NORMS CANNOT BE GIVEN EFFECT FROM A DATE EARL IER THAN THE DATE NORMS ARE BEING INTRODUCED. HOWEVER, AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSSESSEE ON MERITS AND EVEN AFTER TAKING INTO ACCOUNT THE AMEN DMENTS BROUGHT ABOUT BY FINANCE ACT 2012, WE NEED NOT DEAL WITH THIS ASPECT OF THE MATTER IN GREATER DETAIL. 35. WHEN IT WAS PUT TO THE LEARNED DEPARTMENTAL REP RESENTATIVE THAT THERE COULD BE A VIEW THAT ISSUANCE OF GUARANTEES COULD BE OUTSIDE T HE AMBIT OF SCOPE OF INTERNATIONAL TRANSACTION ITSELF HE SUBMITTED THAT THERE ARE LAR GE NUMBER OF DECISIONS IN INDIA AND ABROAD, NOTABLY IN CANADA, DEALING WITH THE DETERMI NATION OF ARMS LENGTH PRICE OF GUARANTEES. HIS ARGUMENT SEEMED TO BE THAT EVEN SUC H A VIEW IS TO BE UPHELD, ENTIRE TRANSFER PRICING JURISPRUDENCE WILL BE TURNED UPSID E DOWN. THERE DOES NOT SEEM TO BE M/S. VIDEOCON INDUSTRIES LTD. , 50 ANY LEGALLY SUSTAINABLE MERITS IN THIS ARGUMENT EIT HER. AS FOR THE DECISIONS DEALING WITH QUANTUM OF ALP ADJUSTMENTS IN THE GUARANTEE CH ARGES, IN NONE OF THESE CASES THE SCOPE OF INTERNATIONAL TRANSACTIONS TINDER SECTI ON 92B(L) HAS COME UP FOR EXAMINATION. A JUDICIAL PRECEDENT CANNOT HE AN AUTH ORITY FOR DEALING WITH A QUESTION WHICH HAS NOT EVEN COME UP FOR CONSIDERATION IN THA T CASE. IT IS ONLY ELEMENTARY THAT, AS WAS ALSO HELD BY HONB!E BOMBAY HIGH COURT IN TH E CASE OF CIT V. SUDHIR JAYANTILAL MULJI [1995] 214 ITR 154[11996] 84 TAXM AN 205, THAT A JUDICIAL PRECEDENT IS AN AUTHORITY FOR WHAT IT ACTUALLY DECI DES AND NOT WHAT MAY WHAT COME TO FOLLOW FROM SOME OBSERVATIONS MADE THEREIN. AS OBSE RVED BY HONBLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGG. WORKS (P.) LTD. [1 992] 198 ITR 297/64 TAXMAN 442 A JUDGEMENT MUST BE READ AS A WHOLE AND THE OBSERVAT IONS FROM THE JUDGEMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTION WHICH WE RE BEFORE COURT AND THAT A DECISION. TAKES ITS COLOUR FROM THE QUESTIONS IN VOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATE R CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DE CISION.. AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGEMENT, DIVORCED FRO M THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONING. IT WOULD, THEREFORE, BE WHOLLY INAPPROPRIATE TO USE THOSE JUDICIAL PRECEDEN TS, DEALING WITH ALP OF GUARANTEE COMMISSION, TO DECIDE A QUESTION WHICH WAS NOT EVEN BEFORE THOSE JUDICIAL FORUMS. COMING TO THE FOREIGN DECISIONS ON THE ISSUE OF ALP ADJUSTMENTS IN GUARANTEE COMMISSION, WE HAVE NOTED THAT IN THE CASE OF GE CA PITA! CANADA INC (SUPRA), THE TAX COURT OF CANADA HAS INDEED DEALT WITH ALP DETER MINATION OF THE GUARANTEE FEES BUT THEN IT WAS DONE IN THE LIGHT OF THEIR DOMESTIC LAW PROVISIONS WHICH ARE QUITE AT VARIANCE WITH THE INDIAN TRANSFER PRICING LEGISLATI ON. UNLIKE ELABORATE WORDINGS OF SECTION 92 B OF THE INDIAN INCOME TAX. ACT, 1961 DE FINING INTERNATIONAL TRANSACTION, SECTION 247 OF THE CANADIAN INCOME TAX ACT ONLY GIV ES AN INCLUSIVE DEFINITION WHICH DOES NOT EVEN REALLY ATTEMPT TO DEFINE THE EXPRESSI ON TRANSACTION. IT IS NOBODYS CASE THAT THE RELEVANT LEGAL PROVISIONS ARE IN PAN MATERIA. WE NEED NOT, THEREFORE, DEAL WITH THOSE FOREIGN JUDICIAL PRECEDENTS. SUFFIC E TO SAY THAT HAVE REACHED OUR CONCLUSIONS ON THE BASIS OF THE LEGAL PROVISIONS UN DER SECTION 92B AND NO JUDICIAL PRECEDENT, CONTRARY TO OUR UNDERSTANDING OF THESE L EGAL PROVISIONS, HAS BEEN CITED BEFORE US. THERE IS A DECISION OF THE CO-ORDINATE B ENCH IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA), REFERRED TO IN THE DRP ORDER, BU T THAT DECISION DOES NOT DEAL WITH THE SCOPE OF AMENDED SECTION 92B AND LEAVES THE I SSUE OPEN BY STATING THAT POST INSERTION OF EXPLANATION TO SECTION 92B, THE MATTER WILL HAVE TO BE EXAMINED IN THE LIGHT OF THE AMENDED LAW. WE HAVE HELD THAT EVEN AF TER THE AMENDMENT IN SECTION 92 B, BY AMENDING EXPLANATION TO SECTION 92 B, A CORPO RATE GUARANTEE ISSUED FOR THE BENEFIT OF THE AES, WHICH DOES NOT INVOLVE ANY COST S TO THE ASSESSEE, 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. AS WE HAVE DECIDED THE MATTER IN FAVOUR OF THE ASS ESSEE ON THIS SHORT ISSUE, WE SEE NO NEED TO ADDRESS OURSELVES TO OTHER LEGAL ISS UES RAISED BY THE ASSESSEE AND THE JUDICIAL PRECEDENTS CITED BEFORE US. 36. FOR THE REASONS SET OUT ABOVE, AND AS WE HAVE H ELD THAT THE ISSUANCE OF CORPORATE GUARANTEES IN QUESTION DID NOT CONSTITUTE INTERNAT IONAL TRANSACTION WITHIN MEANINGS THEREOF UNDER SECTION 92B, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ALP ADJUST MENT OF RS 33,10,161. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. (EMPHASIS OURS) M/S. VIDEOCON INDUSTRIES LTD. , 51 9.11 SUBSEQUENTLY, CHENNAI BENCH OF ITAT IN THE CAS E OF REDINGTON INDIA LTD. VS. ACIT (SUPRA) FOLLOWING THE AFOREMENTIONE D DECISION HAS ALSO GIVEN THE RELIEF TO THE ASSESSEE, COPY OF THIS DECISION I S FILED AT PAGES 358 TO 381 OF THE PAPER BOOK AND RELEVANT OBSERVATION OF THE TRIBUNAL ARE REPRODUCED BEOW: 92. THE NEXT TP ISSUE RAISED BY THE ASSESSEE IS TH E ADDITION MADE BY THE ASSESSING AUTHORITY ON ACCOUNT OF CORPORATE AND BANK GUARANTE ES. CORPORATE AND BANK GUARANTEES ISSUED BY THE ASSESSEE COMPANY IN FAVOUR OF ITS ASSOCIATES WERE OUTSTANDING IN THE IMPUGNED PREVIOUS YEAR. THE ASSE SSEE DID NOT CHARGE ANY CONSIDERATION FOR THOSE GUARANTEES PROVIDED BY IT. THE TPO HAS MADE THE ALP ADJUSTMENT BY WAY OF COMMISSION ON THE OUTSTANDING AMOUNT OF CORPORATE AND BANK GUARANTEES. THE TPO HAS PROPOSED 2% COMMISSION. THE DRP IN THE LIGHT OF ADJUSTMENTS MADE III THE EARLIER ASSESSMENT YEARS, MODIFIED IT TO 0.85%. 93. THE ASSESSEE HAS NOT GRANTED ANY NEW GUARANTEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, RELIAN CE PLACED BY THE TPO ON THE DEFINITION OF THE TERM INTERNATIONAL TRANSACTION A S RETROSPECTIVELY AMENDED BY THE FINANCE ACT, 2012, DOES NOT SEEM TO BE PROPER. THE CORPORATE AND BANK GUARANTEES PROVIDED BY THE ASSESSEE COMPANY ENABLE ITS ASSOCIA TES TO SECURE CREDIT IN THEIR OVERSEAS JURISDICTION. IT IS NECESSARY FOR THE ASSO CIATE CONCERNS TO DEPEND ON LOCAL SOURCE OF HINDS FOR SUPPORTING THEIR BUSINESS ACTIV ITIES. IT IS SEEN THEREFORE, THAT THE ASSESSEE HAS PROVIDED THE CORPORATE AND BANK GUARAN TEES FOR THE OVER-ALL INTERESTS OF ITS BUSINESS. 94. THE ITAT, DELHI BENCH, IN THE CASE OF BHARTI AI RTEL LTD. (SUPRA), HAS HELD THAT PROVIDING OF CORPORATE GUARANTEE DOES NOT INVOLVE A NY COST TO THE ASSESSEE AND, THEREFORE, IT IS NOT AN INTERNATIONAL TRANSACTION , EVEN UNDER THE DEFINITION OF THE SAID TERM AS AMENDED BY THE FINANCE ACT, 2012. THIS IS BECAUSE, THE GUARANTEE PROVIDED BY AN ASSESSEE DOES NOT HAVE ANY BEARING O N PROFITS, INCOME, LOSS OR ASSETS OF THE ASSESSEE., 95. IN VIEW OF THE NATURE OF CORPORATE AND BANK GUA RANTEES GIVEN BY THE ASSESSEE COMPANY AND IN THE LIGHT OF THE ABOVE ORDER OF THE ITA1 DELHI BENCH, WE HOLD THAT THE TP ADDITION MADE AGAINST CORPORATE AND BANK GUARANT EES IS NOT SUSTAINABLE IN LAW. THE ADDITION IS THEREFORE DELETED. 9.12 NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THE CORPORATE GUARANTEE ISSUED BY THE ASS ESSEE TO ITS AES INVOLVED ANY COST OR IT WAS HAVING BEARING ON PROFITS, INCOME, L OSSES OR ASSETS OF THE AE. IF IT IS SO THEN WE SEE NO REASON TO DIFFER FROM THE A FOREMENTIONED TWO DECISIONS M/S. VIDEOCON INDUSTRIES LTD. , 52 OF THE CO-ORDINATE BENCHES, IN WHICH IT HAS BEEN HE LD THAT THE CORPORATE BANK GUARANTEE GIVEN TO AES WHICH DOES NOT INVOLVE ANY C OST AND WHICH DOES NOT HAVE BEARING ON PROFITS, INCOME, LOSSES OR ASSETS OF THE AE WILL BE OUTSIDE THE PURVIEW OF INTERNATIONAL TRANSACTION. THE OTHER DE CISIONS OF TRIBUNAL IN WHICH BENCH MARKING OF GUARANTEE RATE IS RESTRICTED 0.20 TO 0.50% RENDERED PRIOR TO THE AFOREMENTIONED TWO DECISIONS OF THE TRIBUNAL. APPLYING THE RATIO LAID DOWN BY CO-ORDINATE BENCH IN THE CASE OF BHARATI AIRTEL LTD. VS. ADDL. CIT(SUPRA) , WE HOLD THAT NO TRANSFER PRICING ADJUSTMENT COULD B E MADE WITH REGARD TO CORPORATE GUARANTEE ISSUED BY THE ASSESSEE TO ITS AES AND IMPUGNED ADDITIONS ARE DELETED AND THESE GROUNDS OF THE ASSESSEE ARE A LLOWED. 10. GROUND NO.7 FOR A.Y. 2009-10 & 2010-11 WERE AR GUED TOGETHER BY BOTH THE PARTIES. THESE RELATE TO ADDITION MADE ON ACCO UNT OF BOGUS PURCHASES MADE BY THE ASSESSEE IN RESPECT OF ASSESSMENT YEAR 2009 -10 FROM M/S. SAI ENTERPRISES AND M/S. TRISHUL ENTERPRISES AND IN RE SPECT OF A.Y 2010-11 IN RESPECT OF FOLLOWING ENTITIES: I) M/S. SAI ENTERPRISES, II) M/S. TRISHUL ENTERPRISES, III) M/S. SARVESH ENTERPRISES IV) M/S. G.M TRADING , V) M/S. CRYSTAL ENTERPRISES VI) MAHALAXMI DISTRIBUTORS VII) SURESH LIGHT HOUSE VIII) JAGDISH TRADING CO. LTD. IX) MANEK ENTERPRISES X) P.S. TRADING COMPANY. M/S. VIDEOCON INDUSTRIES LTD. , 53 10.1 IT WAS SUBMITTED THAT FACTS RELATING TO THIS ADDITION IN BOTH THE YEARS ARE SAME. ACCORDING TO FACTS SUMMARIZED BY LD. CIT(A) IN A.Y 2009-10 THE ASSESSEE HAD MADE PURCHASES OF RS.4,66,82,128/- FRO M TRISHUL ENTERPRISES AND RS.18,15,48,263/- FROM M/S. SAI ENTERPRISES. THE I NFORMATION WAS RECEIVED BY THE AO FROM SALES TAX DEPARTMENT INDICATING THAT TH ESE CONCERNS DID NOT ACTUALLY SELL ANY MATERIAL TO THE ASSESSEE BUT ONLY BILLS WERE ISSUES. A STATEMENT WAS GIVEN BY THE PROPRIETOR /PARTNER OF M/S. TRISHU L ENTERPRISES NAMELY MR. PRAKASH MANGAL SHAH ON 1/3/2012, ACCORDING TO WHICH IT WAS CONFESSED BEFORE SALES TAX DEPARTMENT THAT HE IS PROPRIETOR OF TRISH UL ENTERPRISES AND DID NOT MAKE PURCHASE OR SALE OF ANY MATERIAL OF ANY SORT. HE FURTHER STATED THAT HE HAS MERELY ISSUED SALES BILLS WITHOUT ACTUAL DELIVERY O F ANY MATERIAL AND ISSUED FAKE BILLS; WHATEVER AMOUNT WAS RECEIVED TOWARDS THESE A LLEGED SALES BY CHEQUE WAS WITHDRAWN FROM BANK AND RETURNED TO THE ALLEGED PU RCHASER IN CASH. SIMILAR STATEMENT WAS GIVEN BY THE PROPRIETORS/PARTNERS OF M/S. SAI ENTERPRISES NAMELY MR. RAJARAM GOVIND JHADAV TO THE SALES TAX DEPARTMENT ON 1/3/2012. BASED UPON SUCH INFORMATION THE AO REQUIRED THE ASS ESSEE TO FURNISH ALL THE DETAILS RELATING TO THE PURCHASES MADE FROM ABOVE M ENTIONED TWO ENTITIES. THE ASSESSEE FILED ALL REQUIRED DETAILS AND SUBMITTED T HAT THE PURCHASES ARE MADE BY THE ASSESSEE FROM AFOREMENTIONED TWO CONCERNS, WHIC H ARE CONCERNS OF ONE MR. SURESH AMRITLAL PAREKH AND HE HAS SUPPLIED THESE MA TERIAL TO THE ASSESSEE. THE PAYMENT IS MADE BY ACCOUNT PAYEE CHEQUES IN THE NAM E OF THESE PARTIES AND ASSESSEE HAD NEVER TO DEAL WITH THE TWO PERSONS W HOSE AFFIDAVITS HAVE BEEN REFERRED. THE ASSESSEE HAS NOT ONLY GIVEN ALL DE TAILS AND SUBMITTED THAT THE PURCHASES ARE GENUINE BUT ALSO FILED CONFIRMATION LETTER FROM MR. SURESH PAREKH STATING THEREIN THAT THE GOODS WERE ACTUALLY SUPPLI ED TO THE ASSESSEE. IN RESPECT OF DELIVERY OF THE GOODS IT WAS SUBMITTED THAT DELI VERY WAS GIVEN AT THE PLACE OF THE ASSESSEE, THEREFORE, ASSESSEE DOES HAVE EVIDEN CE OF TRANSPORT OF THE GOODS. THE AO REJECTED ALL SUCH CONTENTIONS OF THE ASSESSE E. HOWEVER, THE AO OBSERVED THAT THE RAW MATERIAL SO PURCHASED WAS USE D BY THE ASSESSEE IN THE M/S. VIDEOCON INDUSTRIES LTD. , 54 MANUFACTURING PROCESS AND THE FINISHED GOODS, WHICH HAVE ACTUALLY BEEN SOLD BY THE ASSESSEE AND ASSESSEE WAS ABLE TO PROVE THIS F ACT. THE AO OBSERVED THAT THE FACT OF SALE OF FINISHED GOODS BY THE ASSESSEE CANNOT BE DOUBTED AS THE SAME IS SUBJECT TO CENTRAL EXCISE DUTY. THE NATURAL P RESUMPTION WHICH WOULD BE DRAWN IS THAT GOODS WERE PURCHASED BY THE ASSESSEE, NOT FROM M/S. SAI ENTERPRISES OR M/S. TRISHUL ENTERPRISES AND PURCHAS E OF THESE RAW MATERIALS WERE ACCOUNTED IN THE NAME OF M/S. SAI ENTERPRISES AND M/S. TRISHUL ENTERPRISES. 10.2 IN THE LIGHT OF STATEMENT OF PROPRIETORS OF M/S. SAI ENTERPRISES AND M/S.TRISHUL ENTERPRISES, THE AO OBSERVED THAT THE P AYMENT MADE BY THE ASSESSEE THROUGH CHEQUES/RTGS HAVE COME BACK IN THE FORM OF CASH AND ARE BEING ROTATED OUTSIDE BOOKS OF ACCOUNTS FOR ACTUAL PURCHASE OF RAW MATERIAL FROM UNDISCLOSED PARTIES IN CASH. FROM THE DETAILS THE AO NOTICED THAT FIRST CHEQUE WAS ISSUED BY THE ASSESSEE TO THESE PARTIES ONLY ON 15/5/2008 AND PRIOR TO THAT DATE TOTAL PURCHASES WERE MADE TO THE TUNE OF RS.3,23,11,371/- WHICH WERE TREATED TO BE UNEXPLAINED PURCHASES AND AFTER 15/5/2008 PEAK WAS WORKED OUT AT RS.1,62,00,092/-. THE AGGREGATE OF BOTH THE SE AMOUNTS, A SUM OF RS.4,85,11,463/- WAS ADDED TO THE INCOME OF THE AS SESSEE. 10.3 SIMILARLY, FOR ASSESSMENT YEAR 2010-11 THE AS SESSEE MADE PURCHASES FROM VARIOUS PARTIES WHICH ARE LISTED BELOW: S.NO. PARTIES NAME AMOUNT (IN RS.) 1. M/S. G.M. TRADING 2,15,70,100/- 2. M/S. SARVESH ENTERPRISES 4,48,16,512/- 3. M/S. TRISHUL ENTERPRISES 4,88,51,296/- 4. M/S. SAI ENTERPRISES 3,77,42,702/- 5. M/S. CRYSTAL ENTERPRISES 2,15,92,594/- 6. M/S. MAHALAXMI DISTRIBUTORS 5,50,11,518/- M/S. VIDEOCON INDUSTRIES LTD. , 55 7. SURESH LIGHT HOUSE 9,99,601/- 8. JAGDISH TRADING CO.LTD. 95,38,115/- 9. MANEK ENTERPRISES 42,46,536/- 10. P.S.TRADING COMPANY 53,78,526/- TOTAL 24,97,47,500/- THE ASSESSEE EXPLAINED THE UTILIZATION OF THE AFORE MENTIONED PURCHASES AS FOLLOWS: UTILIZATION OF MATERIAL AS AMOUNT (IN RS.) TREATM ENT IN ACCOUNTS PLANT & MACHINERY/MOULDS 10,81,64,098 ADDITION TO PLANT & MACHINERY TRIAL RUN 9,98,28,029/- CHARGED TO CAPITAL WI P TRIAL PRODUCTION 2,40,00,698/- CHARGED TO CAPI TAL WIP RAW MATERIAL & CONSUMABLES 1,77,54,674/- CHARGED TO PROFIT & LOSS ACCOUNT TOTAL 24,97,47,500/- 10.4 ON THE ABOVE FACTS THE AO MADE ADDITIONS (I) O F RS.1,70,26,380/- ON ACCOUNT OF DEPRECIATION ON PLANT AND MACHINERY AND MOULDS ON THE GROUND THAT THESE PURCHASES WERE FROM HAWALA DEALERS; (II) REDU CED WRITTEN DOWN VALUE OF PLANT AND MACHINERY AND MOULDS BY RS.4,70,51,020/- AND RS.3,99,26,540/- RESPECTIVELY BY HOLDING THAT THE ASSESSEE DOES NOT HAVE EVIDENCE IN RESPECT OF PURCHASE OF SAID PLANT AND MACHINERY AND MOULDS AND ASSESSEE HAS NEVER PROCURED AND PUT THEM INTO USE; (III) A SUM OF RS. 12,38,28,727/- WAS REDUCED FROM THE BOOK VALUE OF CAPITAL WORK-IN-PROGRESS BY HOLDING THAT ASSESSEE COULD NOT PRODUCE COGENT EVIDENCE TO SUBSTANTIATE THE CLA IM OF PURCHASES ACCOUNTED UNDER CAPITAL WORK-IN-PROGRESS ON ACCOUNT OF TRIA L RUN AND TRIAL PRODUCTION. THE ADDITIONS SO MADE HAVE BEEN CONFIRMED BY LD. CI T(A) IN THE IMPUGNED ORDERS. M/S. VIDEOCON INDUSTRIES LTD. , 56 10.5 IT IS THE SUBMISSION OF THE ASSESSEE THAT ALL THESE PURCHASES WERE MADE AGAINST RESPECTIVE BILLS OF THE RESPECTIVE CONCE RNS AND THESE WERE THE CONCERNS OF SHRI SURESH AMRITLAL PAREKH WHO PROVIDED THE MA TERIAL TO THE ASSESSEE AS PER INVOICES. THE PERSONS WHOSE AFFIDAVITS/STATEMENTS ARE PROVIDED BY THE AO TO THE ASSESSEE ARE NOT KNOWN TO THE ASSESSEE DOES NOT HAVE ANY DEALING WITH THEM. IN THOSE STATEMENTS THE NAME OF ASSESSEE DOES NOT A PPEAR AND AS PER BONAFIDE BELIEF OF THE ASSESSEE SHRI SURESH AMRITLAL PAREKH WAS THE PROPRIETOR/OWNER OF M/S. TRISHUL ENTERPRISES AND M/S. SAI ENTERPRISES. THE NATURE OF MATERIAL PURCHASED AND DETAILS OF UTILIZATION OF MATERIAL WA S SUBMITTED TO THE AO. THE PAYMENTS ARE MADE IN THE NAME OF THESE CONCERNS BY ACCOUNT PAYEE CHEQUES/RTGS IN FAVAOUR OF THOSE PARTIES . THE ASS ESSEE HAD SUBMITTED ALL THE DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF TH E PURCHASES. THEREFORE, APPLYING THE DECISION OF THE TRIBUNAL IN THE CASE O F M/S. VIJAY PROTEINS LTD. VS. ACIT, 55 TTJ 76 (AHD) THE AO WAS NOT JUSTIFIED I N MAKING THE ADDITION. 10.6 IT IS ALSO THE CONTENTION OF THE ASSESSEE THA T THE MATERIAL WAS ACTUALLY PURCHASED AND IS PROPERLY ACCOUNTED FOR IN THE BO OKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE PURCHASES WERE SUPPORTED BY THE CONFIRMATION LETTER FURNISHED BY SHRI SURESH AMRITLAL PAREKH, WHICH REMAINED UNCO NTROVERTED. THE AO DID NOT MAKE EXAMINATION OF THE PARTIES AND ASSESSEE WA S NOT PROVIDED WITH THE OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON THE BAS IS OF WHOSE STATEMENT THE ADDITIONS HAVE BEEN MADE. FOR THIS PURPOSE RELIANC E HAS BEEN PLACED ON THE FOLLOWING DECISIONS. (1) M/S. NIKUNJ EXIMP ENTERPRISES (P) LTD., (2012) 35 TAXMANN.COM 384 (BOM): THIS IS THE DECISION OF HONBLE BOMBAY HIGH COUR T. IN THE SAID CASE, TO SUPPORT THE PURCHASES, THE ASSESSEE FILED LETTE R OF CONFIRMATION OF SUPPLIER, COPIES OF BANK STATEMENT SHOWING ENTRIES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TO THE SUPPLIER AND STOCK RECONCILIATION ST ATEMENT, SALE OF PURCHASED M/S. VIDEOCON INDUSTRIES LTD. , 57 GOODS WERE NOT DOUBTED AND SUBSTANTIAL SALES WERE MADE BY THE ASSESSEE TO GOVERNMENT DEPARTMENT. THE BOOKS OF ACCOUNTS WERE ALSO NOT REJECTED. THE TRIBUNAL DELETED THE DISALLOWANCE. IT WAS HELD THA T MERELY BECAUSE SUPPLIER DID NOT APPEAR BEFORE AO OR LD. CIT(A), ADDITION COULD NOT BE MADE AND TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION. (2) ITO VS. PARMANAND (2008) 25 SOT 11 (JODHPUR): IN THIS CASE ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPART MENT THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM TWO PARTIES CERTAIN ADDIT IONS WERE MADE UNDER SECTION 69 OF THE ACT. IN ADDITION TO PURCHASES A FURTHER SUM OF RS.55,632/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE QUESTION RAISED BEFORE THE TRIBUNAL WAS THAT WHETHER SINCE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRY, THE ADDITION MADE WAS JUSTIFIE D, PARTICULARLY KEEPING IN VIEW THE FACT THAT ASSESSEE HAD DISCHARGED PRIMARY ONUS CAST UPON ON HIM BY SHOWING PURCHASES IN THE BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES AND PRODUCING VOUCHERS OF SALE OF GOODS, I T WAS HELD THAT ADDITION WAS LIABLE TO BE DELETED. (3) M/S. JAGDAMBA TRADING CO. VS. ITO (2007) 16 SOT 66 (JODH). IN THIS CASE, ON THE BASIS OF AFFIDAVIT FILED IN SALES TAX PROCEEDING, A SUM OF RS.2,20,000/- WAS ADDED TO THE INCOME OF THE ASSESS EE AND IT WAS HELD THAT IN VIEW OF EVIDENCE FILED BY THE ASSESSEE TO SUPPORT P URCHASES AND PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES ADDITION COULD NOT BE MADE AS AFFIDAVIT OF THE SELLERS WERE FILED DURING THE COURSE OF SALES TAX PROCEEDINGS WOULD HAVE NO EVIDENTIARY VALUE AGAINST THE ASSESSEE PARTICULARL Y ON THE FACT THAT ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE SAID AFFIDAVITS. M/S. VIDEOCON INDUSTRIES LTD. , 58 ( 4) ACIT VS. G.V.SONS , ITA NO,.2238,2239 & 2240/MU M/2012 DATED 05/12/2014: IN THIS CASE DURING THE SURVEY MADE UNDER SECTIO N 133A IN GROUP CASES, WHERE STATEMENTS OF OWNERS OF SAID GROUP WE RE RECORDED, ACCORDING TO WHICH IT WAS STATED THAT THE SAID GROUP WAS PROVIDI NG ACCOMMODATION BILLS TO VARIOUS ENTITIES. IT WAS OBSERVED BY THE TRIBUNAL THAT SURVEY ACTION WAS CONDUCTED ON A THIRD PARTY; THE ASESSEE WAS ONE OF THE PARTIES WHO WAS HAVING BUSINESS RELATION WITH THE SAID GROUP; THERE WAS NO IOTA OF EVIDENCE WITH AO TO PROVE THAT ASSESSEE DID NOT HAVE STRAIGHT DEALIN GS WITH THE MOXIDIAM GROUP. THE ASSESSEE ENTERED EACH OF ITS TRANSACTION IN IT S PRIMARY BOOKS OF ACCOUNT COMPRISING OF LEDGER AND STOCK REGISTER IN ABSENCE OF ANY MATERIAL, ACCORDING TO WHICH IT CAN BE SAID THAT THE ENTRY RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS SHAM, IT COULD NOT BE SAID THAT THE PU RCHASES MADE BY OF THE ASSESSEE WERE THROUGH ACCOMMODATION ENTRIES AND THE ADDITION WAS DELETED. 10.7 ON THE OTHER HAND, IT IS THE CASE OF THE LD. D R THAT SINCE THE PARTIES FROM WHOM THE ASSESSEE HAS PURCHASED THE GOODS HAVE CLEA RLY STATED BEFORE SALES TAX AUTHORITIES THAT THEY DID NOT MAKE ANY SALES, THE, ADDITION WAS RIGHTLY MADE BY THE AO AND HAS RIGHTLY BEEN SUSTAINED BY LD. CIT(A) . LD. DR PLEADED THAT THESE GROUNDS OF THE ASSESSEE SHOULD BE DISMISSED. 10.8 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTE NTIONS HAVE CAREFULLY BEEN CONSIDERED . IT IS ONE OF THE CONTENTIONS OF THE AS SESSEE THAT IN VIEW OF THE EVIDENCES FILED BY THE ASSESSEE TO SUPPORT THE PUR CHASES THE ADDITION COULD NOT BE MADE. IT IS ALSO THE CONTENTION OF THE ASSESSE E THAT ADDITIONS COULD NOT BE MADE MERELY ON THE STATEMENTS MADE BY THE CONCERNE D PARTIES BEFORE SALES TAX AUTHORITIES. IT IS ALSO THE CONTENTION OF THE ASSE SSEE THAT ASSESSEE HAS NOT BEEN PROVIDED WITH THE OPPORTUNITY TO REBUT THE STATEMEN T OF THE OWNERS OF THE CONCERN AND IN ABSENCE OF SUCH OPPORTUNITY OF CROSS EXAMINATION ADDITION COULD NOT BE MADE OR SUSTAINED. WE FOUND SUBSTANCE IN S UCH CONTENTION OF THE M/S. VIDEOCON INDUSTRIES LTD. , 59 ASSESSEE THAT ASSESSEE IS REQUIRED TO BE PROVIDED W ITH REASONABLE AND SUFFICIENT OPPORTUNITY TO REBUT THE EVIDENCE IN THE POSSESSION OF THE DEPARTMENT ON THE BASIS OF WHICH IT IS THE CASE OF THE REVENUE THAT A SSESSEE DID NOT MAKE PURCHASES FROM THESE PARTIES. THIS IN OUR OPINION IS NECESSARY IN VIEW OF THE FACT THAT ACCORDING TO THE FACTS EVIDENCE FILED BY THE ASSESSEE CAN BE SAID TO BE SUFFICIENT TO DISCHARGE THE PRIMARY ONUS AS ASSES SEE HAS PRODUCED INVOICES OF PURCHASES AND PAYMENTS HAVE ALSO BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES/RTGS. IT IS ONLY ON THE BASIS OF PRESUMPTI ON, IT IS THE CASE OF AO THAT THE SAID AMOUNT WHICH IS DEPOSITED IN THE BANK ACC OUNT OF THE SELLERS HAVE COME BACK TO THE COFFERS OF THE ASSESSEE. FOR R AISING SUCH PRESUMPTION THERE SHOULD BE MATERIAL ON RECORD TO SUGGEST THAT THE AM OUNT PAID BY THE ASSESSEE HAS AGAIN CAME BACK TO THE COFFERS OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT IT WOULD SERVE THE INTEREST OF JUSTICE IF THE ISSUES RAISED IN GROUND NO.7 OF BOTH THE IMPUGNED ASSESSMENT YEAR S IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO RE-ADJUDICATE THIS I SSUE IN THE MANNER AFORESAID AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING AND PLACING ALL THE MATERIAL ON RECORD. AFTER GIVING SUCH OPPORTUNITY TO THE ASSESSEE THE AO WILL RE-DECIDE THIS ISSUE AS PER PROVISIONS OF LAW. GRO UND NO.7 FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 11. IT MAY BE MENTIONED HERE THAT GROUND NO.8, 9, 1 0 & 11 FOR ASSESSMENT YEAR 2009-10 AND 2010-11 RAISE ISSUE REGARDING GRA NTING OF CREDIT FOR TDS AND LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY LD. AR THAT THESE ARE CONSEQUENTIAL IN NATURE AND AO MAY BE DIRECTED TO GRANT APPROPRIATE CREDIT FOR TAX DEDUCTED AT SOURCE AND LEVY INTEREST UNDER SECTION 234A, 234B A ND 234C OF THE ACT IN ACCORDANCE WITH THE PROVISIONS OF LAW AFTER GIVING EFFECT TO THE ORDER PASSED IN THE APPEALS FILED BY THE ASSESSEE AND DEPARTMENT. M/S. VIDEOCON INDUSTRIES LTD. , 60 11.1 LD. DR DID NOT HAVE ANY OBJECTION TO SUCH SUBM ISSION OF LD. AR. 11.2 AFTER CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY BOTH THE PARTIES, WE DIRECT THE A.O TO GIVE THE ASSESSEE THE APPRO PRIATE CREDIT FOR TAX DEDUCTED AT SOURCE AS PER PROVISIONS OF LAW AFTER GIVING TH E ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. SIMILARLY, WITH REGARD TO LEVY OF INTEREST UNDER SECTION 234A, 234B & 234C OF THE ACT, WE DIRECT THE AO TO RE-COMPUTE THESE INTEREST AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE O PPORTUNITY OF HEARING AND AFTER GIVING EFFECT TO THIS ORDER OF THE TRIBUNAL . WE DIRECT ACCORDINGLY. 12. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE AS WELL AS APPEAL FILED BY THE REVENUE ARE PARTLY ALLOWED IN THE MANNER AFORES AID. ORDER PRONOUNCED IN THE OPEN COURT ON 06 /02/2015 . . ) ,-' / 0!1 06/02/2015 - ) 2 SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 0! DATED ./02/2015 . . . . ) )) ) &*3 &*3 &*3 &*3 43'* 43'* 43'* 43'* / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 362 &*! , , / DR, ITAT, MUMBAI 6. 27 8 / GUARD FILE. .! .! .! .! / BY ORDER, '3* &* //TRUE COPY// 9 99 9 / : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ! . .VM , SR. PS