DCIT CIRCLE- 2(1)(1), MUMBAI V. M/S BOMBAY DYEING & MANUFACTURING CO. LTD, MUMBAI

ITA 928/MUM/2020

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0395 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMAR
• Keywords: Capital asset converted into stock in trade; Capital asset; Transfer pricing; Principle of natural justice; International transaction; Retrospective amendment; Fair market value; Avoidance of tax; Capital receipt; Commercial expediency; Revised return; Capital Gains
• Section: 145; 27; 45(2); 143(3); 92; 92B; 14A; 115JB; 43D; 144C; 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “K”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.335/M/2020 Assessment Year : 2009-10 & ITA No.2741/M/2019 Assessment Year: 2010-11 M/s. The Bombay Dyeing & Mfg. Co. Ltd., Neville House, J.N. Heredia Marg, Ballard Estate, Mumbai – 400 001 PAN: AAACT2328K Vs. Addl. CIT/ DCIT, Range/Circle – 2(1), Room No.561, Aayakar Bhavan, M.K. Road, Mumbai - 400020 (Appellant) (Respondent) ITA No.928/M/2020 Assessment Year: 2009-10 & ITA Nos.3299 &2779/M/2019 Assessment Years: 2010-11 & 2013-14 ACIT/ DCIT, Range/Circle – 2(1)(1), Room No.561, 5 th Floor, Aayakar Bhavan, M.K. Road, Mumbai - 400020 Vs. M/s. The Bombay Dyeing & Mfg. Co. Ltd., Neville House, J.N. Heredia Marg, Ballard Estate, Mumbai – 400 001 PAN: AAACT2328K (Appellant) (Respondent) Present for: Assessee by : Shri Yogesh Thar, A.R. Shri Chaitanya D. Joshi, A.R Revenue by : Dr. Yogesh Kamar, D.R. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 2 Date of Hearing : 25/26 . 05 . 2022 Date of Pronouncement : 05 . 07 . 2022 O R D E R Per : Kuldip Singh, Judicial Member: Aforesaid cross appeals filed by the appellant M/s. The Bombay Dyeing & Mfg. Co. Ltd (hereinafter referred to as ‘assessee company’) and Deputy Commissioner of Income Tax, Mumbai (hereinafter referred to as ‘Revenue’) bearing common question of law and facts are being disposed of by way of composite order to avoid repetition of discussion. 2. Assessee and Revenue by filing present cross appeals sought to set aside the impugned order dated 21.11.2019, 14.03.2019 & 22.02.2019 passed by the Commissioner of Income Tax (Appeals), (hereinafter referred to as CIT(A)] qua the assessment years 2009- 10, 2010-11 & 2013-14 respectively on the grounds inter alia that: Revenue’s grounds of appeal ITA No.928/M/2020 for A.Y. 2009-10 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no disallowance can be made if there is no exempt income while CBDT circular no. 5/2014 dtd 11.02.2014 clearly specifies that even if no exempt income is earned on the investments for the purpose of calculation of disallowance u/s 14A r.w.r. 8D, these are to be included. 1.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that from A.Y. 2008-09, the disallowance u/s. 14A is required to be computed as per rule 8D as held by the Bombay High Court in Godrej & Boyce and the method adopted by the assessee is not a valid method. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing relief to the assessee relying on the decision of Hon'ble Special Bench of ITAT Delhi in the case of ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 3 Vireet Investment (P) Ltd., without appreciating the facts that the issue has not reached to its finality as the Hon'ble Delhi High Court in its decision in the case of Goetz India Ltd., reported in 361 ITR 505 held that while computing Book Profit disallowance u/s 14A is required to be made. However, in its later judgment the Hon'ble Delhi High Court in the case of Bhushan Steel Ltd. (ITA No. 593 & 594/2015) has taken a contrary view. 3.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2010-11 & 2012 13 in holding that, when recovery of principal is doubtful, the question of charging of interest thereon on hypothetical basis does not arise despite the fact that, assessee is following mercantile system of accounting and the very foundation of special provisions relating to avoidance of tax contained in chapter X of Income Tax Act, 1961 as introduced by Finance Act 2001 w.e.f 01.04.2002 lies on computation of income from international transaction having regard to Arm's Length Price to be determined as per section 92F(ii) in a third party uncontrolled scenario and consequently deleting the adjustment made u/s. 92CA(3) of the Act on account of charging of interest amounting to Rs.1,78,18,044/- on shareholder deposit of Rs.15,21,60,920/- placed with the assessee's Associate Enterprise (PT Five Star, Indonesia)? 3.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y. 2010-11 and A.Y 2012-13 in deleting the interest charged on the deposit on accrual basis as it is mandatory on the part of the companies to account only on mercantile basis as per Companies Act read with section 145 of the Income tax Act, more so when there is a provision to write off in the Act, if the interest could not be recovered conclusively at any later point of time? 3.3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in following the ITAT decision in assessee's own case for A. Y 2010-11 & 2012-13 in deleting the interest charged basing its decision on the approval given by the RBI to treat the arrears of technical fees receivable by the assesses as "Shareholder Deposit" stating that the assessee is under statutory obligation not to charge interest, whereas RBI nowhere stated that the assessee should not charge interest on the said shareholder deposit? 3.4 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2010-11 & 2012-13 in assuming the permission given by the RBI to treat the arrears of technical fees receivable by the assessee as the shareholder deposit as a statutory bar on charging interest at arm's length on the said deposit under specific anti-avoidance provisions of Chapter X? ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 4 3.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in following the ITAT decision in assessee's own case for A.Y 2010-11 & 2012-13 which in turn relies on RBI approval ignoring the decision of Hon'ble Punjab &, Haryana High Court in Coco cola case (309 ITR 194) wherein it has been held that the Income tax Authorities are not bound by the RBI for determining ALP? 3.6 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2010- 11 & 2012-13 in stating that the shareholder deposit is not the international transaction of the impugned assessment year, whereas the issue under consideration is whether the chargeable interest on the deposit is the international transaction and not the deposit? 3.7 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2010-11 & 2012-13 which in turn relied on the Hon'ble Supreme Court's decision in the case of UCO Bank Vs CIT (1999) 237 ITR 889 ignoring the fact that the said decision relates to banking companies with reference to accounting interest on cash basis on doubtful debts u/s 43D, whereas the assessee is not a banking company and hence the said section 43D and the said decision are not applicable in the present case? 3.8 Whether on the facts and in the circumstances of the case and in. law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y. 2010-11 & 2012-13 in deleting the interest even when the jurisdictional High Court in the case of Tata Aulocomp Systems Ltd. and jurisdictional ITAT in the case of Aurinpro Solution Ltd. Vs Addl.CIT (2013) 33 taxmann.com 187 have clearly held that AO/TPO can compute ALP in case of interest free loan to subsidiary and that the said deposit partakes the character of loan only? 3.9 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the basic tenet of Transfer Pricing as enshrined in Section 92F(ii) that no unrelated party in uncontrolled circumstances would have kept such huge money exceeding Rs. 15 Crores for no return for a long period? 3.10 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the facts that royalty on technical knowhow accrued to the assessee long back from the AE at Indonesia has not been received and such receivables left in Indonesia itself with the AE as shareholder deposit lead to base erosion in India which needs to be set right by transfer pricing provisions charging arm's length interest on the same? ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 5 3.11 Whether on the fresh facts and circumstances of the case and position of law brought in above relating to the impugned AY 2009- 10, the Ld. CIT(A) is correct in treating the issue as covered issue relying on the decision of the Hon'ble ITAT in assessee's own case for AYs 2010-11 & 2012-13 wherein the above facts and position of law have not been brought to the notice of the Hon'ble ITAT? 4.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CJT(A) is justified in following the ITAT decision in assessee's own case for A. Y 2010-1 1 and A.Y. 2012-13 in holding that, the outstanding balances with Associated Enterprise-is outside the ambit of International Transaction, despite the existence of Explanation (c) to section 92B of the Act as inserted by the Finance Act 2012, with retrospective effect from 01.04.2002 and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of interest on such outstanding balances amounting to Ks.51,13,361/-? 4.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2010-11 & 2012-13 in relying on Hon'ble Supreme Court's decision in the case of UCO Bank (supra) in deleting the interest charged on the receivables when the facts are completely distinguishable? 4.3 Whether on the fresh facts and circumstances of the case and position of law brought in above relating to the impugned AY 2009- 10, the Ld. CIT(A) is correct in treating the issue as covered issue relying on the decision of the Hon'ble ITAT in assessee’s own case for AYs 2010-11 & 2012-13 wherein the above facts and position of law have not been brought to the notice of the Hon’ble ITAT? 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's claim of deduction of Rs.34,06,295/- towards provisions for Inter-corporate deposits and advances written off treating it as revenue expenditure without appreciating the fact that the same are capital in nature? 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's claim of deduction of Rs.21,57,000/- towards Security Deposit written off treating it as revenue expenditure without appreciating the fact that the same is capital in nature? 7. The appellant craves leave to amend, alter, and delete any of the aforesaid grounds and add any additional grounds either before or at the time of hearing.” ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 6 ITA No.3299/M/2019 for A.Y. 2010-11 “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no disallowance can be made if there is no exempt income while CBDT circular no. 5/2014 dtd 11.02.2014 clearly specified that even if no exempt income is earned on the investments for the purpose of calculation of disallowance u/s 14A r.w.r. 8D, these are to be included ? 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing relief to the assessee relying on the decision of Hon'ble Special Bench of ITAT Delhi in the case of Vireet Investment (P) Ltd., without appreciating the facts that the issue has not reached to its finality as the Hon'ble Delhi High Court in its decision in the case of Goetz India Ltd., reported in 361 ITR 505 held that while computing Book Profit disallowance u/s 14A is required to be made. However, in its later judgment the Hon'ble Delhi High Court in the case of Bhushan Steel Ltd. (ITA No. 593 & 594/2015) has taken a contrary view. 3.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in relying on Tribunal's decision in assessee's own case for AY 2012-13 wherein it is held that, when recovery of principal is doubtful, the question of charging of interest thereon on hypothetical basis does not arise despite the fact that, assessee is following mercantile system of accounting and the very foundation of special provisions relating to avoidance of tax contained in chapter X of Income Tax Act, 1961 as introduced by Finance Act 2001 w.e.f. 01.04.2002 lies on computation of income from international transaction having regard to Arm's Length Price which is hypothetical and not real income and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of Charging of interest on shareholder deposits placed with the assessee's Associate Enterprises amounting to Rs.1,86,09,281/-? 3.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest charged on the deposit on accrual basis as it is mandatory on the part of the companies to account only on mercantile basis as per Companies Act read with section 145 of the Income tax Act, more so when there is a provision to write off in the Act, if the interest could not be recovered conclusively at any later point of time? 3.3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the interest charged basing its decision on the approval given by the RBI to treat the arrears of technical fees receivable by the assessee as "Shareholder deposit" stating that the assessee is under statutory obligation not to charge ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 7 interest, whereas RBI nowhere stated that the assessee should not charge interest on the said shareholder deposit? 3.4 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in assuming the statutory permission given by the RBI to treat the arrears of technical fees receivable by the assessee as the shareholder deposit as a statutory bar on charging interest at arm's length on the said deposit? 3.5 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in stating that the shareholder deposit is not the international transaction of the impugned assessment year, whereas the issue under consideration is whether the chargeable interest on the deposit is the international transaction and not the deposit? 3.6 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in relying on Tribunal's decision in assessee's own case for AY 2012-13 wherein it is relying on the Hon'ble Supreme Court's decision in the case of UCO Bank Vs CIT (1999) 237 ITR 889 as the decision relates to banking companies with reference to accounting interest on cash basis on doubtful debts u/s 43D, whereas the assessee is not a banking company and hence the said section 43D and the said decision are not applicable in the present case? 3.7 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest even when the jurisdictional High Court in the case of Tata Autocomp Systems Ltd and jurisdictional ITAT in the case of Aurinpro Solution Ltd. Vs Addl.CIT (2013) 33 taxmann.com 187 have clearly held that AO/TPO can compute ALP in case of interest free loan to subsidiary? 3.8 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the basic tenet of Transfer Pricing as enshrined in Section 92F(ii) that no unrelated party in uncontrolled circumstances would have kept such huge money exceeding Rs. 15 Crores for no return for a long period? 3.9 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the facts that royalty on technical knowhow accrued to the assessee long back from the AE at Indonesia has not been received and left in Indonesia itself with the AE as shareholder deposit lead to base erosion in India which needs to be set right by transfer pricing provisions charging arm's length interest on the same? 4.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that, when the financial position of Associated Enterprise is weak or bad non-recognition of income on account of Technical fees receivable from AE as per the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 8 agreement for the F Y 2011- 12 on accrual basis is lawful despite the fact that, assessee is following mercantile system of accounting and the very foundation of special provisions relating to avoidance of tax contained in chapter X of Income Tax Act, 1961 as introduced by Finance Act 2001 w.e.f 01.04.2002 lies on computation of income from international transaction having regard to Arm's Lengths Price which is hypothetical and not real income and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of Technical fees receivable from AE as per the agreement for the F Y 2011-12 amounting to Rs. 98,22,939/-? 4.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that no technical fee accrues to the assessee based on business prudence, commercial expediency and exigency, when it is mandatory on the part of the assessee company to charge the fees on accrual basis for the impugned assessment year as per Companies Act read with section 145? 4.3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the basic tenet of transfer pricing that the transaction has to be viewed by lifting the veil of related-nature and whether unrelated parties in uncontrolled circumstances would have behaved in such manner in view of Section 92F(ii)? 4.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the legal position that once the income has accrued to the assessee from the AE. it has to be necessarily booked as revenue in the books of assessee and if it is not recoverable from the AE, nothing prohibits the assessee to write off in its books as bad debt later subject to provisions of law? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in holding that, the outstanding balances with Associated Enterprise is outside the ambit of International Transaction, despite the existence of Explanation (c) to section 92B of the Act as inserted by the Finance Act 2012, with retrospective effect from 01.04.2002 and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of interest on such outstanding balances amounting to Rs.1,75,62,280/-? 5.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in following the ITAT decision in assessee's own case for A.Y 2012-13 in relying on Hon'ble Supreme Court's decision in the case of UCO Bank (supra) in deleting the interest charged on the receivables when the facts are completely distinguishable? 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the receipt of Rs. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 9 18,62,51,866/- as subsidy from the Government of Maharashtra under ' The Package Scheme of Incentive ('PSI') 2007' as capital receipt' whereas there is no obligation casted upon the assessee to apply the subsidy for any particular purpose? 7. The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored.” ITA No.2779/M/2019 for A.Y. 2013-14 “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in relying on Tribunal's decision in assessee's own case for AY 2012-13 wherein it is held that, when recovery of principal is doubtful, the question of charging of interest thereon on hypothetical basis does not arise despite the fact that, assessee is following mercantile system of accounting and the very foundation of special provisions relating to avoidance of tax contained in chapter X of Income Tax Act, 1961 as introduced by Finance Act 2001 w.e.f. 01.04.2002 lies on computation of income from international transaction having regard to Arm's Length Price which is hypothetical and not real income and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of Charging of interest on shareholder deposits placed with the assessee's Associate Enterprises amounting to Rs. 1,27,66,301/-? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest charged on the deposit on accrual basis as it is mandatory on the part of the companies to account only on mercantile basis as per Companies Act read with section 145 of the Income tax Act, more so when there is a provision to write off in the Act, if the interest could not be recovered conclusively at any later point of time? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the interest charged basing its decision on the approval given by the RBI to treat the arrears of technical fees receivable by the assessee as ''Shareholder deposit" stating that the assessee is under statutory obligation not to charge interest, whereas RBI nowhere stated that the assessee should not charge interest on the said shareholder deposit? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in assuming the statutory permission given by the RBI to treat the arrears of technical fees receivable by the assessee as the shareholder deposit as a statutory bar on charging interest at arm's length on the said deposit? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in stating that the shareholder deposit ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 10 is not the international transaction of the impugned assessment year, whereas the issue under consideration is whether the chargeable interest on the deposit is the international transaction and not the deposit? 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in relying on Tribunal's decision in assessee's own case for AY 2012-13 wherein it is relying on the Hon'ble Supreme Court's decision in the case of UCO Bank Vs CIT (1999) 237 ITR 889 as the decision relates to banking companies with reference to accounting interest on cash basis on doubtful debts u/s 43D, whereas the assessee is not a banking company and hence the said section 43D and the said decision are not applicable in the present case? 7. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the interest even when the jurisdictional High Court in the case of Tata Autocomp Systems Ltd and jurisdictional ITAT in the case of Aurinpro Solution Ltd. Vs Addl.CIT (2013) 33 taxmann.com 187 have clearly held that AO/TPO can compute ALP in case of interest free loan to subsidiary? 8. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that, when the financial position of Associated Enterprise is weak or bad non-recognition of income on account of Technical fees receivable from AE as per the agreement for the F Y 2011- 12 on accrual basis is lawful despite the fact that, assessee is following mercantile system of accounting and the very foundation of special provisions relating to avoidance of tax contained in chapter X of Income Tax Act, 1961 as introduced by Finance Act 2001 w.e.f 01.04.2002 lies on computation of income from international transaction having regard to Arm's Lengths Price which is hypothetical and not real income and consequently deleting the adjustment made u/s.92CA(3) of the Act on account of Technical fees receivable from AE as .per the agreement for the F Y 2011-12 amounting to Rs. 1,22,32,000/-? 9. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that no technical fee accrues to the assessee based on business prudence, commercial expediency and exigency, when it is mandatory on the part of the assessee company to charge the fees on accrual basis for the impugned assessment year as per Companies Act read with section 145? 10. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is justified in holding that, the outstanding balances with Associated Enterprise is outside the ambit of International Transaction, despite the existence of Explanation (c) to section 92B of the Act as inserted by the Finance Act 2012, with retrospective effect from 01.04.2002 and consequently deleting the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 11 adjustment made u/s.92CA(3) of the Act on account of interest on such outstanding balances amounting to Rs.1,64,59,050/-? 11. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the receipt of Rs.23,37,58,195/- as subsidy from the Government of Maharashtra under The Package Scheme of Incentive ('PSI') 2007' as 'capital receipt' where as there is no obligation cast on the assessee as to applying the subsidy for any particular purpose. 12. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no disallowance can be made if there is no exempt income while CBDT circular no. 572014 dtd 11.02.2014 clearly specified that even if no exempt income is earned on the investments for the purpose of calculation of disallowance u/s 14A r.w.r. 8D, these are to be included. 13. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the whole of Capital Gains on conversion of land to stock in trades cannot be brought to tax in the year in which only part sale of stock in trade is effected without appreciating the fact that the time of chargeability of income tax for capital gain arising from conversion of capital asset to stock in trades should be the point when the stock in trade is sold or otherwise transferred. 14. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of Hon’ble ITAT in the case of Alok Industries Ltd. in ITA No. 1017/Mum/2017 dated 21.05.2018 while the facts of the instant case are different from it and the decision is not squarely applicable to this case. 15. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred m allowing relief to the assessee relying on the decision of Hon’ble Special Bench of ITAT Delhi in the case of Vireet Investment (P) Ltd., without appreciating the facts that the issue has not reached to its finality as the Hon’ble Delhi High Court in its decision in the case of Goetz India Ltd.3 repotted in 361 ITR 505 held that while computing Book Profit disallowance u/s 14A is required to be made. However, in its later judgment the Hon’ble Delhi High Court in the case of Bhushan Steel Ltd. (ITA No. 593 & 594/2015) has taken a contrary view. 16. The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored.” ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 12 Assessee’s grounds of appeal ITA No.335/M/2020 for A.Y. 2009-10 “I.GROUND 1 - TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF RISK INVOLVED IN GIVING GUARANTEE ON LOAN ADVANCED TO ASSOCIATE ENTERPRISE 1. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in disregarding the binding decision of the Hon'ble Jurisdictional Mumbai Tribunal in Appellant's own case for earlier order whereby the impugned transaction was held not to be falling within the purview of international transaction as defined u/s. 92B and thereafter directing the AO to make addition on account of risk involved in giving guarantee on loans advanced to the AE applying the rate of 0.5%. 2. The Appellant prays that the impugned direction of the Id. CIT(A) be deleted. II. GROUND II - SUBSIDY RECEIVED UNDER PACKAGE INCENTIVE SCHEME AMOUNTING TO RS.27,43,53,333/- is A CAPITAL RECEIPT NOT CHARGEABLE TO TAX: 1. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in upholding the action of the Assessing Officer in treating the amount received of Rs.27,43,53,333/-from the Government of Maharashtra under the Package Incentive scheme, 2007 as a revenue receipt chargeable to tax. 2. The Appellant prays that the AO be directed to consider the claim of the Appellant and treat the same as a capital receipt not chargeable to tax. WIYHOUT PREJUDICE TO GROUND II, IIII GROUND III: NOT ADMITTING AND ADJUDICATING THE ADDITIONAL GROUND PREFERRED BY THE APPELLANT IN RESPECT OF EXCLUSION OF SUBSIDY WHILE COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT; 1. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in not admitting and adjudicating the additional ground preferred by the Appellant during the course of appellate proceedings in respect of exclusion of amount of subsidy credited to the Profit and Loss Account for the purpose of computing book profits u/s. 115JB of the Act. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 13 2. The Id. CIT(A) failed to appreciate and ought to have admitted and adjudicated the additional ground since the same was purely a legal ground, based on various recent judicial pronouncements and no factual verification was required. 3. The Appellant therefore prays that the amount of subsidy be directed to be excluded while computing book profits u/s. 115JB of the Act or alternatively, the Id. CIT(A) be directed to admit the additional ground and adjudicate the same. I.V. GROUND IV: ADDITION OF INCREMENTAL LONG TERM CAPITAL GAIN ON ACCOUNT OF CONVERSION OF CAPITAL ASSET INTO STOCK-INTRADE - RS. 8,78,21,905/-: 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the action of the AO in recomputing the Long Term Capital Gain on sale of land recognized by the appellant based on the percentage completion method on land converted into stock-in-trade at Rs.1,66,88,61,759/- instead of Rs.1,58,10,39,854/- as offered by the Appellant. 2. The Appellant therefore prays that the AO be directed to take fair market value as on 01.04.1981 as supported by valuation report submitted by the Appellant and delete the addition.” ITA No.2741/M/2019 for A.Y. 2010-11 GROUND NO. 1: TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF RISK INVOLVED IN GIVING CORPORATE GUARANTEE ON LOANS ADVANCED TO THE AE: On the facts and circumstances of the case and in law, the CIT(A) erred in disregarding the binding decision of the Hon’ble Jurisdictional Mumbai Tribunal in Appellant’s own case for earlier year whereby the impugned transaction was held not to be falling within the purview of international transaction as defined u/s. 92B and thereafter directing the AO to make addition on account of risk involved in giving guarantee on loans advanced to the AE applying the rate of 0.5%. The Appellant prays that the impugned direction of the CIT(A) be deleted. GROUND NO. 2: ADDITION OF INCREMENTAL LONG TERM CAPITAL GAINS ON ACCOUNT OF CONVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE: On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the AO on account of ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 14 incremental long term capital gains (LTCG) arising on account of conversion of capital asset, being land, into stock-in-trade, considering the fair market value as on 01.4.1981 applying the rate of Rs. 220/- per sq. ft. instead of Rs.293/- per sq. ft. as determined by the registered valuer. The Appellant prays that the addition of Rs.12,59,15.556/- on account of incremental capital gains as determined by the AO be deleted. GROUND NO.3: NOT ADMITTING AND ADJUDICATING THE ADDITIONAL ROUND PREFERRED BY THE APPELLANT IN RESPECT OF EXCLUSION OF SUBSIDY WHILE COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT: On the facts and circumstances of the case and in law, the CIT(A) erred in not admitting and adjudicating the additional ground preferred by the Appellant during the course of appellate proceedings in respect of exclusion of amount of subsidy credited to the Profit and Loss Account for the purpose of computing book profits u/s. 115JB of the Act. The CIT(A) failed to appreciate and ought to have admitted and adjudicated the additional ground since the same was purely a legal ground, based on various recent judicial pronouncements and no factual verification was required. The CIT(A) erred in not granting any opportunity of being heard after receiving the remand report of the AO and thereby violated the principles of natural justice. The Appellant prays that the CIT(A) be directed to admit and adjudicate the said ground on merits of the case. WITHOUT PREJUDICE TO GROUND NO. 3; GROUND NO. 4: NON-EXCLUSION OF RS.18,62,51,866/- BEING SUBSIDY RECEIVED UNDER PACKAGE INCENTIVE SCHEME: On facts and circumstances of the case and in law, the AO erred in not excluding the amount of Rs.18,62,51,866/- received towards subsidy under the Package Incentive Scheme, 2007 of Maharashtra while computing book profits u/s. 115JB of the Act. The AO failed to appreciate and ought to have held that having regard to the purpose for which the said subsidy was granted to the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 15 Appellant, the same was capital in nature and therefore deserves to be excluded while computing the book profits. The Appellant prays that the AO be directed to exclude the amount of Rs.18,62,51,866/- received towards subsidy while computing the book profits u/s. 115JB.” 3. Briefly stated facts necessary for adjudication of the controversy at hand are : assessee is into the business of manufacturing cum trading, specifically in textiles and Polyester Staple Fibre (PSF) and Development of Real Estate. Draft order was passed in these cases which was served upon the assessee but no objections have been filed on behalf of the assessee and as such draft order is treated as final assessment order. Assessing Officer (AO) after making different additions/disallowances framed the assessment in all the aforesaid appeals under section 143(3) read with section 144C of the Income Tax Act, 1961 (for short ‘the Act’). 4. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same vide orders dated 21.11.2019, 14.03.2019 & 22.02.2019 for A.Y. 2009-10, 2010-11 & 2013-14 respectively. Feeling aggrieved the assessee company as well as Revenue have come up before the Tribunal by way of filing present cross appeals. 5. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 16 Grounds of Revenue’s appeal bearing ITA No.928/M/2010 for A.Y. 2009-10, ITA Nos.3299 & 2799/M/2019 for A.Y. 2010-11 & 2013-14 Ground No.1 of A.Y. 2009-10 & 2010-11 bearing ITA No.928/M/2010 & ITA No.3299/M/2019 respectively and Ground No.12 of A.Y. 2013-14 bearing ITA Nos.2799/M/2019 6. AO being dissatisfied with the working given by assessee for making disallowance under section 14A of the Act, invoked the provisions contained under section 14A read with rule 8D and thereby made disallowance of Rs.3,58,69,794/-, Rs.68,46,172/- & Rs.27,97,935/- for A.Y. 2009-10, 2010-11 & 2013-14 respectively. The Ld. CIT(A), however, deleted the addition by following the order passed by CIT(A) in assessee’s own case for A.Y. 2010-11 on the ground that there were no exempt income earned by the assessee during the years under consideration, hence no disallowance can be made. Revenue has challenged the deletion of addition by filing present appeals. 7. Factum of earning no dividend income by the assessee company during the years under consideration i.e. A.Y. 2009-10, 2010-11 & 2013-14 is admitted one. It is settled principle of law that when no exempt income has been earned by the assessee during the years under consideration no disallowance can be made under section 14A read with rule 8D of the Act. So finding no illegality or perversity in the impugned deletion of addition, findings returned by Ld. CIT(A) are upheld. So ground No.1 of A.Y. 2009-10 & 2010-11 and ground No.12 of A.Y. 2013-14 of Revenue’s appeals are decided against it. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 17 Ground No.2 of A.Y. 2009-10, 2010-11 bearing ITA No.928/M/2010 & ITA No.3299/M/2019 and Ground No.14 of A.Y. 2013-14 bearing ITA Nos.2799/M/2019 8. AO made disallowance of Rs.3,58,69,794/-, Rs.68,46,172/- and Rs.27,97,935/- under section 14A read with rule 8D under Minimum Alternate Tax (MAT) computation under section 115JB of the Act. However, the Ld. CIT(A) deleted the disallowance made by the AO. Revenue is in appeal before the Tribunal. 9. In view of our findings on ground No.1 of A.Y. 2009-10, 2010-11 & ground No.5 of A.Y. 2013-14, when there is no disallowance under section 14A read with rule 8D of the Act, no disallowance is sustainable under section 14A read with rule 8D under MAT computation under section 115JB of the Act as has been held by Special Bench of the Tribunal in case of ACIT vs. Vireet Investment Pvt. Ltd. 165 ITD 27 (SB). So Ground No.2 of A.Y. 2009-10, 2010-11 & ground No.14 of A.Y. 2013-14 are decided against the Revenue. Ground No.3 of A.Y. 2009-10, 2010-11 bearing ITA No.928/M/2010 & ITA No.3299/M/2019 and Ground Nos.1 to 7 of A.Y. 2013-14 bearing ITA Nos.2799/M/2019 10. Ld. Transfer Pricing Officer (TPO)/AO/CIT made transfer pricing adjustment qua interest on shareholders’ deposit to the tune of Rs.1,78,18,044/-, 1,86,09,281/- & Rs.1,27,66,301/- for A.Y. 2009-10, 2010-11 & 2013-14 respectively on the ground that the assessee has taken risk by giving deposit to an international Associate Enterprise (AE) without taking any security and charged the interest @ 11.71% with additional amount of 1% to the rate of ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 18 interest for not taking any security, to the amount of shareholders’ deposit. 11. However, the Ld. CIT(A) deleted the adjustment by following the decision of Tribunal passed in assessee’s own case in ITA No.1716/M/2017 dated 27.10.2017. 12. The Ld. D.R. for the Revenue challenging the impugned deletion of adjustment made by the TPO relied upon the order passed by TPO/AO and also relied upon by the decision rendered by Hon’ble Punjab & Haryana High Court in case of Coca Cola 309 ITR 194 that Income Tax Authorities are not bound by the Reserve Bank of India (RBI) guidelines for determining arms length price. 13. However, on the other hand, the Ld. A.R. for the assessee to repel the arguments addressed by the Ld. D.R. for the Revenue contended that this issue has already been decided in favour of the assessee in assessee’s own case for A.Y. 2012-13 in ITA No.1716/M/2017 reported as (2017) 87 taxmann.com 213 (Mum). 14. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2012-13 (supra) which is on identical facts and decided the issue in controversy raised by the Revenue vide ground No.3 of A.Y. 2009-10, 2010-11 & ground No.1 to 7 of A.Y. 2013-14, by returning following findings: “7. In view of these facts, it is clear that the technical know- how fees are recoverable for the period 1981 to 1995 by both the joint venture partners namely The Bombay dyeing & Mfg Co Ltd and Common Wealth textiles. The RBI has given its approval on treating the Outstanding entitlements on account of technical know-how fees for the period Jan 1981 to Dec 1995 estimated to US $ 32,00,692.48 (INR 15.22 Crores) as a shareholder deposit. RBI has given permission ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 19 vide approval to obtain repayment of the said deposits on or before 2010 or earlier as the case may be. This repayment date is extended to 2015 by RBI. Copy of relevant letters issued by RBI is enclosed at Annexure-4 of the assessee’s paper book. Under the facts of the case, we appreciate the argument of the assessee that the said interest free deposit cannot be considered as an international transaction for the previous year ended 31st March 2012 as the said transaction was entered into during the previous year ended 31 March 1998 with the approval of statutory authorities. The statutory permissions required under the foreign exchange laws of India, are equally applicable to controlled and uncontrolled enterprises i.e. they are universally applicable and hence the very restrictions for permissions would be deemed to encompass the principle of neutrality and hence, the standard of arms length is inherent in the provision of law. Hence the company has a contractual and statutory obligation with the PTFSI for not charging any interest on the shareholder deposits and thereby it cannot take any recourse for charging interest till the year 2015 by which PTFSI is required to make payment to the company. There has been no inflow or outflow relating to the above deposit during the Previous Year 2011-12 and hence it is outside the purview of transfer pricing provisions. We are of the view that the assessee cannot be asked to do something which is impermissible in law and expenditure incurred in compliance of law or the direction of the statutory authorities, the same is allowable. This view is supported by the case law relied on by the assessee of Hon’ble Bombay High court in the case of CIT vs. Hukumchand Mills Ltd. (1993) 202 ITR 474 (Bom.). Further, another aspect argued by the learned Counsel is that interest and principal amount itself is doubtful of recovery, the question of taxing hypothetical interest does not arise. This view is also supported by the decision of Hon’ble Supreme Court in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC). In view of the above discussion, we are of the considered opinion that no addition on account of transfer pricing adjustment can be made in relation to interest @ 8.39% amounting to Rs.1,27,66,301/- in relation to non-interest bearing shareholder’s deposits amounting to Rs. 15,21,60,920/- with an associate company. We reverse the orders of DRP and AO/TPO on this issue and allow this issue of the appeal of assessee.” 15. The co-ordinate Bench of the Tribunal decided the identical issue qua transfer pricing adjustment in relation to non-interest bearing shareholders’ deposit by considering the permission accorded by RBI and by considering the decision rendered by Hon’ble Bombay High Court in case of CIT vs. Hukumchand Mills Ltd. (1993) 202 ITR 474 and decision rendered by Hon’ble Supreme Court in case of Uco Bank vs. CIT (1999) 237 ITR 889 ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 20 and as such no addition on account of transfer pricing adjustment qua non-interest bearing shareholders’ deposit is sustainable in the eyes of law. Hence, ground No.3 of A.Y. 2009-10, 2010-11 & grounds No.1 to 7 of A.Y. 2013-14 of Revenue are determined against it. Ground No.4 of A.Y. 2010-11 & Grounds No.8 to 9 of A.Y. 2013-14 bearing ITA No.3299/M/2019 & ITA Nos.2799/M/2019 respectively 16. Ld. TPO proposed adjustment of Rs.98,22,939/- and Rs.1,22,32,000/- on account of transfer pricing adjustment towards accrual of technical knowhow fees from AE i.e. M/s. P.T. Five Star, Indonesia – PTFSI for A.Y. 2010-11 and 2013-14 respectively on the ground that technical fee received/receivable from AE were not reported in the agreement. 17. The Ld. CIT(A) deleted the adjustment by following the order passed by the Tribunal in assessee’s own case for A.Y. 2012- 13. 18. We have perused the order passed by the Tribunal in assessee’s own case for A.Y. 2012-13 (supra) which is on identical issues and this fact has not been controverted by Ld. D.R. for the Revenue. Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee by returning following findings: “11. In view of the above facts and circumstances, we are of the view that since there is uncertainty involved in collection of the technical knowhow fees from the PTFSI due to its bad financial condition, the assessee has rightly not recognized the revenue. This view of ours is supported by the decision of Hon’ble Supreme Court in the case of Godhra Electricity Co. Ltd. vs. CIT (1997) 225 ITR 746 (SC), wherein the question whether there was real accrual of income to the assessee ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 21 company in respect of the enhanced charges for supply of electricity had to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter was considered in this light it was not possible to hold that there was real accrual of income to the assessee company in respect of the enhanced charges for supply of electricity which were added by the AO while passing the assessment orders in respect of the assessment years under consideration. Hon’ble Supreme Court held that the Tribunal, therefore, had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Assessing Officer did not represent the income which had really accrued to the assessee- company during the relevant previous years. Taking the same principle, in the present case before us, we delete the addition made AO / TPO and confirmed by DRP on account of transfer pricing adjustment towards technical knowhow fees from its AE i.e. PTFSI. We direct the AO accordingly. This issue of assessee’s appeal is allowed.” 19. Co-ordinate Bench of the Tribunal by relying upon the decision rendered by the Hon’ble Supreme Court in case of Godhra Electricity Co. Ltd. vs. CIT (1997) 225 ITR 746 (SC) held that when there is an uncertainty involved in collection of technical knowhow fees from PTFSI due to its bad financial conditions the assessee has rightly not recognized the Revenue. So the necessary entries made by the assessee company are merely on hypothetical income and as such the impugned amount brought to tax by the AO has not represented the income which has really accrued to the assessee company during the years under consideration. In view of the matter the Ld. CIT(A) has rightly deleted the addition by following the order passed by the Tribunal in assessee’s own case for A.Y.L 2012-13. Hence ground No.4 of A.Y. 2010-11 & grounds No.8 to 9 of A.Y. 2013-14 raised by the Revenue are decided against it. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 22 Ground No.4, 5 & 10 of A.Y. 2009-10, 2010-11 & A.Y. 2013-14 bearing ITA No.928/M/2010 & ITA No.3299/M/2019 and ITA No.2799/M/2019 respectively 20. TPO proposed to make adjustment of Rs.51,13,361/-, Rs.1,75,62,280/- and Rs.1,64,59,050/- in appeal for A.Y. 2009-10, 2010-11 & 2013-14 respectively on accrual of interest on outstanding balances of the AE. 21. However, the Ld. CIT(A) by following the order passed by the Tribunal in case of assessee for A.Y. 2010-11 deleted the addition proposed by TPO and made by the AO. 22. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2012-13 which is on identical issues and has been decided by following the assessee’s own case for A.Y. 2007-08 and 2008-09 by returning following findings: “23. The facts are that the assessee has shown outstanding balance of Rs. 15.65 crores due from PTFSI as on 31.03.2012, the same is accumulated balance of charges debited to PTFSI towards guarantees and technical fee receivable of earlier years. These both transactions are already shown in form 3CEB of respective years. Hence this is not a transactions entered during the year. The assessee is not charging interest on debit balance due to bad financial condition of the AE. Even assuming, according to assessee, if it would have provided for interest on outstanding balance from PTFSI, it could not have recovered the same from PTFSI, as PTFSI has not honored its commitments to the lenders, as well as it has incurred heavy losses year after year. It was argued by Ld Counsel that following the real income principle it can be said that no interest accrues to the Company based on business prudence, commercial expediency and exigency. 24. We find from records that the AO has treated the debit balance outstanding on the year end as an "International Transaction" and have made proposed addition of notional interest. Now the question arises whether outstanding debit balance with the associate company cannot be regarded as an 'International Transaction' within the meaning of section 92B of the Act. Further, Ld Counsel drew our ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 23 attention to section 92B of the Act which defines the term "international transaction" used in section 92(1) of the Act as under:- "International transaction means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more enterprises." As will be observed from the above provision the outstanding debit balances with the associates is not directly covered within the ambit of 'international transaction'. Also, the terms "any other transaction having a bearing on the profits, income, losses or assets of such enterprises" must be interpreted ejusdem generis with the transactions mentioned in the preceding clause or at least analogous to it and therefore would not include the provision of guarantee for loans taken by associate enterprises. In view of the above, we are of the view that it is the real income and not the hypothetical income which is to be taxed and real income is to be ascertained from the realistic and practical point of view as held by Hon’ble Supreme Court in the case of UCO Bank (Supra). Hence, we delete the disallowance and reverse the orders of the lower authorities.” 23. Since the issue raised by way of ground No.4, 5 & 10 in A.Y. 2009-10, 2010-11 & 2013-14 respectively by the Revenue is no longer resintegra having been decided by co-ordinate Bench of the Tribunal in assessee’s own case in A.Y. 2007-08, 2008-09, 2010- 11 & 2012-13, the debit balance outstanding with the AE on the year end does not fall within the ambit of international transactions and as such Ld. CIT(A) has rightly deleted the adjustment proposed by TPO and made by AO. So ground No.4, 5 & 10 of A.Y. 2009- 10, 2010-11 & A.Y. 2013-14 respectively of Revenue’s appeal are determined against it. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 24 Ground No.6 of A.Y. 2010-11 & ground No.11 of A.Y. 2013-14 bearing ITA No.3299/M/2019 & ITA Nos.2799/M/2019 respectively 24. AO made addition of Rs.18,62,51,866/- and Rs.23,37,58,195/- for A.Y. 2010-11 & 2013-14 respectively on account of subsidy received by the assessee under the package scheme of incentives 2007 from the Government of Maharashtra by treating the same as revenue receipt, which has been deleted by the Ld. CIT(A) by following the order passed by the Tribunal in assessee’s own case for A.Y. 2011-12. 25. The Ld. A.R. for the assessee contended that this issue has also been decided in favour of the assessee in assessee’s own case for A.Y. 2012-13. However, on the other hand, the Ld. D.R. for the Revenue relied upon the assessment order passed by the AO. 26. We have perused the order passed by the Tribunal in assessee’s own case for A.Y. 2012-13 (supra) which is on identical facts and has been decided in favour of the assessee by returning following findings: “28. We have gone through facts and circumstances of the case and noted the facts that the State Government of Maharashtra with a view to encourage the dispersal of industries to the less developed areas of the State of Maharashtra announced "The Package Scheme of Incentives, 2007" w.e.f. 01.04.2007. The PSI was applicable based on the level of Fixed Capital Investment or Employment Generation. Assessee Company is eligible for getting subsidy on account of investment made in new plant commenced at Patalganga and Ranjangaon. Further, in the context of subsidy, the question as to whether it is of 'revenue' or 'capital' in nature will have to be determined, having regard to the purpose for which the subsidy is given. If it is given by way of assistance in carrying on the business, it has to be treated as a 'trading' receipt. The source of the fund is immaterial. If the purpose was to help in setting up a business or complete a project, it must be treated as having been received for 'capital' purpose. But if it is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of trade. This view has been taken by the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 25 Hon’ble Supreme Court in case of Saliney Steel and Press Works Ltd. (supra). Similarly, Delhi Tribunal in case of L G Electronics India Pvt. Ltd. v. Addl. CIT in ITA No. 1404/Del/2007 for AY 2002-03 vide order dated 26-02-2010, has held the sales tax subsidy availed by the assessee as revenue receipt since it was not linked with setting up of industry, rather linked with the production. Reliance was also placed on the decision of the Special Bench of Mumbai Tribunal Reliance Industries Limited (supra), wherein the Tribunal has, after considering the decision of the Supreme Court in Sahney Steels (supra), held that if a subsidy is received for development of industries in backward areas, it constitutes 'capital' receipt regardless of the fact that it has been received only after the commencement of production, as it is the 'purpose' of the scheme which is of fundamental importance in determining the nature of the subsidy as 'revenue' or 'capital'. This decision of the Special Bench has been upheld by Hon’ble Bombay High Court in CIT v. Reliance Industries Limited [2011] 339 ITR 632 (Bom.). 29. Further, the Hon'ble Supreme Court has held in Ponni Sugars and Chemicals Ltd. (supra), after considering the decision in Sahney Steel (supra) held that the character of the receipt of a subsidy in the hands of the assessee under a scheme has to be determined with respect to the 'purpose' for which the subsidy is granted and that if the purpose of a subsidy is to enable the assessee to run the business more profitably then the receipt is on 'revenue' account but if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand the existing unit then the receipt would be on 'capital' account. Further, it was held that the point of time at which the subsidy is paid is not relevant, the source is irrelevant and the form of subsidy is irrelevant. Attention is also invited to a recent decision of the Hon'ble Jammu & Kashmir High Court in Shri Balaji Alloys vs. CIT (2011) 333 ITR 335 (J&K), wherein, considering Ponni Sugar (supra) and Sahney Steel (supra) it is held that the excise duty refund, interest subsidy and insurance subsidy received under a State Scheme are of 'capital' in nature. In arriving at its decision, the High Court noted that the foregoing incentives were given to achieve dual objectives, viz. acceleration of industrial development and generation of employment in the State and that such incentives designed to achieve a public purpose, could not be construed as production or operational incentives for the benefit of the assessee alone. Similarly, the Hon'ble Calcutta High Court in CIT v. Rasoi Limited (2011) 335 ITR 438 (Cal), following the ratio of Supreme Court in Ponni Sugar (supra) has held that subsidy received from Government of West Bengal under scheme of industrial promotion for expansion of its capacities, modernization and improving its marketing capabilities would be 'capital' receipt. 30. Further, the Central Board of Direct Taxes ('CBDT') has issued Circular No. 142 dated 01-08-1974 wherein it has clarified that where the subsidy is primarily given for helping the growth of industries and ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 26 not for supplementing their profits, such subsidy can be regarded as 'capital' receipt in the hands of the recipient. Further, it has been time and again held by various Courts that Circulars issued by CBDT are binding on Revenue and it is not open to the Revenue even to raise a contention contrary to the binding circular. Therefore, it is the purpose' under the Scheme which is relevant to decide whether the incentives are 'capital' or 'revenue' receipt and other factors like the point of time when incentive is received, the form, etc are irrelevant considerations. For the same reasons, nomenclature given to any incentive/component of an incentive will not be decisive for determining the 'revenue' or 'capital' nature of such benefits. Thus, considering that the purpose of PSI is to enable the Company to set up a new unit or to expand an existing unit to encourage industrial development in the State, the subsidy / incentives received is on capital account in the present case of the assessee and hence, not chargeable to tax. Accordingly, this issue of the assessee’s appeal is allowed.” 27. Co-ordinate Bench of the Tribunal passed the order on the basis of facts and law applicable thereto which is applicable to the facts and circumstances of the case and since the subsidy has been given as an incentive to set up a new unit or to expand an existing unit to encourage industrial development in the state, the subsidy/incentives received by the assessee is on capital account and as such not chargeable to tax. So the Ld. CIT(A) has rightly decided the issue in favour of the assessee. Hence, ground No.6 of A.Y. 2010-11 & ground No.11 of A.Y. 2013-14 of Revenue’s appeal are determined against it. Ground No.13 of A.Y. 2013-14 bearing ITA No.2799/M/2019 28. The assessee has offered Long Term Capital Gain (LTCG) to the tune of Rs.1,48,68,37,792/- by applying the percentage completion method and by taking indexation till the year of sale. However, AO by disagreeing with the assessee proceeded to hold that the assessee is not entitled for this claim and by removing the wrong claim of indexation and by rejecting the percentage ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 27 completion method for the working of LTCG, the AO made addition of Rs.2,52,57,37,458/- being the differential amount in capital gain offered and thereby added the same to the income of the assessee. 29. However, the Ld. CIT(A) by following the order passed by Tribunal in assessee’s own case for A.Y. 2012-13 deleted the addition made by the AO, which is under challenge before the Bench. 30. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee’s own case in A.Y. 2012-13 which is on identical facts and issue and has been decided in favour of the assessee by returning following findings: “ 52. Facts are that one of the business segments of company is Real estate activity. Revenue is recognized on the 'Percentage of Completion Method' of accounting. This method of accounting has been consistently followed since F.Y. 2005-06. This method of accounting is as per Accounting Standard ('AS')-7/AS-9 read with Guidance Note on accounting for real estate activity issued by ICAI as applicable. Further the same method of accounting has been accepted in the past assessments as well as by other statutory authorities for e.g. Service Tax department, Sales Tax authorities. Under this method "revenue" is recognized during the period of construction as against "project completion method" where under revenue "sale of flats" is recognized when the possession of the flats is handed over to the purchasers. Under the Percentage Completion Method there is no relevance of possession for recognition of revenue. The revenue is recognized even before the flats are constructed. Hence the revenue is not booked as income from sale of flats (Stock in trade). The relevant paragraph of the AS- 7 is reproduced herewith for ready reference: - 24. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract 116 AS 7 (revised 2002) costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 28 provides useful information on the extent of contract activity and performance during a period. 25. Under the percentage of completion method, contract revenue is recognised as revenue in the statement of profit and loss in the accounting periods in which the work is performed. Contract costs are usually recognised as an expense in the statement of profit and loss in the accounting periods in which the work to which they relate is performed. However, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 35. 53. Further, the relevant extract from Guidance Note on Accounting for Real Estate Transactions is reproduced for ready reference: "5.1 The percentage completion method should be applied in the accounting of all real estate transactions/activities in the situations described in paragraph 3.3 above, i.e., where the economic substance is similar to construction contracts. Some further indicators of such transactions/activities are: (a) The duration of such projects is beyond 12 months and the project commencement date and project completion date fall into different accounting periods. (b) Most features of the project are common to construction contracts, viz., land development, structural engineering, architectural design, construction, etc. (c) While individual units of the project are contracted to be delivered to different buyers these are interdependent upon or interrelated to completion of a number of common activities and/or provision of common amenities. (d) The construction or development activities form a significant proportion of the project activity." The accounting policy followed in respect of real estate activity as disclosed in Notes to Financial Statements at (d) under Significant Accounting Policies, is as under: "(d) Revenue from real estate is recognized on the transfer of all significant risks and rewards of ownership to the buyers and it is not unreasonable to expect ultimate collection and no significant uncertainly exists regarding the amount of consideration. The freehold land under Real Estate Development planned for sale is converted from fixed assets into stock-in-trade at market value. The difference between the market value and ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 29 cost of that part of freehold land is credited to revaluation reserve. Revenue arising on sale of undivided interest in the underlying freehold land pertaining to fiats / office premises, which are under construction, is being accounted on the percentage of completion method. Revenue from construction activity is recognized on the 'Percentage of Completion Method' of accounting. Revenue is recognized in relation to the sold areas only, on the basis of percentage of cost incurred as against the total cost of project (including land). Revenue is recognized if the cost incurred is in excess of 25% of the total estimated cost. The estimates of saleable area and cost of construction are revised periodically by the management. The effect of such changes to estimates is recognized in the period such changes are determined. The estimated cost of construction as determined is based on management's estimate of the cost expected to be incurred till the final completion and includes cost of materials, service and other related overheads. Unbilled costs are carried as real estate work in progress. Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company, some of which are of a technical nature, concerning, where relevant, the percentages of completion, costs to completion, the expected revenues from the project activity and the foreseeable losses to completion." 54. In accordance with the aforesaid policies, in the year in which the company converts Fixed Assets being Land to Stock-in-trade the unrealized appreciation i.e. the difference between the market value of land on the date of conversion into stock in trade and the cost of the said land in books of the company is credited to revaluation reserve. Based on Percentage Completion Method of accounting, the appropriate amount is released from Revaluation Reserve to statement of Profit & loss in proportion of revenue recognized. In other words, the revenue comprising of Capital Gains and Business Profits is accounted on the same basis each year, as contemplated in the provisions of the act. Accordingly, each year income from Real Estate Activity is offered to Tax under the head Long Term Capital Gains (pertaining to gains on conversion of Fixed Assets to Stock in Trade) & Business income (pertaining to revenue accruing thereafter). 55. Our attention was drawn towards the provision of section 2(47)(iv) of the Income Tax Act, 1961 ("the Act") "transfer, in relation to a capital asset, includes, - ...... ....... ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 30 "(iv) In a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment". Hence, under section 45 of the Act, profits & gains arising from such transfer (conversion to stock in trade) is chargeable to tax in the year of transfer. However as per non obstante provision contained in sub section (2) of section 45, the capital gains shall be chargeable to income tax as income of the previous year in which such stock in trade is sold or otherwise transferred by him. Since the sale of Stock in Trade would actually happen when the flats are completed and ownership transferred, a strict interpretation of section 45(2) would suggest that the capital gains arising on conversion of stock in trade would be chargeable to tax when project is completed. However, it would be inconsistent to say that the business profits arising from real estate activity would be chargeable to tax on percentage completion method each year during the construction activity and the capital gains portion of there is chargeable to tax in a different year i.e. when the project is completed. A reading down of section 45(2) of the Act would therefore mean that the capital gains on conversion should be charge to tax in the same year in which the corresponding business income is offered to tax, on the same basis i.e. percentage completion method which the company is following. Further, the assessee has made disclosure by way of a note at serial no. 31 in Notes to Financial Statement in relation to the Revaluation Reserve and amount released from the revaluation reserve on credited to profit and loss account and which is read as under: "31. The Company has during the year ended March 31, 2012 converted a part of the freehold land under real estate development from Fixed Assets to Stock in trade at market value and the difference between the market value and cost amounting to Rs. 764.30 crores (2010-11 Rs. 853.96 crores) has been credited to Revaluation Reserve. An amount of Rs.165.27 crores (2010-11 Rs. 70.57 crores) has been released from revaluation reserve to Statement of Profit and Loss in proportion of revenue recognized on the area sold in accordance with the accounting Policy.” 56. We find from records that lower authorities proceeded on total misreading of the relevant provision of the Act and have brought to tax the whole of the capital gain on the conversion of the land (fixed asset) to stock in trade in the year in which only part sale of stock in trade is effected and assessee has offered the proportionate capital gain in the year under consideration. We, in view of the above facts and circumstances, direct the AO to verify the sale of stock in trade effected and offered the proportionate capital gains in the relevant years and the same should be taxed accordingly. This issue of ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 31 assessee’s appeal is set aside for verification purpose only with the above directions.” 31. Since the issue before hand is identical to the issue decided by the co-ordinate Bench of the Tribunal in A.Y. 2012-13, so by following the order we hereby set aside the same for verification purpose only to verify the sale of stock in trade affected and offered the proportionate capital gains in the relevant years to tax the same accordingly. Because whole of the capital gain on conversion of land to stock in trade in the year in which only part of sale of stock in trade is affected cannot be brought to tax. So ground No.13 of A.Y. 2013-14 of Revenue’s appeal is determined against it. Ground No.14 of A.Y. 2013-14 bearing ITA No.2799/M/2019 32. In view of our findings on ground No.11 of A.Y. 2013-14 when the subsidy received by the assessee under package scheme of 2007, Maharashtra is held to be not taxable being capital in nature, the same is required to be excluded while computing the book profit under section 115JB of the Act. Identical issue has been decided by the co-ordinate Bench of the Tribunal in ITA No.4613/M/2016 & CO No.166/M/2018 of A.Y. 2010-11 in case of DCIT vs. M/s. Deegee Orchards Pvt. Ltd. date of order 08.08.2018. The Ld. CIT(A) decided this issue by following order passed by co- ordinate Bench of the Tribunal in case of Alok Industries Ltd. ITA No.1017/M/2017. So we find no illegality or perversity in the findings returned by Ld. CIT(A), hence ground No.14 of A.Y. 2013-14 is decided against the Revenue. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 32 Ground No.15 of A.Y. 2013-14 bearing ITA No.2799/M/2019 33. AO made disallowance of Rs.7,97,935/- made under section 14A read with rule 8D while computing the book profit under section 115JB of the Act. However, the Ld. CIT(A) deleted the same. 34. When admittedly the assessee company has not earned any exempt income during the year under assessment no disallowance under section 14A read with rule 8D is sustainable. In these circumstances when no disallowance is made under section 14A read with rule 8D, the same cannot be made for the purpose of computing book profit under section 115JB of the Act. The Ld. CIT(A) by following the decision rendered by Hon’ble Bombay High Court in case of Bengal Finance & Investments Pvt. Ltd. (ITA No.337/2013 order dated 10.02.2015 and order passed by Special Bench of the Tribunal in case of Vireet Investment (P.) Ltd. reported in 165 ITD 27. So in these circumstances we find no illegality or perversity in the impugned deletion of disallowance made by the Ld. CIT(A), hence ground No.15 is determined against the Revenue. Ground No.5 of A.Y. 2009-10 bearing ITA No.928/M/2010 35. Assessee’s claim of deduction of Rs.34,06,295/- qua provision for inter corporate deposit written off has been disallowed by the AO. However, the Ld. CIT(A) decided the issue by directing the AO to verify the facts if the same were actually written off and if so allowed the same as deduction by returning following findings: ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 33 “14. The fact of the case is examined. The sum is titled as "Provision". The submission does speak on "writing off' or "written off' the debts due. Security Deposit forfeited is a deductible expenditure. Such a view is held in multitude of decisions including AT&T Communication Services India Limited vs ACIT(6016/Del/2015) dated 15.02.2018 in addition to case decisions relied upon by assessee. This covers Rs 15,00,965. Regarding Rs 19,05,221 it is a business advance, and if actually written off, is eligible for deduction. 15. The Assessing Officer disallowed the sum holding it as capital expenditure. In instant case, the sum is eligible for deduction if it is actually written off. Whether it is written off or not needs verification. The Assessing Officer is directed to merely verify (other aspects as held by me in preceding paragraph) whether the sums were actually written off and if so, allow the sum as a deduction. With this direction the ground is disposed of. No order prejudicial to assessee should be passed without granting opportunity of being heard. The ground is treated as partly allowed.” 36. The Ld. A.R. for the assessee contended that since no prejudice is being caused to the revenue with the findings returned by the Ld. CIT(A) he has no objection if the issue is ordered to be verified by the AO as per directions issued by the Ld. CIT(A). Accordingly, this ground is decided in favour of the assessee for statistical purposes and AO is directed to verify and allow the deductions if the amounts claimed were actually written off. Ground No.6 of A.Y. 2009-10 bearing ITA No.928/M/2010 37. AO has disallowed the write off of the security deposits of Rs.21,57,000/- out of an amount of Rs.27,30,207/- claimed as written off by the assessee qua the security deposit paid by it. However, the Ld. CIT(A) decided the issue by referring the same back to the AO to verify whether the same were actually written off and if so allow the sum as deduction by returning following findings: “17. The fact of the case is examined. The sum is titled as "Provision". The submission does speak on "writing off 1 or "written ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 34 off' the debts due. Security Deposit forefeited is a deductible expenditure. Such a view is held in multitude of decisions including AT&T Communication Services India Limited vs ACIT(6016/Del/2015) dated 15.02.2018 in addition to case decisions relied upon by appellant. This covers Rs.21,57,000/-. 18. The Assessing Officer disallowed the sum holding it as capital asset. In instant case, the sum is eligible for deduction if it is actually written off. Whether it is written off or not needs verification. The Assessing Officer is directed to merely verify (other aspects as held by me in preceding para) whether the sums were actually written off and if so, allow the sum as a deduction. With this direction the ground is disposed of. No order prejudicial to assessee should be passed without granting opportunity of being heard. The ground is as treated as Partly Allowed.” 38. Since department is not prejudiced in any manner with the findings returned by the Ld. CIT(A) as the amount if actually written off is an allowable deduction. It would be done by the AO only after verification. So this ground is determined against the Revenue. Assessee’s appeals bearing ITA No.335/M/2020 & ITA No.2741/M/2019 for A.Y. 2009-10 & 2010-11 respectively Ground No.1 of A.Y. 2009-10 & 2010-11 bearing ITA No.335/M/2020 & ITA No.2741/M/2019 respectively 39. The assessee company stood as guarantor for a loan availed of by its AE without charging anything for the risk involved. The Ld. TPO taken the view that when the AE was in bad financial conditions no company would have granted such loan without charging a sum for the risk involved as in the case of bank charging guaranteed commission. Ld. TPO also taken the view that the arms length compensation should be more than the rate charged by the bank and thereby proposed a mark up of 1% of the amount of the loan granted on account of risk involved for A.Y. 2009-10 & 2010-11. The Ld. CIT(A) restricted the mark up to 0.5% of the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 35 amount of loan granted on account of arms length price by partly accepting the contention of the assessee. 40. However, the Ld. A.R. for the assessee brought to the notice of this Bench that this issue has already been decided in favour of the assessee by the Tribunal in its own case for A.Y. 2012-13, which fact has not been controverted by the Ld. D.R. for the Revenue who has rather relied upon the order passed by Ld. CIT(A). 41. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2012-13 which is on identical issue with no distinguishing feature and operative part whereof is as under: “14. Before us assessee contended that DRP as well as AO/TPO failed to understand that the provision of counter guarantee to a third party for the loans borrowed by the JV of the assessee cannot be regarded as an 'International Transaction' within the meaning of section 92B of the Act. Furthermore, the assessee had already debited actual commission on counter indemnity charged by banks for the year ended 31.03.2012 to the associate company's account. It was claimed that similar issue had also arisen in the assessee's own case for AY 2006-07, wherein the DRP has deleted the said disallowance made by the AO on account of the counter guarantee charges and the relevant para of DRP order reads as under: - "In view of the submissions made by the assessee that counter indemnity charges have already been debited to PTFS, the very basis on which the TPO has made the adjustment appears to have gone. As the TPO had merely taken a benchmark of 3% while the assessee has debited the actual expenses, the adjustment made on this account is directed to be deleted." Further, in assessee’ own case for AY 2007-08, this transaction was accepted at arm's length and no addition was made. Further in assessee’ own case for AY 2008-09 addition was made by AO but deleted by CIT(A) on this ground. It was argued that the lower ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 36 authorities observed that the assessee has assumed risk in providing the counter guarantee to bank for lending money to its subsidiary and for that it should have charged risk premium for assuming the risk by providing the counter guarantee. 15. It was argued that the transaction is not an international transaction per Section 92B of the Act, which defines an 'international transaction' as under: - "International transaction means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more enterprises." It is submitted that an 'international transaction' would arise only when the foreign subsidiary defaults in making the payment of loan to the bank. Therefore, section 92(1) of the Act would, primarily, not be applicable at all, till the guarantee is invoked. 16. We find that Delhi Tribunal in the case of Bharti Airtel Ltd. v. ACIT [2014] 63 SOT 113 (Delhi - Trib.), held as under: "There can be number of situations in which an item may fall within the description set out in clause (c) of Explanation to Section 92B, and yet it may not constitute an international transaction as the condition precedent with regard to the 'bearing on profit, income, losses or assets' set out in Section 92B(1) 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 and yet they provide certain comfort levels to the parties doing dealings with the associated enterprise. These guarantees thus do not have any impact on income, profits, losses or assets of the Assessee. There can be a hypothetical situation in which a guarantee default takes place and, therefore, the enterprise may have to pay the guarantee amounts but such a situation, even if that be so, is only a hypothetical situation, which is, as discussed above, excluded. In any event, the onus is on the revenue authorities to demonstrate that the transaction is of such a nature as to have "bearing on profits, income, losses or assets" of the ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 37 enterprise, and there was not even an 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 hypothetical 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 profits, income, losses or assets. Clearly, these conditions are not satisfied on the facts of this case. We have held that even after the amendment in Section 92 B'by amending Explanation to Section 92 B, a corporate guarantee issued for the benefit of the AEs, which does not involve any costs 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 assessee on this short issue, we see no need to address ourselves to other legal issues raised by the assessee and the judicial precedents cited before us. For the reasons set out above, and as we have held that the issuance of corporate guarantees in question did not constitute ' international transaction' within meanings thereof under section 92B, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment of Rs 33,10,161. The assessee gets the relief accordingly." 17. We further notice that the decision of Ahmedabad Tribunal in the case of Micro Ink Ltd. Vs. Add. CIT [2016] 157 ITD 132 (Ahd-Trib.), which has followed the decision of Bharti Airtel (supra) held that issuance of corporate guarantees was in the nature of shareholder's activity/quasi capital, thus, could not be included in the ambit of international transaction u/s 92(1) of the Act. Further, Ahmedabad Tribunal has distinguished the decision of Hon'ble Bombay High Court in the case of CIT vs. Everest Kanto Cylinders Ltd [2015] 378 ITR 57 (Bom.), wherein the assessee had actually charged for corporate guarantee fee, unlike in the case of the assessee as well as in the case of Micro Ink Ltd. (supra), for providing corporate guarantee. The Mumbai Tribunal in the case of Siro Clinpharm Private Limited vs. DCIT (in ITA No. 2618/M/2014) dated 31-03-2016 for AY 2009-10 following the decision of Mirco Ink Ltd. (supra) has, inter alia, held that issuance of corporate guarantees will not fall within the ambit of international transaction u/s 92(1) of the Act. Thus, following the decisions of the co-ordinates benches of the Tribunal (supra), we in the present case are of the view that the above transaction does not fall within the purview of international transaction as defined under section 92B of the Act. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 38 18. Further, we are in agreement with the argument of the assessee that even if providing corporate guarantee falls within the definition of "international transaction", in our view, providing such corporate guarantee by a parent company to its wholly owned subsidiary without charging any commission/fees would still be regarded as being at arm's length price, if such corporate guarantee was provided by the parent company for the overall benefit of the business of the group and therefore, ultimately benefiting the parent company itself. Having regard to the direct or indirect commercial interest of the Company, corporate guarantee is given with a view to safeguard and to further business interest. Hence, relying on the Hon'ble Supreme Court's decision in case of S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC), wherein it has been held that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure and having regard to the circumstances of the case. 19. Further we have also gone through the decision of the Mumbai Tribunal in the case of ACIT v. Nimbus Communications Ltd. [2013] 145 ITD 582 (Mum-Trib.), wherein it was held as under: "For the guarantee given to the bank against the financial assistance given to its AEs, no commission was charged by the assessee company on the ground that the said AEs were not benefited by the guarantee so given and it was the assessee who benefited as a result of commercial benefits secured for future. In support of this stand of the assessee, the assessee has contended that business strategy should be taken into consideration while making any TP adjustments in respect of such transactions and has relied on the OECD Transfer Pricing Guidelines issued in 2010. As stated in para 1.59 of the said guidelines, the business strategies should also be examined in determining comparability for transfer pricing purposes and certain illustrations of such business strategies are also given therein. As stated in para 1.60 of the said guidelines which has been relied upon by the assessee, business strategies also could include market penetration schemes and taxpayer seeking to penetrate a market or to increase its market share might temporarily charge a price for its product that is lower than the price charged for otherwise comparable products in the same market. As explained further, a taxpayer seeking to enter a new market or expand (or defend) its market share might temporarily incur higher costs and hence achieve lower profit levels than other taxpayers operating in the same market. The relevant facts of the present case do not indicate that there was any such business strategy adopted by the assessee in not charging ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 39 commission in respect of guarantees issued for its AEs. As a matter of fact, there is nothing to suggest that any such business strategy was adopted by the assessee with specific intention or motive and the case has been sought to be made out merely on the basis of commercial expediency by claiming that the assessee was benefited as a result of giving the guarantees in the form of commercial benefits secured for future." 20. Thus, the above decision of the Mumbai Tribunal reiterates the proposition of the assessee that when the guarantee has been given by 26 ITA No. 1716/ Mum/2017 The Bombay Dyeing & Mfg. Co. Limited (A.Y:2012-13) the assessee results in a direct or indirect benefit to the assessee itself, then there arises no need to charge any commission on the same. Thus, following the decisions of the co- ordinates benches of the Tribunal (supra), we, in the present case are of the view that the above transaction does not fall within the purview of international transaction as defined under section 92B of the Act and hence, the orders of the lower authorities are reversed. This issue of assessee’s appeal is allowed.” 42. So in view of the matter and following the order passed by co-ordinate Bench of the Tribunal, we are of the considered view that when corporate guarantee has been provided by the parent company for the overall benefit of business of the group and ultimately to the benefit of the parent company itself, the transaction qua providing corporate guarantee is to be treated at arms length without any separate mark up. Moreover, as already decided by co-ordinate Bench of the Tribunal the transaction as to providing corporate guarantee qua the loan availed of by the AE does not cover under the definition of international transactions as defined under section 92B of the Act. So we hereby set aside the order passed by the Ld. Lower Authorities and addition made by Ld. Lower Authorities on account of transfer pricing adjustment qua risk involved in giving guarantee on loan advance to the AE is ordered to be deleted. So ground No.1 of A.Y. 2009-10 & 2010-11 is determined in favour of the assessee. ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 40 Ground No.2 of A.Y. 2009-10 bearing ITA No.335/M/2020, Ground No.3 of A.Y. 2009-10 & 2010-11 bearing ITA No.335/M/2020 & ITA No.2741/M/2019 respectivley & Ground No.4 of A.Y. 2010-11 bearing ITA No.2741/M/2019 43. Assessee company during the assessment proceedings vide letter dated 27.01.2012 requested to consider the subsidy amounts of Rs.27,43,53,333/- & Rs.18,62,51,866/- for A.Y. 2009-10 & 2010-11 respectively received under package scheme of incentives from Government of Maharashtra as capital subsidy so as to exclude the same while computing the total income for the year under reference, which request has been declined by the AO on the ground that since this claim has not been lodged by the assessee company by way of filing revised return the same is not admissible. However, Ld. CIT(A) has declined to decide this issue raised by the assessee by way of additional ground by following its own order for A.Y. 2011-12. Similarly, the Ld. CIT(A) has also declined to decide the additional ground filed by the assessee regarding exclusion of subsidy while computing book profit under section 115JB of the Act. 44. When the assessee has come up before the Ld. CIT(A) by way of specific ground qua the subsidy received under package incentive scheme of 2007 of Government of Maharashtra as capital subsidy and to exclude the subsidy amount while computing the book profit under section 115JB of the Act which is purely a legal issue, the Ld. CIT(A) was required to decide the issue on merits having been declined by the AO on the ground that this claim was not raised by the assessee by way of filing revised return. So we set aside this issue back to the Ld. CIT(A) to decide afresh in view of the findings returned by co-ordinate Bench of the Tribunal in ITA No.2741/M/2019 M/s. The Bombay Dyeing & Mfg. Co. Ltd. 41 assessee’s own case for A.Y. 2012-13. Consequently, Ground No.2 of A.Y. 2009-10, Ground No.3 of A.Y. 2009-10 & 2010-11 & Ground No.4 of A.Y. 2010-11 are decided in favour of the assessee for statistical purposes. 45. In view of what has been discussed above, aforesaid appeals filed by the assessee company as well as the Revenue are partly allowed for statistical purposes. Order pronounced in the open court on 05.07.2022. Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 05.07.2022. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.