TAKE SOLUTIONS LTD.,CHENNAI V. ITO, CORPORATE WARD-6(1), CHENNAI

ITTPA 66/CHNY/2024

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The case involves Take Solutions Limited appealing against the assessment order for the year 2017-18, which included a TP adjustment and a disallowance under section 14A of the Income Tax Act, 1961. The primary contention was the enhancement of the corporate guarantee commission rate from 1% to 2.55% by the Assessing Officer and the Dispute Resolution Panel (DRP). The Tribunal referenced a previous decision in the assessee's own case for a different assessment year, where a 1% rate was sustained, and directed the same to be applied in this case. Additionally, the Tribunal addressed the disallowance under section 14A, suggesting that only investments yielding exempt income should be considered, and remanded the matter for re-examination.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107399 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Other Referred Cases: IT(TP)A No. 43/Chny/2022, AY 2012-13
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K.N.DHANDAPANI
• Assessee Lawyers: K. PARSANNA
• Keywords: Earning of tax free income; Wholly owned subsidiary; Rule 8D
• Section: 143(3); 14A; 144C

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T(TP)A. No.66/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2017-18 Take Solutions Limited, No. 56, Ragas Building, 4th Floor, Dr. Radhakrishnan Salai, Mylapore, Chennai 600 004. [PAN:AABCT3684M] Vs. The Income Tax Officer, Corporate Ward 6(1), Chennai (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri K. Parsanna, Advocate ŮȑथŎ की ओर से/Respondent by : Shri K. N. Dhandapani, CIT सुनवाई की तारीख/ Date of hearing : 31.12.2024 घोषणा की तारीख /Date of Pronouncement : 31.12.2024 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the assessment order dated 23.08.2024 passed under section 143(3) r.w.s. 144C (13) r.w.s. 144B of the Income Tax Act, 1961 [“Act” in short] by the Assessing Officer for the assessment year 2017-18. 2. Ground No. 1 is general in nature and requires no adjudication. 3. Ground No. 2 [2.1 to 2.9] raised by the assessee in challenging the action of the Assessing Officer and DRP in enhancing the rate for computing I.T.(TP)A. No.66/Chny/24 2 the corporate guarantee commission from 1 % to 2.55% in the facts and circumstances of the case. 4. The assessee provided corporate guarantee to its wholly owned subsidiary Take Solutions Global Holdings Pte. Ltd. (Singapore). The guarantee to the extent of ₹.227.06 Crores was outstanding during the year. In pursuance to the order passed by the TPO giving effect to the directions of the DRP-2, Bengaluru determining the corporate guarantee commission at 2.55%, the Assessing Officer made TP adjustment by making addition of ₹.5,79,00,300/- and added to the income of the assessee. 5. The ld. AR Shri K. Parsanna, Advocate submits that the Assessing Officer and the DRP failed to apply the Arm’s Length Price (ALP) of guarantee charges as 1% by relying upon the decision of the Tribunal in assessee’s own case for the assessment year 2018-19. We have perused the order of the Tribunal in assessee’s own case for the assessment year 2018-19 in IT(TP)A No. 43/Chny/2022 dated 06.06.2023, wherein, the Tribunal sustained the TP adjustment computed at 1% by the TPO by relying upon Tribunal’s order for the AY 2012-13, which was confirmed by the DRP. Under the above facts and circumstances, we direct the Assessing Officer to apply the ALP of guarantee charges as 1% and recompute the TP adjustment. Thus, the ground raised by the assessee is allowed. I.T.(TP)A. No.66/Chny/24 3 6. Ground No. 3 [3.1 to 3.4] raised by the assessee in challenging the action of the Assessing Officer and DRP in making disallowance under section 14A of the Act by invoking Rule 8D of the Income Tax Rules, 1962. 7. The assessee earned exempt income of ₹.18,90,84,481/- and offered suo-motu disallowance under section 14A of the Act r.w. Rule 8D for ₹.84,68,600/-. However, the Assessing Officer in his order under section 144C(1) of the Act, determined the disallowance under section 14A r.w. Rule 8D of ₹.3,49,66,838/- in para 4.4.2 of the assessment order. The assessee disputed the same before the DRP. The DRP directed the Assessing Officer to recompute the disallowance under section 14A of the Act r.w. Rule 8D by excluding the investment in foreign companies, which is reproduced in para 4.6 of the assessment order. Accordingly, the Assessing Officer recomputed the disallowance under section 14A r.w. Rule 8D and the variation of ₹.1,89,09,200/- was brought to tax. 8. Before us, the ld. AR submits that the disallowance should be computed by considering only those investments which have yielded exempt income during the year. We find force in the arguments of the ld. AR. Similar issue on identical facts was considered by the Tribunal for AY 2018-19 and remanded the matter to the file of the Assessing Officer for fresh examination. Accordingly, for the assessment year under consideration also, we remand the matter to the file of the Assessing Officer for fresh I.T.(TP)A. No.66/Chny/24 4 examination on similar lines keeping all the issues open. Thus, the ground raised by the assessee is allowed for statistical purposes. 9. Ground No. 4 [4.1] in challenging the alleged difference between the turnover as per service tax return and income offered to tax has not been pressed at the time of hearing and accordingly, ground No. 4 is dismissed as not pressed. 10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on 31st December, 2024 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 31.12.2024 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "