SRF Limited Vs ACIT (ITAT Delhi)
Corporate guarantee @ 0.25% upheld; 14A interest disallowance & MAT add-back quashed; CER receipts held capital — ITAT Delhi in SRF Ltd
Delhi Tribunal largely allowed Assessee’s appeals, following its own consistent precedents. On corporate guarantee, Tribunal held that guarantee fee @ 0.25% charged to wholly-owned AEs is at arm’s length, rejecting higher rates adopted by TPO/DRP. Tribunal reiterated that bank guarantee rates are not valid CUPs for corporate guarantees and that specific bank quotations obtained by Assessee constitute reliable comparables; further, guarantees backed by counter-guarantees involve minimal risk. Accordingly, TP adjustment of ₹53.25 lakh was deleted.
On s.14A, Tribunal held that where Assessee had sufficient own funds far in excess of investments, no interest disallowance u/r 8D(2)(ii) could be made. Following Assessee’s own cases for earlier years, interest disallowance of ₹1.17 crore was deleted. Tribunal further held that 14A disallowance cannot be added back while computing MAT u/s 115JB, relying on Vireet Investment (SB) and Delhi HC precedents; corresponding MAT addition was also deleted.
On staff welfare, donation to SRF Vidyalaya School, Chennai, run within factory premises & giving preference to employees’ children, was held allowable u/s 37, following Mahindra & Mahindra (Bom HC) and Assessee’s own cases. Short-deduction TDS addition was deleted based on TRACES evidence.
Crucially, Tribunal held that receipts from transfer of Carbon Emission Reduction (CERs) and cancellation of CER contracts are capital receipts, not chargeable to tax under normal provisions nor includible in book profits u/s 115JB, following a long line of HC decisions and Assessee’s own cases. Tribunal also reiterated that legitimate legal claims can be raised before appellate authorities even without revised return, distinguishing Goetze (India) and relying on NTPC & Mitesh Impex. Certain MAT computation issues, TDS/TCS credit & consequential verifications were restored to AO for statistical purposes. Overall, Tribunal reaffirmed consistency, substance over form & binding own-case precedents, granting substantial relief to Assessee
FULL TEXT OF THE ORDER OF ITAT DELHI
