Tribunal allows appeal on lease rent and repair expenses but upholds disallowance on offshore services.

The Tribunal partly allowed the assessee's appeal regarding the disallowance of lease rent paid on leasehold land, repairs and maintenance expenses on plant and machinery, and other repairs and maintenance expenses. The Tribunal directed the AO to delete the additions based on specific arguments presented by the assessee. However, the disallowance of expenses related to offshore services and foreign travel was upheld. The Tribunal provided detailed directions for re-examination of certain expenses and their appropriate treatment. The order was pronounced on April 13, 2018.

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Issues Involved:
1. Disallowance of lease rent paid on leasehold land.
2. Disallowance of repairs and maintenance expenses paid to WIPRO for offshore services.
3. Disallowance of foreign travel expenses.
4. Adhoc disallowance of repairs and maintenance expenses on plant and machinery.
5. Disallowance of other repairs and maintenance expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Lease Rent Paid on Leasehold Land:
The assessee, engaged in marketing motor spirit and hybrid diesel, entered into long-term lease agreements for land used for retail outlets. The AO disallowed the lease rent, treating it as capital expenditure since the lease periods ranged from 30 to 99 years, considering the assessee as the deemed owner under section 269UA. The assessee contended that the lease rent was periodic, not lump sum, and the land was to be surrendered after the lease term. The Tribunal found merit in the assessee's arguments, noting that the lease agreements were for limited periods with monthly payments, and the assessee was not the owner. Relying on the Gujarat High Court's decision in DCIT vs. Sun Pharmaceuticals Industries Ltd., the Tribunal directed the AO to delete the additions.

2. Disallowance of Repairs and Maintenance Expenses Paid to WIPRO for Offshore Services:
The AO disallowed Rs. 16,26,383 paid to WIPRO for IT support services, claiming it was for the parent company's benefit in the UK, not the assessee's business. The assessee argued the payment was for revenue-related IT support services, with TDS deducted. The Tribunal upheld the AO's disallowance, agreeing that the payment was for the parent company's benefit, not the assessee's business.

3. Disallowance of Foreign Travel Expenses:
The AO disallowed foreign travel expenses, asserting they were unrelated to the assessee's business in India and were for the entire Shell group. The assessee argued the expenses were for employee training and meetings relevant to its business. The Tribunal found the assessee failed to counter the AO's findings and upheld the disallowance, noting the expenses were for the entire group, not specifically for the assessee's business in India.

4. Adhoc Disallowance of Repairs and Maintenance Expenses on Plant and Machinery:
The AO disallowed 25% of repairs and maintenance expenses, amounting to Rs. 15,87,768, citing higher expenditure compared to the previous year. The assessee argued the expenses were justified due to business expansion and increased revenue. The Tribunal found the AO's disallowance unjustified as it was based on volume without specific discrepancies. The Tribunal upheld the CIT(A)'s decision to delete the addition, noting the expenses were in line with business growth.

5. Disallowance of Other Repairs and Maintenance Expenses:
The AO disallowed Rs. 1,96,69,928 for computer maintenance, treating it as capital expenditure for software, licences, and patents. The assessee contended these were annual maintenance contracts for IT support services. The Tribunal noted conflicting findings between the AO and CIT(A). The Tribunal remanded the issue to the AO to re-examine if the expenses were indeed annual maintenance contracts (revenue expenditure) or for acquiring capital assets. The AO was directed to allow or disallow based on this re-examination.

Conclusion:
The appeal filed by the assessee was partly allowed, and the appeal filed by the revenue was partly allowed for statistical purposes. The Tribunal provided detailed directions for re-examination and appropriate treatment of disputed expenses. The order was pronounced on April 13, 2018.

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