2018 (5) TMI 1166 - HC - Income Tax

Appeal admitted for analysis on benchmarking, guarantee fees, TDS, R&D expenses, trademark fees, and more

The Court admitted the appeal for further consideration and analysis on issues related to Benchmarking of Convertible Loan, Guarantee fee charges, ... TDS u/s. 195 - payment of legal professional fees to non resident - non deduction of tds - Held that:- Tribunal noted that the assessee had made payments to professional law firms by way of Consultancy Fees. Such firms did not have any fixed base available in India. The Tribunal, therefore, had recorded that under such circumstances, looking to the Double Taxation Avoidance Agreement between the two countries, the recipient of the fees had no tax liability in India. That being the position, no question of law arises. TDS u/s. 195 - payment of clinical and analytical testing charges to non-resident - TDS liability - Held that:- The recipient of the fees did not have permanent establishment in India. This Question is therefore also not considered. Depreciation on Hummer Car - as per revenue car was in the name of the Director and there was no evidence to show that the same was used wholly and exclusively for the purpose of business - Held that:- Case of the assessee was that the payment for purchase of vehicle was made by the Company, though the car was registered in the name of the Director. This Court under similar circumstances in the case of Commissioner of Income-Tax v. Aravali Finlease Limited, reported in [2011 (8) TMI 814 - Gujarat High Court] ruled in favour of the assessee. This question is, therefore, not considered. Questions [A], [B], [C], [D1], [E], [F], [G] and [I] arise for our consideration. Tax Appeal is, therefore, admitted for consideration of these substantial questions of law Issues:1. Benchmarking of Convertible Loan2. Guarantee fee charges3. Interest on Loan to Zydus France4. Non-deduction of TDS on commission to non-resident5. Product Registration expenditure6. Trademark Registration & Patent Fee7. Expenses incurred outside approved R&D facility8. Disallowance under Section 14A for Book Profit computationAnalysis:Benchmarking of Convertible Loan (Issue A): The High Court admitted the appeal to consider whether the Appellate Tribunal erred in deleting the addition made on account of Benchmarking of Convertible Loan. This issue is pending for further consideration.Guarantee fee charges (Issue B): The Court also admitted the appeal to examine if the Appellate Tribunal erred in deleting the addition made on account of Guarantee fee charges. This issue is awaiting detailed review.Interest on Loan to Zydus France (Issue C): Another issue admitted for consideration is whether the Appellate Tribunal was correct in deleting the addition made on account of interest on Loan to Zydus France. This matter is yet to be analyzed.Non-deduction of TDS on commission to non-resident (Issue D1): The Court will review whether the Appellate Tribunal erred in deleting the addition made under Section 40[a](i) for non-deduction of TDS on commission to a non-resident. This issue is pending further examination.Product Registration expenditure (Issue E): The appeal also raises the question of whether the Appellate Tribunal was correct in deleting the addition made on account of Product Registration expenditure. This issue is awaiting detailed scrutiny.Trademark Registration & Patent Fee (Issue F): The Court will consider if the Appellate Tribunal erred in deleting the addition of expenses for Trademark Registration & Patent Fee. This issue is pending further analysis.Expenses incurred outside approved R&D facility (Issue G): The appeal questions the deletion of expenses incurred outside the approved R&D facility. The Court will review this issue for a detailed decision.Disallowance under Section 14A for Book Profit computation (Issue I): The Court will examine whether the Appellate Tribunal erred in deleting the addition of disallowance under Section 14A for Book Profit computation. This issue is pending further consideration.Non-deduction of TDS on legal professional fees (Issue D2): The Tribunal found that the recipient of legal professional fees had no tax liability in India due to the Double Taxation Avoidance Agreement. Therefore, no question of law arises regarding this issue.Non-deduction of TDS on clinical and analytical testing charges (Issue D3): The recipient of these charges also did not have a permanent establishment in India, leading to the Tribunal not considering this issue.Depreciation on Hummer Car (Issue H): The Court cited a previous ruling in favor of the assessee regarding depreciation claimed on a car purchased for the Director, stating that the payment was made by the Company, and hence, this question is not considered.The Court has admitted the appeal for issues A, B, C, D1, E, F, G, and I for further consideration and analysis, while issues D2, D3, and H have been addressed with reasons for not considering them.