2021 (11) TMI 529 - AT - Income Tax

Tribunal Upholds Assessee's Cross-Objection, Allows Depreciation, Remands Commission Disallowance

Dy. Commissioner of Income Tax Circle–9 (1) (2), Mumbai Versus Sabmiller India Ltd. (Now known as Anheuser Busch InBev India Ltd.) And (Vice-Versa)

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. The Tribunal upheld the CIT(A)'s deletion of disallowances ... TDS u/s 195 - Disallowance invoking section 40(a) on account of Foster’s Brand - said amount was capitalized by the assessee in the books under Fixed Assets and depreciation on the same was claimed @ of 25% under section 32(1) - CIT(A) directed the Assessing Officer to delete the addition brought by disallowing depreciation - HELD THAT:- No infirmity in the order of the learned CIT(A) which is self–explained and speaking order as reproduced above. Before us, during the course of hearing, both the AR for the parties conceded that similar issue has been decided by Anheuser Busch InBev India Ltd. [2020 (3) TMI 212 - ITAT MUMBAI] and Anheuser Busch InBev India Ltd. [2020 (3) TMI 212 - ITAT MUMBAI] wherein the Tribunal has deleted identical addition by holding that the claim of depreciation under section 32 of the Act is not in respect of the amount paid or payable which is subject to TDS, but is a statutory deduction on an asset which is eligible for deduction of depreciation. Consistent view being maintained by the Co–ordinate Bench of the Tribunal in assessee’s own case cited supra, similar directions are issued on this issue also. Consequently, we have no hesitation in upholding the order of the learned CIT(A) by dismissing the grounds no.1 to 3, raised by the Revenue. Disallowance of grossed–up expenses to the extent of taxes withheld u/s 195A - HELD THAT:- We find that identical issue has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case in ACIT v/s Anheuser Busch InBev India Ltd. [2020 (3) TMI 212 - ITAT MUMBAI] and Anheuser Busch InBev India Ltd. v/s ACIT. [2020 (3) TMI 212 - ITAT MUMBAI] wherein the Tribunal has decided the issue in favour of the assessee and against the Revenue as held that assessee has computed TDS on a net of tax basis and no tax has been separately debited to the Profit & Loss Account. It is also a fact on record that as per the borrowing arrangement, the tax liability, if any, on payment of interest has to be borne by the assessee. Therefore, the tax withheld has to be allowed as expenditure to the assessee. TDS liability on commission payment - CIT(A) did not consider the additional evidences filed by the assessee - HELD THAT:- Assessee during the course of first appellate authority, had filed certain additional evidences in support of its claim which were ignored by the learned CIT(A) consequent to which the order of the learned CIT(A) in the instant case becomes cryptic one which is without deliberating upon the provisions of the Act in disregarding the admissibility of the additional evidences filed by the assessee. Considering the legal proposition, the learned CIT(A) ought to have considered the additional evidences adduced by the assessee and could have decided the issue on merit and since the learned CIT(A) is failed to do so, therefore, we deem it fit and proper to admit the additional evidences filed by the assessee. Issues Involved:1. Disallowance of depreciation on Foster's Brand under section 40(a)(i) of the Income Tax Act.2. Disallowance of grossed-up expenses related to taxes withheld under section 195A.3. Disallowance of commission to agents under section 40(a)(ia) due to non-deduction of tax under section 194H.Issue-wise Detailed Analysis:1. Disallowance of Depreciation on Foster's Brand:The Revenue challenged the deletion of disallowance of Rs. 16,17,97,500 on account of depreciation claimed on Foster's Brand, arguing that the assessee failed to deduct TDS under section 195. The Assessing Officer (AO) had disallowed the depreciation under section 40(a)(i) for non-deduction of TDS. The CIT(A) directed the AO to delete the addition, citing that the Bombay High Court had ruled that the income from the transfer of trademarks was not taxable in India, thus negating the need for TDS. The Tribunal upheld the CIT(A)'s decision, noting that depreciation is a statutory deduction on an asset and not subject to TDS. The Tribunal referenced its earlier decisions in the assessee's favor, confirming that section 40(a)(i) does not apply to depreciation claims.2. Disallowance of Grossed-up Expenses Related to Taxes Withheld:The AO disallowed Rs. 4,97,36,399 being the tax deducted on payments made on a grossed-up basis. The CIT(A) deleted the addition, explaining that under section 195A, tax payable is part of the total consideration and thus deductible. The Tribunal upheld the CIT(A)'s decision, noting that the tax liability borne by the assessee forms part of the cost of availing services and should be allowed as an expenditure. The Tribunal referenced its previous rulings and the decision in CIT v/s BOB Cards Ltd., supporting the allowance of such expenses.3. Disallowance of Commission to Agents:The AO disallowed Rs. 4,36,32,364 as commission to agents under section 40(a)(ia) for non-deduction of tax under section 194H. The CIT(A) upheld the AO's decision, not considering additional evidence provided by the assessee. The Tribunal found that the CIT(A) should have considered the additional evidence, which demonstrated that the payments were reimbursements and not commissions. The Tribunal set aside the CIT(A)'s order and directed a fresh examination of the evidence, citing the decisions in Director of Income Tax (IT) v/s A.P. Moller Maersk AS and Krupp Udhe GmbH. The Tribunal emphasized that reimbursements do not constitute income and are not subject to TDS.Conclusion:The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. The Tribunal upheld the CIT(A)'s deletion of disallowances related to depreciation and grossed-up expenses, while remanding the issue of commission disallowance for reconsideration with additional evidence. The Tribunal's decisions were consistent with its earlier rulings and relevant judicial precedents.