ITAT allows appeal, rejects AO's disallowances. Emphasizes substantiating expenses, TDS compliance.

The ITAT allowed the appeal of the assessee on all grounds, finding that the disallowances made by the AO were not justified based on the provided evidence and relevant legal precedents. The judgment emphasized the importance of substantiating expenses and complying with TDS provisions where applicable.

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Issues Involved:
1. Legality of the assessment order.
2. Disallowance of Rs. 96,89,231 on an ad-hoc basis.
3. Disallowance of Rs. 6,51,57,000 under section 40(a)(i) for payments made to AEs.
4. Opportunity of being heard and consideration of appellant's reply.
5. Specific disallowances related to professional fees and salaries.

Summary:

1. Legality of the Assessment Order:
The assessee challenged the assessment order passed by the AO under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, claiming it to be illegal, perverse, and bad in law.

2. Ad-hoc Disallowance of Rs. 96,89,231:
The AO disallowed 10% of certain expenses on an ad-hoc basis, alleging that the expenses remained unsubstantiated. The assessee provided detailed ledger accounts and major invoices, arguing that the expenses were business-related and necessary for fulfilling contractual obligations with NHAI. The ITAT found that the assessee had sufficiently substantiated the expenses and held that no ad-hoc disallowance was warranted, relying on the ITAT's decision in M/s. Cheminova India Ltd. versus ACIT.

3. Disallowance under Section 40(a)(i):
The AO disallowed Rs. 6,51,57,000 for payments made to AEs, claiming non-compliance with TDS provisions under section 195. The assessee argued that the actual amount paid to Eurostudios India Pvt. Ltd. was Rs. 1,86,33,632, not Rs. 2,01,34,000, and that TDS was duly deducted and deposited. For payments to TPF Getinsa Eurostudios SL Spain, the assessee contended that the transactions did not involve technical knowledge transfer and thus did not qualify as Fees for Technical Services (FTS) under the INDO-SPAIN DTAA. The ITAT agreed with the assessee, stating that the nature of the payments did not warrant TDS, and hence, the disallowances were deleted.

4. Opportunity of Being Heard:
The assessee claimed that the AO made disallowances without providing an opportunity of being heard, as directed by the DRP. The ITAT found that the assessee had filed the necessary documents and evidences, and thus, the AO's action was not justified.

5. Specific Disallowances:
- Professional Fee to Eurostudios India Pvt. Ltd.: The ITAT found that the actual payment was Rs. 1,86,33,632, with TDS duly deducted and deposited, and thus, no disallowance was warranted.
- Professional Fee to TPF Getinsa Eurostudios SL Spain: The ITAT held that the payments were for services that did not involve technical knowledge transfer, and hence, no TDS was required.
- Salary to Expatriates: The ITAT concluded that the payments were pure cost-to-cost reimbursements without any profit element, and thus, no TDS was warranted.

Conclusion:
The ITAT allowed the appeal of the assessee on all grounds, finding that the disallowances made by the AO were not justified based on the provided evidence and relevant legal precedents. The judgment emphasized the importance of substantiating expenses and complying with TDS provisions where applicable.

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