TaxTMI 
TaxTMI 
2015 (1) TMI 157
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....through three Indian companies, namely, Paradigm Hotels Pvt. Ltd. (PHPL), Shantideep Hotels Pvt. Ltd. (SHPL) and Shantideep Foods Pvt. Ltd (SFPL), as share capital/foreign currency (FC) loans. The three Indian companies were later amalgamated with the appellant company through a scheme duly approved by the Hon'ble Delhi High Court vide its order dated 21.6.2007 (with effect from 1.8.2006). In lieu of the FC loans, UBSM was allotted further equity in the appellant company. UBSM is owned by 3 companies - namely Infotech Services Ltd. based in Channel Islands having 20% stake in the appellant company; and Paranal Finance and Mid East Consortium based in British Virgin Islands having 80% stake in the appellant company. Infotech is owned by Mr. Suresh Nanda whereas Paranal and Mid East are owned by one Mr. Hamilton Andrews, a British national. The additions made on account of share application/capital and related issues for various years in the case of the appellant are as under:- A.Y. Amount (Rs.) Investing Company Mode of Payment 2004-05 7,05,00,000 PHPL Share application 2005-06 140,02,18,500 49,26,00,000 UBSM PHPL Share application Share application 2006-07 44,....
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....f income and was subjected to tax in India. The above mentioned documents in fact fully established the fact that Paradigm Hotel had, without any doubt, made the said payments, but had the requisite financial resources to enable it to do so. 1.3 That in complete disregard of all the above mentioned evidence placed before the A.O. by which the appellant fully discharged the burden cast on it by Section 68 of the Income-tax Act, 1961 the A.O. made an addition of the sum on the basis of patently fallacious and irrelevant reasoning, and nothing but mere surmise and conjecture:- The A.O. at para 4.3, page 9 of his order states "it is evident that Mr. Suresh Nanda has used the Mauritius route to bring his unaccounted money into the India Companies to avoid disclosure." Para 4.4 of the Order reads "looking to the Balance Sheet and Profit and Loss Account of Universal Business Solution Ltd. and Paradigm Hotels Pvt. Ltd., it is clear that the Companies do not have significant income. They have been used as mere conduits to channelize the unaccounted money of Shri Suresh Nanda." "Since the assessee company is the ultimate beneficiary of these unaccounted funds hence; these receipts are tre....
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....see during the course of assessment proceedings, in order to establish the genuineness of the credit and to discharge the burden cast on it by Section 68 of the Income-tax Act, 1961, filed the following: 1. Certificate of Incorporation of Star Hospitality Corporation dated 26.11.2002. 2. Amended Certificate of incorporation on change of name from Star Hospitality Corporation to Universal Business Solution Ltd. dated 14.01.2003. 3. Mauritius Tax Residence Certificate issued to Star Hospitality Corporation dated 24.01.2003. 4. Mauritius Tax Residence Certificate issued to Universal Business Solutions Ltd. dated 27.1.2009 for the assessment years from 05.11.2004 to 04.11.2008. 5. Letter dated 15.09.2009 from Barclay Bank, Mauritius showing statement of funds remitted to Claridges Hotel Pvt. Ltd. towards share capital. 6. Banker's Reference Letter dated 24.06.2008 from Barclay Bank, Mauritius. 7. Balance Sheet and Income Statement for the years ended 31.03.2004 to 31.03.2007 and a certificate dated 28.10.2009 from Chartered Accountant on the borrowings reflected in the respective balance sheets of Universal Business Solutions Ltd. 8. Certificate dated 12.10.2009 from the Ch....
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....is company), Paranal Finance, BVT and Mid East Consortium, BVI. The Assessing Officer was also provided with the details showing that Infotech Services LTd. had only a 20% stake in UBS, 80% being held by Paranal Finance and Mideast Consortium, and that Mr. S. Nanda had no interest or shares in the other two companies i.e. Paranal Finance or Mid East Consrotium. The assessing authority was also informed by Mr. Suresh Nanda that one Mr. Hamilton Andrews, a British National held the controlling stake in the other two companies i.e. Paranal and Mid East, and that Mr. Nanda did not hold any stake in these companies. A duly notarized Affidavit of Mr. Hamilton, giving the details of his residential address and his affirmation on oath that he controlled the two companies i.e. Paranal and Mid Easst was also placed before the two companies i.e. Paranal and Mid East was also placed before the assessing authority by Mr. Suresh Nanda in his assessment. There is no finding recorded by the A.O. that the appellant is not a genuine company or that it did not actually make the payments. In such a case, the settled legal position is that the application money is not income but is only a capital recei....
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....he identity, genuineness and creditworthiness to justify the action of the Learned CIT(Appeals) in deleting the additions. 6. Reiterating the common contentions as discussed hereinabove, the Learned CIT(DR) for the appeal for assessment year 2007-08, submitted further that during the year an amount of Rs. 17,94,15,000 was received by the assessee from Universal Business Solution Ltd. Mauritius (UBSM). The assessee company has been bringing unaccounted money after crediting to inter-mediatory including UBSM and the true source of funds has not been disclosed to the income-tax authorities. Since the assessee company is the ultimate beneficiary of unaccounted funds, the Assessing Officer was justified in making the additions in question. 7. Since the parties choose to argue the appeal for the assessment year 2007-08 as a lead year covering more issues we heard it first. Learned AR submitted that following documents were filed before the authorities to establish the identity, genuineness and creditworthiness of the share applicant:- i. Notarized copy of Certificate Star Hospitality Corporation (dt. 26.11.2002) - page No. PB1/ ii. Notarized of certificate of Incorporation on change ....
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....unexplained income is of the assessee. Learned AR submitted that the issue raised is also covered by the order dated 12.4.2013 of the ITAT in ITA Nos. 4932 & Ors./Del/2011 in the case of Russian Technology Centre Pvt. Ltd. for the assessment year 2007-08. In that case, following ratio has been arrived at: i) CBDT Circular No.5 (F.No. 73A/2(69)-IT (A-II) dt. 20.2.1969- "money brought by Non residents for investments for other purposes is not liable to Indian Income-tax. ......if money has been brought into India through banking channels.......no questions at all are asked by the ITOs as to the origin of the money or assets brought in" (Relevant para at Pg 112/PB1). ii) Money received through banking channels: (para 11 of Pg 114/PB1) The moneys have come to the assessee company through banking channels as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of the remitting bank FIPB approval that too with a liberty to collect share capital up to Rs. 600 crores and ROC compliance etc. clearly indicates the stand of the assessee. The plethora of evidences filed by the assessee amounts to discharge of primary burden cast on the assessee in t....
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....111,550 cannot be sustained. We have already held that the assessee is a tax resident of Mauritius. There is no basis for coming to a conclusion that any income of the assessee accrued, arose or was received in India. In these circumstances, we direct that the addition made be deleted. Ground Nos. 2 to 2.3 raised by the assessee are allowed". 9. Learned AR submitted that facts about the source of source of share application money in the case of assessee has been established in the case of Sh. Suresh Nanda (supra) decided by the ITAT. In that case, sources of income have been elaborately explained. The ITAT in its order in that case has held that UBSM is not a benami company. On the basis of documents submitted, the ITAT held as "we do not find any logic in the Assessing Officer making an addition of this amount in the name of the company i.e. assessee. The ITAT held further that shareholder of UBS Mauritius have filed letters of confirmation as regards the ownership. 10. Learned AR submitted further that the Assessing Officer has doubly taxed the share application money in the hands of Shri Suresh Nanda and the assessee. He drew our attention towards the identical wording in the ....
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....urce of money in the hands of such shareholder (being a resident) or persons making payments towards issue of shares. 13. Learned AR submitted that the order of the Assessing Officer is passed on conjectures or surmises and presumption that the money is the undisclosed income of the assessee company. No evidence is available in this regard with the department. In support, he placed reliance on the decision of the Hon'ble Supreme Court in the case of Omar Sallay Mohd Sait vs. CIT (1959) 37 ITR 151 (S.C) holding that on no account whatever should the ITAT base its findings on suspicion, conjecture or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicion, conjecture or surmises or if it does anything of this sort, its findings even though on question of fact will be liable to be set aside. 14. Regarding addition of Rs. 86,72,88,128 in respect of share application pursuant to amalgamation of Paradigm Hotels Pvt. Ltd., Shantideep Funds (P) Ltd. and Shantideep Hotels (P) Ltd., the Learned AR submitted that in pursuance of Scheme of Amalgamation, the assessee company had received a to....
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.... learned AR having distinguishable facts are not helpful to the assessee. 15. Now, we have to examine as to whether the assessee had been able to furnish proof of existence of the investors, their creditworthiness and genuineness of the transaction, which an assessee is required to establish to get rid of the application of the provisions under section 68 of the Incometax Act, 1961. We have discussed the relevant facts on the issue hereinabove. In nutshell, the Assessing Officer made addition of Rs. 17,94,15,000 being share application money received from Universal Business Solution (A Company Incorporated in Mauritius - in short 'UBSM') and Rs. 86,72,88,128 through three Indian companies, namely, Paradigm Hotels Pvt. Ltd. (PHPL), Shanti Deep Hotels Pvt. Ltd. (SHPL) and Shanti Deep Funds Pvt. Ltd. (SFPL), as income from undisclosed sources. UBSM had invested in the assessee's company both directly as share capital through the FDI Route, through three Indian companies, namely, Paradigm Hotels Pvt. Ltd., Shanti Deep Hotels Pvt. Ltd. and Shanti Deep Funds Pvt. Ltd. as share capital/foreign currency loans. These three Indian companies were later on amalgamated with the ass....
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....at the assessee must prove identity of shareholder and creditworthiness of shareholder and genuineness of the transaction. Again in the case of CIT vs. Youth Construction Pvt. Ltd. (supra), relied upon by the Learned CIT(DR), Hon'ble Delhi High Court has been pleased to express the similar view with observation that factual aspects, surrounding circumstances of the case have to be taken into consideration while dealing with case in a holistic manner dealing with the entire evidence relied upon and having regard to the report of Investigation Wing, the manner in which entries were made in the bank account, the statement. The Hon'ble High Court has also discussed several leading decisions in this regard including the decision of Hon'ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. (2009) 319 ITR 5 (St.) (S.C) and its own decision in the case of CIT vs. Nova Promoters & Finlease Pvt. Ltd. (2012) 342 ITR 169 (Del.) etc. Learned AR has also placed reliance on several decisions including the decision of Lovely Exports Pvt. Ltd. (supra), Shri Barkha Synthetics Ltd. vs. ACIT 283 ITR 377 (Raj.), CIT vs. Dolphin Canpack Ltd. (2006) 283 ITR 190 (Del.), CIT vs. Oas....
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....007. 8. Certificate dated 04.11.2009 from Chartered Accountant confirming the investments and loan receivables reflected in the balance sheets of Universal Business Solutions Ltd. from 31.03.2004 to 31.3.2007. 9. Audited balance sheet and income statement as on 31.3.2004 to 31.03.2007 and a certificate dated 28.10.2009 from Chartered Accountant on borrowings reflected in the respective balance sheets of Universal Business Solutions Ltd. 21. We find from the above documents that the assessee had furnished proof of existence of the investor, proof that the money have come from the investor and has also provided financial statement of the investors, details of the investments by the investors. Ignoring these evidences, the Assessing Officer on the basis of balance sheet and profit and loss account of UBSM has formed his opinion that the said company does not have any significant income. He held that the said company has been used as mere conduit to channelize the unaccounted money of Shri Suresh Nanda. He held that since the assessee company is the ultimate beneficiary of these unaccounted funds, these are treated as unexplained funds of the assessee. The assessee on the other hand....
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....we find that the source of income have been elaborately explained in the case of Shri Suresh Nanda before the ITAT in the appeal for the assessment year 2004-05, 2005-06 and 2008-09. In that case, the documents furnished are relating to evidence showing that money belongs to UBSM and not to Shri Suresh Nanda. The UBSM is an independent entity and is not a company of Shri Suresh Nanda. Incorporation Certificate, Memorandum and Articles of UBSM were filed with tax residency certificate that the UBSM is a tax resident of Mauritius, shareholding of UBSM, confirmation by shareholders of UBSM. The ITAT in that case vide para No. 7.4.4 has held that UBSM is not a benami company and in the same paragraph it has been held that there is no any logic in the Assessing Officer making an addition of the amount in the name of Claridges Hotels Pvt. Ltd. i.e. the assessee. The ITAT also hold that shareholders of UBSM have filed letters of confirmation as regards the ownership. The relevant para Nos. 7.4.2 to 7.4.5 of the said order are being reproduced hereunder for ready reference: "7.4.2 Applying the propositions laid down by the Hon'ble High Court we uphold the order of the Learned CIT(Appe....
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....rates that the assessee is a major shareholder of Infotech Services, which is turn holds only 20% of shareholding of UBS Ltd., Mauritius. The Balance 80% of the share holding of UBS Ltd. is hold by the parties who are not related, much less controlled by the assessee. (iii) Annexure A 8 also supports the claim of the assessee that Infotech Services Ltd. holds 20% of UBS Ltd. Mauritius. The claim of the assessee that the letter in question refers to second round of financial requirements of UBS Ltd., Mauritius and that Info Services Ltd. was required to contribute 20% of share of finance of UBS Ltd. Mauritius and that this was met through interim dividend declared by M/s. UBS Trading FZC, where the assessee is a majority shareholder is proved by this document. (iv) Annexure A 8 at page 36 is a letter written by M/s. UBS Trading FZC declare interim dividend referred to above. This letter does not demonstrate that the assessee has any relationship with M/s. Mid East, S.A. (v) Annexure A 8 page 38, 38 to 71 support the contentions of the assessee that Info Services Ltd. provide funds to UBS Ltd., Mauritius. (vi) Annexure A 8 page 13 also corroborates the claim of the assessee rega....
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.... burden of proof that lie on it; (d) that sources of source need not be established". 22. We note from the above reproduced paragraph No. 7.4.5 of the decision in the case of Shri Suresh Nanda that the ITAT has held that Shri Suresh Nanda is the major shareholder of Infotech Services, which, in turn, holds only 20% of the shareholding of UBSM. The balance 80% of the shareholding of UBSM is held by the parties who are not related, much less, controlled by Shri Suresh Nanda. 23. We also find that an identical issue under almost similar heads has been decided by the ITAT in the case of Russian Technology Centre Pvt. Ltd. (supra). In that case, Russian Technology Centre Pvt. Ltd. was subsidiary of Russian Technology Centre Holding Ltd. (RTCHL) in Tortola BVI. The shares of Russian Technology Centre Pvt. Ltd. (Indian Company) were being held by the holding company RTCHL and Protex Trading Co. Ltd., Seychelles. During the year under appeal, various amounts were received by the Indian company from its holding company and PTCL towards share capital. The Assessing Officer was not satisfied with the explanation and was of the view that the share capital provided by the assessee company was....
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....ation, confirmations and certificate of good standing etc. filed by the assessee in respect of shareholder establish that they are non-resident entity having independent and legal existence. The money have come to assessee through banking channel as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of remitting bank. FIPB approval that too with a liberty to collect share capital up to Rs. 600 crores and ROC compliance, etc., clearly indicates the stand of the assessee. The ITAT thus came to the conclusion that the plethora of the evidence filed by the assessee amounts to discharge of primary burden casts on the assessee in terms of section 68 of the Act for identity and creditworthiness of the creditors and genuineness of transaction. 26. On the second issue regarding applicability of section 68 of the Act, the receipt of money towards share capital from non-resident was discussed by the ITAT in paragraph No. 11.4, 11.5 and 11.6 of the order in the case of Russian Technology Pvt. Ltd. reproduced hereunder: "11.4 The proviso of section 68 though inserted w.e.f. 1.4.2013 also reveals legislative intent that if the share holder is a non-res....
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....ound that it is brought in India by way of remittances. For example, there may be appearing an entry of cash credit in the name of a person of USA by way of loan received through cheque and deposited in the bank account maintained at any city n USA. Such money, being received outside India, cannot be taxed under s. 5(2) unless it is proved that such money is relatable to the income accrued or arising in India. Therefore, the same cannot be taxed under s. 68 merely on the ground that assessee fails to prove the genuineness and source of such cash credit. Therefore, we are of the considered view that provisions of s. 68 or 69 would be applicable in the case of non-resident ony with reference to those amounts whose origin of source can be located in India. Therefore, the provisions of s. 68 or 69, in our opinion, have limited application in the case of non-resident. 28. In the present case, an addition of Rs. 86,72,88,128 has also been made under sec. 68 of the Act by the Assessing Officer. The relevant facts relating to this addition are that during the year Shanti Deep Funds Pvt. Ltd., Shanti Deep Hotels Pvt. Ltd. and Paradigm Hotels Pvt. Ltd. (Travellor's Co.) have amalgamated....
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....50/- 26,1 1,409 26,45.159/- 3. UBSL given amount to for Share Application 5,866 58,660/- 45,38,821 45.97,48 Total: 1,51.070/- 1.16,89.051/- 1.18.40.121/- (c) Issue of shares to UBSL in lieu of their share holding of PHPL, SHPL & SFPL in the exchange ratio approved by the hon'ble High Court i.e. 4,237 shares of the face value of Rs. 10/- each of Claridges Hotel Pvt. Ltd. were issued. That the addition of the impugned amount, made by invoking the reasons or Section 68 of the Income Tax Act, even though no amounts have been received during the year by the Assessee. The share capital has been expanded by virtue of the order of the Hon 'ble High Court of Delhi and in such circumstances there was no cause or reason to invoke provisions of Section 68 and have made the impugned addition. The Ld. AO at Para 7.5, Page 16 of his order states "M/s UBSL is a mere front company to channelize the unaccounted money of Sh. Suresh Nanda into the assessee company. Since M/s Universal Business Solution is the source of the money that has come into the hands of the assessee after amalgamation it is also treated as unexplained. The floating of various entit....
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....isdictions need to be pursued. Fresh enquiries also need to be made with Singapore, Channel Islands, BVI, etc., wherever necessary, to establish the link, if any. As and when such link is established, the income can be taxed as income accruing/arising in India. Else, it cannot be taxed. Hon'ble Supreme Court of India, in Union of India Vs. Kamlakshi Finance Corporation Ltd. AIR 1992 S.C 711 and Khalid Automobiles vs. Union of India [4 SCC (Suppl.) 653] has laid down that the doctrine of binding precedents is equally applicable to Tribunal Orders as Tribunal is a higher Authority in so far as Assessing Officer and Learned CIT(Appeals) are concerned in the judicial hierarchy. In the aforesaid judgment their Lordships have observed that "the order of Appellate Collector is binding on Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon Assistant Collector/Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the order of the higher appellate authorities be followed unreservedly by the subordinate authorities. If this healthy rule is not followed, the result will onl....
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....hold the action of the Learned CIT(Appeals) on this issue, by which he has deleted the addition made under sec. 68 of the Income-tax Act, 1961 on account of undisclosed cash credit. The related ground Nos. 2 & 3 for assessment year 2004-05, ground No.2 for assessment year 2005-06, 2006-07, 2007-08 and 2009-10 of the appeal preferred by the Revenue are thus rejected. 31. Ground and objection relating to disallowance made under sec.14A: The Assessing Officer made disallowances under sec. 14A of the Income-tax Act, 1961 read with Rule 8D as expenditure relating to exempt dividend income in the assessment years 2005-06 to 2007-08, 2008-09 and 2009-10. The same was questioned before the Learned CIT(Appeals). The contentions of the assessee before the Assessing Officer remained that the disallowance under sec. 14A has been computed on the basis of Rule 8D of Income-tax Rules, 1962 ignoring this fact that there was no expenditure incurred nor was there any nexus between any item of expenditure incurred by the assessee and the dividend earned by it. As per the provisions under sec. 14A of the Act as it is originally stood by Finance Act, 2001 with retrospective effect from 01.04.1962, in....
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....unjab & Haryana High Court) ; d) Maxopp Investment Ltd. vs. CIT 247 CTR 162 (Del.) ; e) IACT vs. Bareilly Corporation Bank 27 ITD 1 (Del.); & f) CIT vs. Smt. Godawari Sarraf 113 ITR 589 (Bom.). 33.1 Learned AR submitted that the Assessing Officer has misplaced reliance on the decision of ACIT vs. Chen Invest Ltd. reported in 317 ITR 8. In the said case, the ITAT has observed that the disallowance under sec. 14A can be made even if there is no exempt income generated from that investment. The facts of the case of the assessee are not identical to the facts in the case of CIT vs. Cent Invest (supra). In that case, the assessee had admittedly invested borrowed funds for the purchase of shares held as investment. In such a case, expenses incurred on borrowings the said funds were held to be disallowed under sec. 14A. In the present case, the assessee i.e. Claridges Hotels Pvt. Ltd. had not made any investment out of the borrowed funds but out of the reserve and surplus i.e. own fund. Learned AR submitted that the disallowance cannot exceed exempt income and in support placed reliance on the decision of Tribunal, Delhi Bench in the case of Sahara India Financial Corporation Ltd. vs.....
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....666,000 511,699,000 96.53 Cr. 91.37 Cr. 51.17 Cr. Remarks Pg 20 of P.B. Pg 9 of P.B. Pg 73 of P.B. Investment made 1,376,227,969 2,822,992,989 8,404,099,020 8,279,984,000 8,293,983,000 137.62 Cr 282.30 Cr 840.41 Cr. 827.99 Cr. 829.39 Cr. Remarks Pg. 23 of P.B. Pg. 18 of P.B. Pg. 26 of P.B. Pg. 15 of P.B. Pg. 79 of P.B. 34. Considering the above submissions, we find that the Assessing Officer had made following disallowances on account of expenditure incurred in earning the exempt income invoking the provisions of sec. 14A of the Act. A/Y Applicability of Rule 8D Amount (Rs.) 2005-06 NA 35,17,809 2006-07 NA 5,08,02,595 2007-08 NA 9,26,97,023 2008-09 Yes 4,37,36,365 2009-10 Yes 9,74,27,932 35. There is no dispute as it is now a settled position of law that the provisions laid down under Rule 8D of the Income-tax Rules, 1962 are applicable from the assessment year 2008-09, which has now been upheld by the jurisdictional Hon'ble High Court of Delhi in the case of Maxopp Investment Ltd. vs. CIT (supra). The submissions of the Learned AR....
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.... any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs. 2,03,752 made by the Assessing Officer was in order." 36 In the assessment year 2008-09, the Assessing Officer noted that the assessee had investment in subsidiary companies and holding that section 14A can be applied for disallowance, even if there is no exempt income, he made disallowance of Rs. 4,37,36,365. Before the Learned CIT(Appeals), the assessee also raised an alternative plea that share application money cannot constitute investment till shares are allotted. The Learned CIT(Appeals) set aside the matter to the Assessing Officer to consider whether the amount of Rs. 9 crores share application money should be excluded from investment ....
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....en relief of Rs. 35,17,809 out of the disallowance of Rs. 41,20,767 made by the Assessing Officer. In that year, the Assessing Officer had disallowed Rs. 35,17,809 as net of dividend of Rs. 6,02,958 already disallowed by the assessee in its computation of income and the remaining disallowance was made by the Assessing Officer following the decision of the ITAT in the case of Chemineest & Ors. and holding that Rule 8D was applicable. It is not rebutted that the dividend income during the year was only Rs. 6,02,958, hence we do not find reason to interfere with the first appellate order in this regard. Ground No. 3 (Revenue) is thus rejected. Likewise in the assessment year 2005-06, the Learned CIT(Appeals) has restricted the disallowance upto the exempt income i.e. Rs. 1,30,567 only. The ground No.3 (Revenue) in this regard is accordingly rejected. 37. Besides, the Revenue in its appeal for the assessment year 2001-02 has questioned the first appellate order, whereby the Learned CIT(Appeals) has deleted the disallowance of Rs. 32,35,315 made by the Assessing Officer on account of bad debt written off in the books of account claimed as deduction under sec. 36(1)(vi) of the Act. 38.....
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....er on the issue of validity of proceedings under sec. 153A and/or 143(2) but the same has not been pressed, the related ground of the appeals preferred by the assessee on the issue is thus rejected as withdrawn. The only ground pressed by the assessee in their cross-objections are relating to the disallowance of consultancy fee paid to UBSM in the assessment year 2005-06 for Rs. 11,81,997, in assessment year 2006-07 for Rs. 47,58,902 and in assessment year 2007-08 for Rs. 9,11,582 sustained by the Learned CIT(Appeals). The relevant facts are that in the assessment year 2005-06, the Assessing Officer made addition of Rs. 11,85,997 by disallowing the said amount claimed by the assessee as payment of retainership for business development and marketing services to UBSM. The Assessing Officer noted from the profit and loss account of UBSM that they had incurred design cost of US $71,747. The Assessing Officer held that this amount is much more than the amount reimbursed by the assessee company, hence, the assessee company cannot take plea that the above design cost pertained to consultancy agreement carried out by UBSL. The Assessing Officer observed that UBSM is a mere investment compa....
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....the Learned CIT(Appeals) in the assessment year 2005-06 has sustained the addition, with this noting that in the assessment year 2004-05, the Revenue had added expenditure of Rs. 69,26,313 being payment made vide an agreement between UBSM and Y2 Space Pte. Ltd., Singapore for passing fee etc. relating to renovation of the assessee hotel. The assessee is gross importer of India and services of UBSM, its holding company. Learned CIT(Appeals) observed that when the holding company was paying for renovation made in the assessee company, there was no commercial expediency or reason for the assessee to enter into an agreement with its holding company to pay for certain services as it was simultaneously receiving substantial more capital/services by way of renovation/consultancy free of any cost from the same holding company. Learned CIT(Appeals) observed that the agreement between the assessee and UBSM, vide which the impugned payments were made was providing understanding between two closely linked entities and was also abruptly terminated. The Learned CIT(Appeals) held further that as the expenditure was not based on commercial expediency, it was rightly disallowed. While sustaining th....
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.... the various assets and equipments located in the said premises. During the assessment year, the assessee had incurred Rs. 69,45,108 as repair and maintenance expenses for the building. In support the assessee had produced the necessary details including the purchase order and invoices for Rs. 16,62,300 representing amounts paid to SK Engineering. Out of the said expenditure, the Assessing Officer made an addition of Rs. 12,97,394 by treating the said expenditure as capital in nature. Details of Rs. 16,62,300 have been placed at Page Nos. 123 and 124 of the paper book which, inter alia, includes the details of Rs. 12,97,394. It was also made available before the Assessing Officer and the Assessing Officer has reproduced these details at page Nos. 13 & 14 of the assessment order. The Assessing Officer has, however, not taken cognizance of the details produced by the assessee in support of the fact that the said expenses are Revenue in nature. 50. Learned AR submitted further that from the details of Rs. 12,97,394 it will be observed that no new assets has come into existence of enduring in nature, being of capital in nature. 51. Learned DR on the other hand tried to justify the or....