TaxTMI 
TaxTMI 
2017 (7) TMI 950
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....ssessment for assessment year 2003-04. The deduction U/s 35D was duly allowed to the assessee company by the Ld. Assessing Officer during the assessment year 2003-04. 2. That on the law, facts and in the circumstances of the case, the Learned Commissioner of Income-tax (A) has erred in confirming the disallowance made by Learned Assessing Officer in respect of Telecommunication expenses paid to M/s GNO Solutions Inc. USA and International Private Leased Circuit (IPLC) charges paid to M/s World Com Data International Services USA amounting to Rs. 45,41,474/-, and Rs. 36,47,900/- respectively on the ground that no tax was deducted at source under section 195 of the I. T. Act, 1961 before making such payments as per provisions of section 40(a)(i). 2.1 On the facts and in the circumstances of the case, the CIT (A) erred in upholding the action of the Assessing Officer in treating the payment of telecommunication charges and IPLC charges as chargeable to tax in India under section 9(1) (vii) read with Article 12(2) and 12(4) of DTAA between USA and India. 3. That on the law, facts and in the circumstances of the case, the Learned Commissioner of Income-tax (A)....
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....n'blc Supreme Court in the case of Goetze India Ltd 284 ITR 323, without going into the merits of the claim made by the assessee company through revised computation of income filed during the course of assessment proceedings. 3.1 That on the law, facts and in the circumstances of the case, the Learned Commissioner of Income-tax (A) has further erred in rejecting the claim without considering the detail /documents filed along with revised computation of income and which were duly submitted before Ld. CIT (A). 4. That all the above grounds have to be read conjunctively and also independent of each other. 5. That the above ground(s) of appeal are to be considered separately and without prejudice to one another. 6. That the appellant assessee craves, leaves to add, alter, amend, substitute, withdraw or forego any of the ground(s) of appeal before or at the time of hearing. 7. That the order of Learned CIT (A) is bad in law and wrong on facts of the case and is in violation of the principles of natural justice without providing reasonable opportunity to the appellant assessee to meet the merits of its case." A.Y. 2006-07: ....
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....enges the confirmation of penalty u/s. 271(1)(c) of the Act by the ld. CIT(A)-XVIII, New Delhi vide order dated 11.11.2013, for A.Y. 2004-05. 3. Since these appeals are in respect of the same assessee and the issues involved are interconnected, all these appeals are being disposed of by this consolidated order for the sake of convenience and brevity. We take up the facts from the appeal for the assessment year 2004-05. 4. The brief facts of the case are that the assessee filed return of income declaring loss of Rs. 8,22,03,460/- on 15.10.2004. The return was selected for scrutiny and statutory notices were issued to the assessee. The assessee company was engaged in IT enabled services, i.e., providing call centre services. During the course of scrutiny proceedings, the assessee filed revised computation of income on 14.07.2006 and claimed deduction u/s. 35D of Rs. 67,600/- in respect of filing fee paid to ROC for increase in authorized share capital of the company. The ld. Assessing Officer did not allow the claim of the assessee u/s. 35D and relying the judgment of Hon'ble Supreme Court in the cases of Punjab State Industrial Development Corporation. Ltd. vs. CIT, 225 ITR 79....
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....ials before the Bench for any expansion of the undertaking of the assessee. The AO is empowered for giving deduction claimed by the assessee in the return of income, as decided in Goetz India Ltd. (supra). The case law relied by the assessee is distinguishable on facts because the assessee in that case expanded his industrial undertaking and the AO was fully satisfied after physical verification of the factory premises. In that case, the assessee had claimed deduction u/s. 35D in the return of income. In the above case, the shares were issued publicly for raising funds to meet the capital expenditure and other expenditure relating to expansion of its existing units of production for the research and development activities. The Assessing Officer had treated it as capital expenditure by following the judgment as cited by the AO in his order. In this regard we rely on the order dated 18.07.2012 of the coordinate Bench in the case of Dronagiri Infrastructure Pvt. Ltd. vs. DCIT (ITA No. 3369/Mum/2011 for the assessment year 2006-07 wherein it has been observed as under : "6 We have considered the rival submissions as well as relevant material on record. There is no dispute on t....
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....essee. Therefore the claim of the assessee is rejected. The assessee has relied on the case of CIT Vs. Multi Metals Ltd 188 ITR 151. The facts of that case are totally different. In that case, the expenses were incurred for raising public issue of shares and therefore was held to be covered by Section 35D (2)(c)(iv). The assessee is not a public company and has not incurred any expenses on public issue and therefore the ratio of this decision is not applicable. The other cases relied by the assessee are also distinguishable on facts, Hence the claim of the assessee on account of amortization of expenses are disallowed in view of the above discussion." 6.1 The Assessing Officer disallowed the claim by following the decision of honourable Supreme Court in case of Punjab state industrial development Corporation and broke Brooke Bond India Ltd (supra). Further the honourable Delhi High Court in case of Hindustan Insecticides Ltd (supra) has decided an identical issue after considering and following the aforesaid decisions of honourable Supreme Court and held in para 3 and 4 as under: "We have heard learned counsel for the Revenue. There is no appearance on behalf of t....
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....the notice immediately before the increase." With reference to the said item, the Tribunal held that the additional fee is a registration fee on the difference in the nominal share capital and the increased share capital of the company and is covered by the said item. For coming to said conclusion the Tribunal observed that it has to be kept in view that the whole amount, which becomes the authorised share capital, would have attracted payment of fee at a particular figure at the point of time of original registration of the company. Merely because the share capital is increased subsequently as permissible under section 81 of the Companies Act, the fee paid on the increased capital does not cease to be registration fee. Learned counsel for the Revenue with reference to the various provisions of the Companies Act submitted that item 3 of Schedule X has no application to the facts of the case. There is a conceptual difference between registration of the company and action taken for increase of the share capital. Part II of the Companies Act deals with incorporation of a company and matters incidental thereto. Section 12 deals with mode of forming an incorporated Company. Sec....
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....t and principle of res judicata is not applicable in the Income-tax proceedings, more particularly when the issue under consideration has been decided by Hon'ble Supreme Court against the assessee in the decisions relied by the AO (supra). Therefore, laying our hands on the said decisions of Hon'ble Apex Court and respectfully following the above decision of coordinate Bench, we conclude that the fee paid to ROC for increasing the share capital is to be treated as capital expenditure. Accordingly, ground No. 1 for the assessment year 2004-05 is dismissed. 10. Since this issue is also involved in appeal for A.Y. 2005-06 in which amortization of expenses amounting to Rs. 67,900/- were disallowed, and the facts and circumstances are similar, our above decision and findings would equally apply to ground No. 1 of appeal for A.Y.2005-06 also. The same is accordingly dismissed. 11. Ground No. 2 & 2.1 relate to disallowance u/s. 40(a)(i) of the IT Act regarding payment on account of International Private Leased Circuit (IPLC) charges and connectivity charges to non-resident parties without tax deduction at source. Following payments were made to non-resident parties without TDS : ....
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....s, nature of business and other circumstances attending to the preceding assessment year 2003-04, are identical to the facts prevailing during the year under consideration and in the similar situation, the coordinate bench in the case of assessee itself has decided the issue in favour of the assessee vide order dated 17.01.2017 (supra). The relevant findings recorded by the Tribunal in different paras are as under : "9.12 We have heard the rival submissions of the parties and perused the relevant material including the order of the lower authorities and case laws relied upon by the both the parties. 9.12.1 The assessee company did not deduct tax at source on the payments made to nonresident parties namely "Kick Communication" and "IGTL solutions" holding that no income was chargeable in their hands. The issue in question before us is whether the payments made to those parties was liable as income accrued or deemed to accrue in their hands within the provisions of the Act or income in their hands as per the articles of the DTAA between the USA and the India. If the answer to the question is positive, the assessee was liable to deduct tax at source on those payments....
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....in the nature of the royalty under the DTAA as the term royalty has been defined in clause 3(b) of the DTAA as payment of any kind received as consideration for use of, or the right to use any industrial commercial or scientific equipment. The learned Commissioner of Income-tax (Appeals) upheld the finding of the Assessing Officer in view of the decision of the Tribunal in the case of Asia Satellite Telecommunication Ltd. Vs. Deputy Commissioner of Income Tax, reported in 85 ITD 478(Del). The learned Commissioner of Income-tax (Appeals) alternatively also held that the amount of remittances to both non-resident parties were chargeable as fee for technical services in their hands under section 9(1)(vii) read with article 12(2) and article 12(4) of the DTAA between USA and India. 9.12.3 Therefore, first we discuss whether income accrued or arisen in hands of the recipient non-resident parties in terms of section 9(1)(i) of the Act. In this respect, we are reproducing the relevant part of section 9(1)(i), as under: "Income deemed to accrue or arise in India. 9. (1) The following incomes shall be deemed to accrue or arise in India :- (i) all income a....
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....nder: "2. The expression 'business connection' admits of no precise definition. The import and connotation of this expression has been explained by the Supreme Court in their judgment in CIT vs. R.D. Aggarwal & Co. (1965) 56 ITR 20 (SC) : TC 39R.1098. The question whether a non-resident has a 'business connection' in India from or through which income, profits or gains can be said to accrue or arise to him within the meaning of s. 9 of the IT Act, 1961, has to be determined on the facts of each case. However, some illustrative instances of a non-resident having business connection in India, are given below : (a) Maintaining a branch office in India for the purchase or sale of goods or transacting other business. (b) Appointing an agent in India, for the systematic and regular purchase of raw materials or other commodities, or for sale of the non-resident's goods or for other business purposes. (c) Erecting a factory in India where the raw produce purchased locally is worked into a firm suitable for export abroad. (d) Forming a local subsidiary company to sell the products of the non-resident parent company. (....
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....ase of the assessee are not having any business connection as no such facts of business activity carried out through a person acting on behalf of the non-resident or through a broker or agent have been brought forward before us by the Revenue. 9.12.8 Further, we find that Hon'ble Delhi High Court in the case of Asia Satellite Telecommunication Company Limited Vs. DIT (supra) has decided the issue of applicability of section 9(1)(i) as under: "3.2 After considering the respective submissions, we are of the view that the findings of the learned Tribunal on the non-applicability of Section 9(1)(i) of the Act are proper, justified and legally sustainable. We have already taken note of the Explanation (a) to this sub-clause, which lays down that in the case of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. It, thus, clearly follows that carrying out the operations in India, wholly or at least partly, is sine qua non of the application of Clause (i) of sub-section (1) of Sectio....
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....providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s Kick Communication in India. It was responsible for restoring connectivity and Managing faults in connectivity etc in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in USA and not in India. Since operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) is of the Act is not attracted in case of above two non-resident parties." 10.10 We find that the service in substance is for providing connectivity facility to the assessee to generate and cater to outbound Public Switch Telephone Network (PSTN) calls within the USA. Thus, the clause (iii), (iv) or (iva) are not applicable for consideration paid to M/s IGTL Solutions by the assessee. 10.10.1 In view of above, we are of the opinion that consideration paid to the non-resident parties does not fall under the term royalty in terms of section 9(1)(vi) of the Act. 10.10.2 Further, we now examine whether the conside....
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....ted (supra). The Tribunal observed that the TV channels were utilizing the process made available by the Asia satellite telecommunication company limited in its satellite for the purpose of their business and that the customer were using the process embedded in the satellite for the purpose of their business, and accordingly held that whether any process was used or any service in connection with processes provided, same held within the meaning of royalty as defined in Explanation. -2. 10.13 Above decision of the Tribunal was reversed by the Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co, Ltd. Vs. DIT, 332 ITR 340. The Hon'ble High Court held that consideration paid for bandwidth used for up-linking and down-linking of the television signals cannot be termed as royalty either under the section 9(1)(vi) of the Act or under the terms defined in DTAA. The Hon'ble High Court has discussed in detail the use or right to use the process, information or equipments. The relevant paragraphs of the decision of the Hon'ble High Court are reproduced as under: "55. Keeping in view the aforesaid principles, we now embark upon the interpretative proc....
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....ty of its satellites. The appellant is amplifying and relaying the signals in the footprint area after having been linked up by the TV channels. The essence of the agreement of the TV channels with the appellant is to relay their programmes in India. The responsibility of the appellant is to make available programmes of the TV channels in India through transponders on its satellite. The function of the satellite in the transmission chain is to receive the modulator carrier that earth stations emitted as uplinking, amplifying them and retransmitting them and downlink for reception at the destination earth stations. The meaning of the word process being a series of action or steps taken in order to achieve a particular end, considering the role of the appellant in the light of meaning of the term 'process', it is evident that the particular end, viz., viewership by the public at large was achieved only through the series of steps taken by receiving the uplinked signals, amplifying them and relaying them after changing the frequency in the footprint area including India. This is held that the TV channels in entire cycle of relaying the programmes in India were using the process provid....
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.... in the absence of PE in India. 58. In the light of our discussion explaining Expln. 2 to s. 9(1) of the Act, let us proceed to apply these principles on the facts of the case. The starting point has to be the nature of services provided by the appellant to its customers as per the agreement arrived at between them. Keeping in view the aforesaid operation of the satellites, we revert back to the agreement entered into between the appellant and its customers. It is clear from various clauses of the agreement (and noticed above), the appellant is the operator of the satellites. It also remains in the control of the satellite. It had not leased out the equipments to the customers. On this basis, it is argued by the appellant that the equipment is used by the appellant and it is only providing and rendering services to its customers and not allowing the customers to use the process. In the case of ISRO (supra), AAR has narrated in detail the process of the operation of a satellite and the role played by the transponder therein. 59. Following features of the agreement entered into by the appellant with its clients need to be highlighted at this stage : (a) The....
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....on any business in India through PE, as discussed towards the end, the main contention of Revenue is that the 'charges' paid by the applicant-ISRO under the terms of the agreement is in the nature of consideration paid for the 'use of' or 'right to use' the scientific equipment within the meaning of cl. (b) of art. 13(3) of the treaty. 14. The crucial question that needs to be addressed, therefore, is whether the payment made to IGL under the aforementioned contract constitutes consideration for the use of or right to use equipment of IGL. To answer this question, we have to discern the substance and essence of the contract as revealed from the terms of the contract document, the technical report and other facts furnished by the applicant. The first article in the contract makes it clear that the payment is for the lease of' navigation transponder segment capacity. From the designated transponder (L1 and L5) of Inmarsat satellite, this capacity at a particular frequency is made available to the applicant through INLUS (Navigation Land Uplink Station) which is set up and operated by the applicant. The capacity is meant to be used for the purpose of providing an augmentation....
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....d L5 transponder only means that a segment of the navigational transponder though which the data passes is allocated to the applicant so that it could be utilized for the specific purpose of making available the augmented data sent by the applicant through its ground station to the users extensively. The substance of the contract is the facility given to the applicant for the utilization of space segment capacity of the transponder for transmitting the augmented data as to the position of an object on land, air or water so that the end user can have access to it through SABS receiver. The use of capacity, as clarified by the applicant involves the use of bandwidth, that is to say, a particular bandwidth in the transponder meant exclusively for navigational purposes is linked to the earth station INLUS. The expression 'use of space segment capacity' of transponder has no reference to any operations performed by means of the transponder. The use or operation of transponder as such is not at all contemplated under the contract. What really happens is that the augmented data sent by INLUS reaches the transponder and it is transmitted back to the earth and the same is accessed by SBAS u....
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....th the telecast operator/TV channels. 63. Position is substantially the same in the present case as well. The Tribunal has distinguished this judgment and has opined that it is not applicable because of the reason that in ISRO (supra), there was any (sic-no) amplification of the signal whereas in the present case, signals are amplified. That, to our mind, would not make any difference insofar as ultimate conclusion is concerned, in as much as the ruling of the AAR is not founded on the aforesaid consideration. It becomes manifest when we take note of the question posed by the AAR before answering the same. The AAR expressed this as under: "The crucial question that needs to be addressed, therefore, is whether the payment made to IGL under the aforementioned contract constitutes consideration for the use of or right to use equipment of IGL. To answer this question, we have to discern the substance and essence of the contract as revealed from the terms of the contract document, the technical report and other facts furnished by the applicant." 64. On the aforesaid poser, the AAR discussed the issue and held that the transponder and the process therein are ac....
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....erusal of this meaning reveals that equipment is an instrument or tool which is capable of doing some job independently or with the help of other tools. A part of an equipment incapable of performing any activity in itself cannot be termed as an equipment. We take an example of scissors which has two blades. This scissors is an equipment but when one blade is separated from the other blade, it ceases to be an equipment. In other words, the blade in isolation cannot be termed as an equipment. Reverting to the facts of the present case, we find that the transponder is not an equipment in itself. In other words, it is not capable of performing any activity when divorced from the satellite. It was fairly conceded by the learned Authorised Representative that the transponder in itself without other parts of satellite is not capable of performing any function. Rightly so because satellite is not plotted at a fixed place. It rotates in the same direction and speed as the earth. If it had been fixed at a particular place or the speed or direction had been different from that of earth, it could not have produced the desired results. Transponder is part of satellite, which is fixed in the sa....
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....hat involves the use of goods belonging to the assessee and rendering of several other services and the goods used by the assessee to achieve the desired result continue to be in the effective and general control of the assessee, then, the transaction will not be a transfer of the right to use goods falling within the extended definition of "sale". Let me now clarify the position further, with an illustration which is a variation of the illustration used by the Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. vs. CTO. Illustration : (i) A customer engages a carrier (transport operator) to transport one consignment (a full lorry load) from place A to B, for an agreed consideration which is called freight charges or lorry hire. The carrier sends its lorry to the customer's depot, picks up the consignment and proceeds to the destination for delivery of the consignment. The lorry is used exclusively for the customer's consignment from the time of loading, to the time of unloading at destination. Can it be said that right to use of the lorry has been transferred by the carrier to the customer ? The answer is obviously in the negative, as there is no ....
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....e in India. It is stated at the cost of repetition that the telecast companies/customers are situated outside India and so is the appellant. Even the agreements are executed abroad under which the services are provided by the appellant to its customers. The transponder is in the orbit. Merely because it has its footprint on various continents would not mean that the process has taken place in India. This aspect now stands concluded by the Supreme Court in the case of Ishikawaima-Harima Heavy Industries Ltd. (supra). In that case, the appellant, a nonresident company incorporated in Japan, along with five other enterprises formed a consortium. The consortium was awarded by petronet a turnkey project for setting up a liquefied natural gas (LNG) receiving, storage and regasification facility in Gujarat. The contract specified the role and responsibility of each member of the consortium and the consideration to be paid separately for the respective work of each member. The appellant was to develop, design, engineer, procure equipment, materials and supplies to erect and construct storage tanks including marine facility (jetty and island breakwater) for transmission and supply of LNG to....
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....y in India and receiving, unloading, storing and transporting, paying demurrage and other incidental charges on account of delay in clearance. The price of the goods covered not only their price but also of all these operations which were carried out in India and from which income accrued to the appellant. Therefore, income accrued to the appellant from the offshore supply through business connection in India and some operations of the business were carried out in India. Profits were deemed to accrue/arise in India would be only such part of the profits as was reasonably attributable to the operation carried out in India. (ii) That having regard to art. 7(1) of the Convention for Avoidance of Double Taxation and Fiscal Evasion with respect to taxes on income between India and Japan read with para 6 of the protocol supply of equipment or machinery (sale of which was completed around, the order having been placed directly by the overseas office of the enterprise) would be within the meaning of the phrase directly or indirectly attributable to that PE and, therefore, so much of the amount received or receivable by the appellant as was directly or indirectly attributable to th....
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....d out the extent to which the income of a non-resident would be liable to tax in India. Sec. 9 had a direct territorial nexus. Relief under a double taxation avoidance treaty, having regard to the provisions contained in s. 90(2), would arise only in the event taxable income of the assessee arose in one Contracting State on the basis of accrual of income in another Contracting State on the basis of resident. So far as accrual of income in India was concerned, taxability must be read in terms of s. 4(2) r/w s. 9, whereupon the question of seeking assessment of such income in India on the basis of the double taxation treaty would arise. Para 6 of the protocol to the Convention was not applicable, because, for the profits to be attributable directly or indirectly, the PE must be involved in the activity giving rise to the profits. (iv) That where different severable parts of a composite contract were performed in different places, as in this case, the principle of apportionment could be applied to determine which fiscal jurisdiction could tax that particular part of the transaction. This principle helped to determine where the territorial jurisdiction of a particular State la....
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....oad to the appellant which is also a nonresident, i.e., sought to be brought within the tax net." 10.14 In the case of instant assessee, the control of equipment was with the non-resident parties and they have not leased the equipments, i.e. the undersea cable etc. to the assessee. The equipments were owned and used by the non-resident parties only and therefore it cannot be said that the consideration paid was for use of equipment by the assessee. Similarly the non-resident parties have not provided use of any process to the assessee, which are of patentable nature having exclusive ownership rights. The assessee was not concerned with any of the process involved in transmission or connectivity of call data. The only concern of the assessee was transmission of call data beyond the boundaries of India to the person in USA to whom call was made. 10.15 Identical issue came up before the Delhi bench of Tribunal in the case of Bharti Airtel Ltd. vs. Income Tax Officer (supra), wherein also the issue whether payment towards call interconnectivity charges for call transmission on foreign network was amounted to royalty or not. The findings of the Tribunal are reproduced ....
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....ontended that reliance placed by the AO on decision in case of Verizon Communications Singapore Pvt. Ltd. v. ITO: [2011] 45 SOT 263(Chennai) is misplaced. I have carefully gone through facts of the case law. In that case, the Indian payer company had obtained 'leased lines' on hire basis under a contract from non-resident Verizon Communication. This is a ITA Nos. 3593 TO 3596/Del/2012 [Bharti Airtel Ltd. vs. ITO(TDS)] & ITA Nos. 4076 TO 4079/Del/2012 [ITO(TDS) vs. Bharti Airtel Ltd.] vital fact which makes all the difference. When an Indian Co. takes leased line on hire, then it can be said that it had 'used' it. In present appeal under consideration, the appellant has neither been leased nor been given on hire network of foreign operator, then it cannot be said that the appellant has 'used' the network belonging to foreign operator. Therefore, reliance of AO on the said case law is misplaced. 11.5 It is seen from proposed Explanation 5 & 6 and Memorandum of explanation that meaning of word 'process' has been widened, the 'process' need not be secret and situs of control & possession of right, property or information has been rendere....
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....llite BV, in ITA 473/2012. In the instant case also the assessment year involved is 2002-2003, and thus the Explanation-5 and 6 and Memorandum of Explanation cannot be brought into action as there has not been any corresponding change in the definition of the term royalty in the DTAA between India and the USA. Accordingly, we are of the opinion that under the DTAA, the restricted meaning of the royalty shall continue to operate despite the amendment in law. 10.17 As far as the assessee is concerened, in case of difference between provisions of the Act and an agreement under section 90 i.e. (DTAA), the provisions of the agreement shall prevail over the provisions of the Act. 10.18 In view of our discussion above, we hold that the payments made by the assessee are not in the nature of royalty either under the domestic law or relevant DTAA. 13. The learned Commissioner of Income-tax (Appeals) has alternatively held that the payments to the above two non-resident parties was chargeable in their hands as "Fee for Technical Services" (FTS). In ground No. 1.1, the assessee has challenged this alternative finding of the learned Commissioner of Income-tax (Appeals....
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....e non-resident parties to the assessee , cannot be termed as Fee for Technical services under the treaty also, in the hands of the recipients." Respectfully following the decision of coordinate Bench, we find that this issue is squarely covered by the said decision. Therefore, we allow this ground of assessee's appeal. 15. In respect of ground No. 3, the brief facts of the case are that the AO noticed during the assessment proceedings that the assessee has incurred an expenditure of Rs. 17,71,214/- towards traveling and educational tuition fee incurred outside India on the education of Karun Ansal S/o Deepak Ansal, the main promoter of M/s. Ansal Housing and Construction Ltd. The assessee company is a subsidiary of this company and Shri Deepak Ansal has substantial interest in the assessee company. The assessee was asked as to why these expenditures should not be disallowed as being personal expenditure, as defined u/s. 40A(2)(b) of the Act. After considering the detailed reply of assessee, the AO also observed that the agreement was made only for BBA course and the assessee did not file any service agreement for further extension for MBA course. The assessee has just taken b....
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.... education of the son of the director was not a permissible deduction." In the instant case also it is seen that Sh. Karun Ansal did not attend any specialized course and the simple degree of BBA cannot be said to be directly linked to the business of running a call centre in which the appellant was engaged. There is also no evidence or any material on record to establish that the appellant had sponsored any other student employee for education abroad. Therefore, the decision of the Board of Directors of the appellant company to sponsor M/s Karun Ansal for foreign education was for other than business consideration. I am in agreement with the view of the AO that the expense of Rs. 1771214/- claimed by the appellant on education of Sh. Karun Ansal was not an allowable expenditure. This ground of appeal is dismissed." 16. The ld. AR of the assessee, reiterating the submissions made before the authorities below submitted that Karun Ansal was appointed as Management Trainee in M/s. SAS Net E.com Pvt. Ltd. w.e.f. 20.06.2000. He was selected for BBA course in USA and he requested for sponsorship of his education abroad by letter dated 18.08.2000 which was approved by the asse....
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....Technologies (P.) Ltd.: 200 Taxman 305 5. Decision of Madhya Pradesh High Court in the case of CIT v. Naidunia news and Networking (P.) Ltd.: 210 Taxman 73 6. Decision of Madhya Pradesh High Court in the case of CIT v. Kohinoor Paper Products.: 226 ITR 220 7. Decision of Bombay High Court in the case of Sakal Papers Pvt. Ltd. v. CIT: 114 ITR 256 8. Decision of Delhi bench of Tribunal in the case of Jhalani holding P. Ltd. v. ITO: 42 TTJ 116 9. Decision of Mumbai bench of Tribunal in the case of JB Advani & Co. Ltd. v. JCTT: 92 TTJ 175 17. On the other hand, the ld. DR relying upon the orders of the authorities below, submitted that the expenditure incurred by assessee on foreign education of Karun Ansal, the son of assessee's main promoter, are in the nature of personal expenditure and the assessee has wrongly claimed the same as business expenditure deductible u/s. 37 of the Act. It was submitted that the assessee failed to establish that the educational course done by Karun Ansal abroad for BBA, and further MBA was for the benefit of the business of the assessee, particularly when there was no agreement with the assessee for MBA cou....
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.... employee of the assessee company when he joined his BBA Course in USA and paid fee for first semester himself. Yet his higher education was sponsored by the company, which appears to get benefit of expenditure incurred on his education as business expenditure. Besides, there is nothing on record to establish as to how the educational course (BBA/MBA) done by Karun Ansal abroad was beneficial to the business of call centre then run by the assessee-company. We, therefore, find no justification to discard the finding reached by the ld. CIT(A) that Sh. Karun Ansal did not attend any specialized course and the simple degree of BBA cannot be said to be directly linked to the business of running a call centre in which the appellant was engaged and therefore, the decision of the Board of Directors of the appellant company to sponsor Karun Ansal for foreign education was for other than business consideration. It is also evident from the record, that there was no agreement between the assessee company and Karun Ansal nor is there any such request from Karun Ansal for further MBA course. Suo moto extension of sponsorship of Karun Ansal by the assessee company without any agreement between th....
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....been held as under : It was canvassed for the assessee before the Tribunal that the fact that Rajiv Rai was the son of the director of the company should not be held against him and the expenditure incurred on his training was in fact, an expenditure which was to the benefit of the company as he subsequently became a director. If this logic were to be accepted, in every family owned business, all the expenditure incurred in bringing up the children who may later on be given a role in the business as partners or directors could be claimed as business expenditure incurred in training the prospective employees and directors of the business. The expenditure permissible for deduction is expenditure that is wholly and exclusively laid out for the purposes of the business. The expenditure which a father incurs out of his natural love and affection for his children in meeting the cost of their education cannot become a business expenditure merely because he is also the owner or a director of a business in which the son or daughter subsequently takes part. It is not the case of the assessee that the assessee had a scheme of sending people abroad for training with ....
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....at principle of res judicata is not fully applicable to the income tax proceedings, we find support from the decision of Punjab & Haryana High Court in CIT vs. Punjab Braveries Ltd. (supra), wherein it has been held that the principles of consistency is not absolute. 22. In view of what has been discussed above, we find no justification to interfere with the orders of the authorities below on this count. Accordingly, ground No. 3 of assessee's appeal is dismissed. 23. Since this issue is common in remaining appeals for A.Yrs. 2005-06, 2006- 07 and 2007-08 except the difference in the amount of Training and Development Expenses claimed by assessee, our decision given on this account in appeal for A.Y. 2004-05 would equally apply to the appeals for A.Yrs. 2005-06, 2006-07 and 2007-08 also. 24. In appeal for A.Y. 2007-08 one more issue regarding FBT calculation has been raised by assessee. On this, direct the AO to recalculate the Fringe Benefit Tax after excluding the Training and Development Expenses of Rs. 97,965/- for the reason that these expenses have not been treated as business expenditure deductible u/s. 37(1) of the Act. 25. Adverting to the penalty appeal for A.....