TaxTMI 
TaxTMI 
2018 (10) TMI 243
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....ated 30/01/2014 passed by Ld. Additional Commissioner of Income Tax-8(3), Mumbai [AO] wherein the income of the assessee has been assessed at Rs. 17.79 crores after certain additions / disallowances as against returned income of Rs. 4.40 crores filed by the assessee on 15/10/2011. 3.1 Facts qua the subject matter of assessee's appeal are that during assessment proceedings, it was noted that the assessee debited a sum of Rs. 2,98,472/- under the head catering and gate expenses which were disallowed in earlier years as they were found to be illegal payments in the form of tips paid to certain authorities at the docks and therefore, not allowable in terms of Section 37(1). The Ld.CIT(A) has confirmed the same, against which the assessee is under appeal before us. The Ld. Auhtorized Representative for Assessee [AR], Shri Nimesh Vora, at the outset, fairly conceded that the issue stood covered against the assessee by the order of this Tribunal for several earlier AYs starting from AY 1999-2000. In view of the admitted position, this ground stand dismissed. 3.2 The second addition arises out of the fact that upon perusal of Tax Audit Report, it was noted that the assessee delayed t....
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....nce again made representations to the Ministry of Finance to remove this anomaly. The result was that an amendment was inserted which came into force with effect from 1st April, 2004 and two changes were made in section 43B firstly by deleting the second proviso and further amendment in the first proviso which reads as under:- "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." 15. In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to faul....
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.... Aggrieved, the assessee contested the same with success before Ld. CIT(A) wherein the addition was deleted by observing that no exempt income was earned by the assessee during the impugned AY and therefore, no disallowance was called for in terms various judgments of Hon'ble Punjab & Haryana High Court as well as Delhi High Court. Aggrieved, the revenue is in further appeal before us. 5.3 After hearing respective representatives, we find that it is an undisputed fact that no exempt income has been earned by the assessee during the impugned AY and therefore, no disallowance was called for u/s 14A as per catena of judgments of Higher Judicial Authorities in assessee's favor, the details of some of which are as follows:- No. Case Law Judicial Authority Citation 1. PCIT Vs Ballarpur Industries Ltd Hon'ble Bombay High Court ITA No. 51 of 2016 2. CIT Vs Chettinad Logistics Pvt. Ltd. Hon'ble Madras High Court 80 Taxmann.com 221 3. CIT Vs. Holcim India P. Ltd. Hon'ble Delhi High Court 111 DTR 158 4. Cheminvest Ltd Vs CIT Hon'ble Delhi High Court 378 ITR 33 5. PCIT Vs IL&FS Energy Dev. Co. Ltd. Hon'ble Delhi High Court....
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....ents placed in the paper-book submitted that certain security deposits were given by the assessee to landlords for acquiring the rented premises to be used for business purposes. Since the assessee had vacated the same before the lock-in-period as stipulated in the respective lease agreements, the said security deposits were adjusted / forfeited against the compensation for the non-use of premises as per the lock-in-period and the same being irrecoverable were written-off in the books of accounts. Therefore, the same being incurred for business purposes and written-off during the course of business and hence, rightly allowed u/s 37(1). Per Contra, Ld. DR placed reliance on the stand of Ld. AO. 6.4 Upon careful consideration, we find that factual matrix is not under dispute. The security deposits made by the assessee have been adjusted / forfeited by the landlords on account of the fact that the premises were not used for minimum lock-in-period as stipulated in the respective agreements. It is also undisputed fact that the premises were being used for business purposes. The Ld. AO, himself, in the alternative, opined that the said expenditure was capital in nature which demonstra....
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....e amount was disallowed. 7.2 The Ld.CIT(A) concluded the matter in assessee's favor by observing as under:- 9.4 The submissions made by the appellant has been examined. It is seen that the business of the company in which Mr. Shete was a director, was taken over by the appellant company. In order to ensure smooth transition and to stabilize the activities of the appellant, an agreement was entered into by the parent company of the appellant with Mr. Shete appointing him non-executive Chairman for a period of four years for a consideration of Rs. 60,00,000 per annum and expenses to the extent of Rs. 40,00,000/-. 9.5 The AO has placed his reliance on the agreement to conclude that the payment represented non-compete fee paid to Mr. Shete and hence a payment which was capital in nature. The business activity of the appellant has been examined. It is seen that the appellant is in hospitality business which requires a very intimate knowledge of the clients and is extremely sensitive to even small errors or mismanagement. The operations include supplying catering and other services to airlines etc. which have serious quality standards. Hospitality business is not a b....
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....essee and as stated, with a view to preserve existing clients / business, aforesaid arrangement was made with Shri Raju Shete. The Ld. AO disallowed the same by treating the same as non-compete fees and opined that the same was capital in nature. The Ld. CIT(A), after examining the various agreements / correspondences and Income Tax Returns of the stated individual, reached a conclusion that the aforesaid payment was nothing but professional fees paid by the assessee and hence, allowable to the assessee as business expenditure. 7.4 As per the directions of the bench, the assessee, vide letter dated 19/09/2018, has placed on record the relevant extract of the Share Sale Agreement dated 10/03/2009 whereby Sodexo SA has acquired the entity namely Radhakrishna Hospitality Private Limited [RHKS-renamed as Sodexo Food Solutions India Private Limited or SFS i.e. the assessee] and RKHS Food & Allied Services Private Limited from the existing shareholders. Shri Raju Shete is a part of selling shareholder [non-compete parties]. In terms of Clause 8.5(c) of the said agreement, the non compete parties are entitled for additional compensation of US$1 million, the break-up of which has been p....
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....f Rs. 11.28 Crores to its various Associated Enterprises [AE] situated in Singapore / France / Malaysia etc. on account of procurement services, trademark fees, payment of technical assistance, receipt of manpower services, corporate guarantee and reimbursement of expenses. In its TP study dated 25/11/2011, the assessee adopted entity level Transactional Net Margin Method [TNMM] as the most appropriate method [MAM], the assessee being the tested party with Profit Level Indicator [PLI] as Operating Profit / Operating Revenue. 8.2 In assessee's TP Study, the margins of tested party were reflected as 0.68% as against -10.52% reflected by 7 comparables, the details of which have already been extracted at Para-10.4 of the quantum assessment order. In view of the same, no adjustment was offered / proposed. The margin of -10.52% was arrived on the basis of three years data viz. Financial Year [FY] 2008-09, 2009-10 & 2010-11 out of which the data for 2010-11 was incomplete. The Ld. AO rejected the three years data and opined that only the data of relevant FY was to be considered for comparability analysis. Based on data for FY 2011-12, the assessee arrived at margin of -20.91% for six c....
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....ntity level TNMM for benchmarking related party transactions which constitute a very small fraction of total turnover. Hence, prima facie, the method selected by the appellant is not correct. The various transactions should have been benchmarked separately. However, it is seen that he AO has accepted the method and has proceeded to benchmark the transactions on the basis of /arithmetic mean of overall margin of the comparables. 10.5.2 Under such circumstances, there has been an overwhelming judicial approval for restricting the adjustment to that %age of turnover which the transactions have with the turnover. In the present case, the total value of transactions is Rs. 11,28,82,570/-. The turnover of the appellant is Rs. 4,44,81,42,358/-. Hence, the international transaction is 2.54% of the total turnover. Hence, the adjustment will have to be restricted to a level of 2.54% of the adjustment computed on entity level. The AO has computed all of Rs. 10,49,74,001/- at entity level. The proportionate adjustment will be 2.54% of this amount or Rs. 26,63,974/-. 10.5.3 The total transaction value is Rs. 11,28,82,570/-. If the adjustment falls within --/- 5% of this amount....