TaxTMI 
TaxTMI 
2015 (12) TMI 1806
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....under s. 40(a)(i) of the Act in respect of Professional and Consultancy fees paid to non-residents - Rs. 12,99,57,302 The brief facts of this issue is that during the course of assessment proceedings, the learned AO observed huge payments made by the assessee and reflected under 'Expenditure in foreign currency' in Note No. 26(a) to Notes on Accounts to the financial statements relating to professional, consultancy and other matters. The assessee was asked to furnish the details of the same together with compliance of TDS provisions thereon. The assessee filed replies vide letters Dt. 21st Nov., 2005 and 3rd March, 2006. The break-up of the aforesaid expenditure of Rs. 12,99,57,302 is as below: 2.1 The learned AO disallowed the aforesaid expenditure on the ground that TDS obligations were not complied with by the assessee in respect of the said payments which was also upheld by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following grounds: "1. That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in confirming the disallowance of Rs. 12,99,57,302 made under s. 40(a)(i) of the Income-tax Act, 19....
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....h and every item contained in the said break-up as below: 2.3.1 Professional Charges - Rs. 4,95,97,115 The assessee had made payments to Atanaskovic Hartnell, Sydney, NSW, Australia on various dates during the financial year 2002-03 relevant to asst. yr. 2003-04 towards lawyer's professional fees for services rendered outside India. The details of the same are submitted in p. 251 of the paper book filed by the assessee. Since the income thereon is not chargeable to tax in India in the hands of the payee and they do not have any PE in India, there is no obligation on the part of the assessee to deduct tax at source in terms of s. 195 of the Act. This issue is squarely covered in favour of the assessee by the decision of the Hon'ble apex Court in the case of GE India Technology Centre (P) Ltd. v. CIT (2010) 234 CTR (SC)153 : (2010) 44 DTR (SC)201 : (2010) 327 ITR 456 (SC). Hence, no disallowance could be made under s. 40(a)(i) of the Act for the same. We also find that the said services are governed by Art. 14 of DTAA as per which the said payments are not liable to be taxed in India. It is well settled that the provisions of DTAA would prevail over the Act and the a....
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....nd that the assessee had duly complied with the TDS obligations wherever applicable in respect of payments made to Micros Fidelio Asia Pacific (P) Ltd., Australia towards annual maintenance charges for central reservations system and customer information system support fees. We find that in all these cases, the services were rendered outside India and accordingly, no part of the said payments are chargeable to tax in India in the hands of the payee and hence, there is no obligation on the part of the assessee to deduct tax at source in terms of s. 195 of the Act. 2.4 On services not performed in India It is undisputed that the services rendered by the professional consultants outside India and none of them were neither utilized in India nor rendered in India. In these circumstances, the payments made to them would not come under the ambit of taxation in India irrespective of the fact whether the said parties have PE in India or not. Reliance in this regard is placed on the decision of the Hon'ble apex Court in the case of Ishikawajima-Harima Heavy Industries Ltd. v. Director of IT (2007) 207 CTR (SC) 361 : (2007) 288 ITR 408 (SC). 2.5 On retrospective amendment w.e.f. ....
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.... by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force'. When these obligations are to be charged at the point of time when payment is made or credited, whichever is earlier, such obligations can only be discharged in the light of the law as it stands at that point of time." 2.5.2 We also place reliance on the following decision of the Hon'ble apex Court in the case of CIT v. Hindustan Electro Graphites Ltd. (2000) 160 CTR (SC) 8 : (2000) 243 ITR 48 (SC) in this regard: "In this case, the assessee company filed a writ petition in the High Court challenging the very constitutionality of s. 143(1)(a) r/w s. 143(1A) and s. 4 and also the intimation sent by the AO levying additional tax. High Court speaking through one of us (Ruma Pal, J.) noticed that s. 28 of the Act was amended with retrospective effect from 1st April, 1967. It said: "An assessee cannot be imputed with clairvoyance. When the return was filed, the assessee could not possibly have known that the decision on the basis of which cash compensatory support has been claimed as not amounting to the assessee's income ceased to be operative by reason of retros....
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....other matters. The assessee was asked to furnish the details of the same and show cause as to how the aforesaid expenditure are allowable under s. 37 of the Act. The break up of the aforesaid expenditure of Rs. 16,75,13,445 is as below: 3.1 The learned AO disallowed the aforesaid expenditure on the ground since no details were filed with supporting evidences before him and hence, the same are not incurred wholly and exclusively for business purposes and hence, not allowable under s. 37 of the Act which was also upheld by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following ground: "4. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs. 16,75,13,445 claimed by the assessee overseas office maintenance, sales promotion, sales office expenses, aircraft maintenance and other matters for which remittances were made in foreign exchange and spent wholly and exclusively for the business purpose." 3.2 The learned Authorised Representative took us to the relevant pages of the paper book filed by the assessee wherein the entire details of the aforesaid expenditures were submitted da....
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....t in order to give comfort level to the assessee herein for adoption of those figures in the consolidated financial statements of the assessee. We find lot of force in the arguments of the learned Authorised Representative that no disallowance on this count was made in the earlier years and also in subsequent years by the Revenue. Hence, we hold that the principle of consistency should be followed by the Revenue. Reliance in this regard is placed on the decision of the Hon'ble apex Court in the case of Radhasoami Satsang v. CIT (1991) 100 CTR (SC) 267 : (1991) 193 ITR 321 (SC). From the details furnished, we are completely satisfied that the entire expenditures are incurred wholly and exclusively for the purpose of business of the assessee and accordingly, direct the learned AO to grant deduction for the whole amount as deduction. Hence, the ground No. 4 raised by the assessee is allowed. 4. Disallowance of Rs. 7,31,507 under s. 80HHC of the Act in respect of export of food and beverages to out bound flights of foreign airlines, the payments for which were received in convertible foreign exchange The brief facts of this issue are that the assessee derived sale proceeds on ac....
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....nsel for the parties and after going through the aforesaid provisions of law we find that in order to get the benefit of deduction under s. 80HHC of the Act, the assessee must comply with the terms of the said section. In the case before us, the only grounds of refusal of the benefit are that first, that the sale of such food and beverages to the foreign airlines did not amount to export out of India and secondly, that the payment received from the said foreign airlines in India in the form of Indian rupees could not be treated as payment in convertible foreign exchange within the meaning of the provisions of s. 80HHC of the Act. The word "export" has not been defined in the Act and thus, the said word is to be interpreted in the light of the language of s. 80HHC of the Act including the Explanation added thereto and if the formalities required in s. 80HHC are fully complied with, in our opinion, it is not necessary that all the other formalities prescribed in the Customs Act for export of the articles are also required to be fully complied with by an assessee in addition to those prescribed under s. 80HHC. 14. As for instance, under the Customs Act, a transaction by way o....
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.... 13th April. 2004 certifies that all bonded goods and catering food supplies are carried in a sealed Hi-Lift of M/s. Oberoi Flight Services, the appellant before us, which is escorted by the customs preventive officer on duty, to the aircrafts of international airlines catered by them at the tarmac at Chhatrapati Shivaji International Airport, Mumbai, as required under the regulations of the Customs Act. 1963. In our opinion, the aforesaid certificate indicates that the appellant in the process of selling the food and beverage in the said airport has complied with the condition mentioned in Expln. (aa) of the s. 80HHC. 24. Similarly in reply to the letter written by the assessee to the General Manager of the Reserve Bank of India to issue a certificate showing that the payments made in Indian rupees to the hotels by Foreign Airlines and diplomats are being treated by Reserve Bank as Convertible Foreign Exchange for the purpose of Foreign Exchange Regulation Act, 1973 and the Rules made thereunder as also the Foreign Exchange Management Act, it appears that the Asstt. General Manager, Foreign Exchange Department has written a letter Dt. 7th Nov., 2005. By the said letter th....
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....foreign tourist who wants to enjoy five-star luxury of the international standard in all respects. Copies of the log book for both the aircrafts were enclosed before the learned AO together with the monthly break-up of repairs, running and maintenance of the said aircrafts. The following details were also filed before the learned AO: "(a) Statement of chartered flights effected during the period April 2002 to March 2003 indicating the flying time effected for the respective aircrafts. (b) Statement of Corporate Flights of Jet Aircraft effected during the period April 2002 to March 2003 indicating the flying time. (c) Statement of Corporate Flights of King Aircraft effected during the period April 2002 to March 2003 indicating the flying time. (d) Month wise income from chartering of aircrafts for the period April 2002 to March 2003. (e) The details of total fuel uploaded during the period April 2002 to March 2003 together with the details of average fuel consumption per hour of flight for each aircraft together with its price were filed. (f) The detailed statement of expenditure amounting to Rs. 1,04,10,435 incurred for running,....
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....04,416 is debited to P&L a/c is grossly incorrect. It is observed that ultimately the assessee had derived surplus of Rs. 1,07,87,457, being the difference between the chartering income of Rs. 2,02,52,452 and maintenance and running of aircrafts expenditure to the tune of Rs. 95,64,995, even though deriving surplus thereon is not a prerequisite for allowance of expenditure incurred. We also find that complete details of the entire expenditure towards running and maintenance of aircrafts together with the log book has been filed before the learned AO and hence, there is absolutely no case for the learned AO to reject the same and proceed to make disallowance on estimated basis to be in line with the disallowances made in earlier years. We also find that the earlier years Tribunal order on this issue need not be followed for the asst year under appeal as in this year, the entire details were very much before the learned AO. We also find lot of force in the arguments of the learned Authorised Representative that the assessee company being a non-natural person cannot have any personal element thereon and all the expenditure incurred thereon had to be construed only for business purpose....
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.... 9,71,00,200 This includes a sum of Rs. 9,01,50,000 paid to Nandi Hills & Resorts Limited for the joint venture project with the Janson Group of Bangalore, Karnataka. The amount was advanced for acquisition of land for the project out of own generation of funds. Amounts paid to Green Fields Hotels & Resorts P Ltd. - Rs. 8,00,00,000 The amount was advanced for acquisition of land for the Golf course in Khandala, Maharashtra for the joint venture project out of own generation of fund. Amounts paid to Mashobra Resort Ltd. - Rs. 13,00,00,000 The company is a joint venture company owning Hotel Wildflower Hall at Shimla. According to joint venture agreement, the company is required to finance for construction of hotel which was initially considered as advance for equity shares. The amount paid shall be adjusted against equity shares to be issued to the company. Amounts paid to Mumtaz Hotel Ltd. (formerly known as Goyals International Hotels & Resorts Ltd.) - Rs. 5,33,91,181 This is a joint venture company owning Hotel Amarvilas at Agra. The assessee has controlling interest to the extent of 60 per cent of the issued equity capital of the company. This was paid as loa....
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.... making these advances is factually incorrect which has been further endorsed by the learned CIT(A). He further argued that this issue is directly covered by the order of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 316/Kol/2006, Dt. 11th Sept., 2015. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 6.4 We have heard the rival submissions and perused the materials available on record. We find from the paper book filed by the assessee that the entire details as to for what purpose the monies were paid by the assessee company to the aforesaid parties were given before the learned AO. We find that in respect of amounts advanced by the assessee to certain group companies where interest is charged by it, there is absolutely no dispute. In respect of interest-free advances, it has to be seen whether the same were advanced out of own funds or out of borrowed funds by the assessee. The learned AO simply states that similar disallowances were made in the earlier years and accordingly, the same is to be made for this assessment year ....
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....krishna Muralidhar (1963)47 ITR 469 (AP) (b) Woolcombers of India Ltd. v. CIT (1981) 23 CTR (Cal) 204 : (1982)134 ITR 219(Cal) (c) CIT v. Hotel Savera (1998) 148 CTR (Mad) 585 : (1999) 239 ITR 795 (Mad). (d) CIT v. Britannia Industries Ltd. (2005) 198 CTR (Cal) 426 : (2006) 280 ITR 525 (Cal) (e) S.A. Builders Ltd. v. CIT (2006) 206 CTR (SC) 631 : (2007) 288 ITR 1 (SC) (f) Addl. CIT v. Tulip Star Hotels Ltd. in CC No. 7138-7140/2012, Dt. 30th April, 2012 by the Supreme Court, wherein it was held as below: "In our view, S.A. Builders Ltd. (2006) 206 CTR (SC) 631 : (2007) 288 ITR 1 (SC), needs reconsideration. Though it is stated that the decision in S.A. Builders Ltd. v. CIT & Anr. in 288 ITR 1 (SC) requires reconsideration, notice has been ordered to be issued to both the parties and the matter is still pending before the Supreme Court as on date. Hence, the decision in S.A. Builders Ltd. is very much applicable as on date until the judgment in Tulip Star Hotels Ltd. is pronounced by the Supreme Court. (g) Munjal Sales Corporation v. CIT & Anr. (2008) 3 DTR (SC) 217 : (2008) 215 CTR (SC) 105 : (2008) 298 ITR 298....
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.... 7. Disallowance of depreciation on addition to fixed assets--Rs. 7,84,550 The brief facts of this issue are that during the course of assessment proceedings, the learned AO observed that the assessee had shown additions to buildings and computers to the tune of Rs. 30,94,172 and Rs. 19,79,476, respectively during the year under appeal and claimed depreciation thereon among others. The assessee submitted that the bills for the entire additions to fixed assets have been duly subjected to statutory and tax audit by chartered accountants and income-tax depreciation figures were certified by them accordingly, prayed for acceptance of the depreciation figure based on the said certification. The learned AO not being satisfied with this reply sought to disallow depreciation on buildings and computers to the tune of Rs. 7,84,550 while accepting the income-tax depreciation figure in respect of other assets as per the certification done by tax auditor. This action was upheld by the learned CIT(A) in first appellate proceedings. Aggrieved, the assessee is in appeal before us on the following ground: "10. That on the facts and in the circumstances of the case, the learned CIT(A) w....
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....ee derived a notional loss on such restatement in view of increase in liability payable on the loan account amounting to Rs. 7,87,63,270. The same is worked out as below: 8.1 The assessee added the same to its taxable income as the same was notional loss which was not incurred as on the date of balance sheet date and accordingly, filed its return of income. 8.2 But during the asst. yr. 2002-03, the assessee on similar restatement of foreign currency loan earned a notional gain due to decrease in foreign currency loan to the extent of Rs. 4,15,36,381 which was reduced from the taxable income by the assessee while filing the return for the asst. yr. 2002-03. 8.3 The learned AO having added the notional exchange gain for the asst. yr. 2002-03 amounting to Rs. 4,15,36,381 sought to remain silent on the notional exchange loss which was voluntarily disallowed by the assessee in the return and did not give any finding in this regard in his assessment order. This silent action was also confirmed by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following ground: "11. That on the facts and in the circumstances of the case, the learned CIT(A) was ....
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.... Accordingly, the Ground No. 5 raised by the assessee is dismissed." 8.5.2 Hence, in view of our clear finding given in asst. yr. 2002-03 in ITA No. 316/Kol/2006, Dt. 11th Sept., 2015, we hold that the assessee is indeed entitled to claim exchange loss of Rs. 7,87,63,270 arising out of restatement of foreign currency loan at the end of the accounting year which has been utilized on revenue account. Accordingly, the ground No. 11 raised by the assessee is allowed. 9. Charging of interest under s. 234B of Rs. 3,69,21,375 and under s. 234D of Rs. 42,49,712 of the Act We find that this issue is only consequential in nature and hence, does not require any adjudication. In the result, the appeal of the assessee in ITA No. 57/Kol/2007 for the asst. yr. 2003-04 is allowed. ITA No. 2182/Kol/2006--Asst yr. 2003-04--Department Appeal 10. Disallowance of deduction under s. 80HHD--Exclusion of payments received in Indian Rupees from foreign Airlines and Embassies--Rs. 12,90,46,618 The brief facts of the case are that the assessee claimed deduction under s. 80HHD of the Act in respect of profit derived from the services provided to the foreign tourists in accordance with the provisio....
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....r issued in the context of EPCG scheme, could be applied for the purpose of granting deduction under s. 80HHD of the Act. In this connection, it is relevant to look into the purpose behind granting deduction under s. 80HHD of the Act by the legislature to an assessee. From the said intention, it could be easily inferred that the provisions of s. 80HHD being beneficial in nature needs to be viewed liberally. Moreover, the provisions of s. 80HHD relies on the meaning of "convertible foreign exchange" in cl. (a) of Explanation to s. 80HHC. It is relevant to reproduce cl. (a) of Explanation to s. 80HHC here: 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 and any rules made thereunder." From the above meaning, it is very clear that once the RBI accepts a particular receipt to have been received in convertible foreign exchange, the deduction under ss. 80HHC and 80HHD should be granted to the assessee. In the instant case, admittedly, the assessee had received monies in accordance with the scheme approved ....
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....sion of indirect cost of Rs. 59,98,77,014m in the computation of deduction under s. 80HHD of the IT Act, 1961." 11.1 The learned Authorised Representative further argued that similar addition made in asst. yr. 2002-03 by the learned AO in assessee's own case came up before this Tribunal and the same in ITA No. 426/Kol/2006 (Revenues appeal), Dt. 11th Sept., 2015 had held this issue in favour of the assessee. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 11.2 We have heard the rival submissions and perused the detailed paper book of the assessee and perused the materials available on record. We find that this issue is squarely covered by the decision of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 426/Kol/2006 (Revenue's appeal), Dt. 11th Sept., 2015, wherein in para 9, it has been held as under: "9.3. We have heard the rival submissions and we find that this issue is now squarely covered by the decision of the apex Court in the case of CIT v. Lakshmi Machine Works Ltd. (2007) 210 CTR (SC) 1 : (2007) 2....
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....le interpreting the similar provision of s. 80HHC(3) of the Act. It further appears that copy of Accountant's certificate in form 10CCAD has also been produced. Therefore, the AO wrongly considered the total turnover of Rs. 395,62,34,559 instead of gross receipt in business amounting to Rs. 390,93,27,318 certified by the Auditor and accordingly, the relief allowed under s. 80HHD should be enhanced to Rs. 77,62,17,303 instead of Rs. 77,53,58,471 allowed by the AO.' In view of the aforesaid decisions, we are not inclined to interfere with the decision of the learned CIT(A) on this issue. Accordingly, the ground No. 1 raised by the Revenue is dismissed." 11.3 Respectfully following the Co-ordinate Bench decision of this Tribunal for the asst. yr. 2002-03 as stated supra, we find no infirmity in the order of the learned CIT(A) in this regard and accordingly, the ground No. 2 raised by the Revenue is dismissed. 12. Disallowance of preopening expenses as capital in nature relating to new hotel The Oberoi Udayvilas--Rs. 1,66,62,614 The brief facts of this issue are that the assessee had incurred a sum of Rs. 1,66,62,614 pertaining to new hotel "The Oberoi Udayvil....
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....opment of general managers, service engineers etc. were incurred by the assessee after the setting up of its business but before the date of commencement of business to enable smooth functioning of the activities post commencement of business to provide uninterrupted and better services to the guests in the hotel without any obstruction. These expenses though treated as deferred revenue expenditure in the books of accounts, as according to the assessee, the benefit out of these expenditure could be spread over a period of 5 years, but for the purpose of income-tax, the same were claimed as revenue expenditure in full in the year of incurrence. Now the short point that arises for our consideration is as to whether the expenditure incurred from the date of setting up of business till the date of commencement of business could be charged off as Revenue expenditure or not. We find that this issue has been elaborately dealt with in the following cases: (a) CIT v. Kanoria General Dealers (P) Ltd. (1986) 53 CTR (Cal) 165 : (1986) 159 ITR 524 (Cal) (b) CIT v. Ramaraju Surgical Cotton Mills Ltd. (1967) 63 ITR 478 (SC) (c) CIT v. Hughes Escorts Communications Ltd. ....
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.... yr. 2002-03 and accordingly, proceeded to delete the addition made in the sum of Rs. 24,37,804 by the learned AO. Aggrieved, the Revenue is in appeal before us on the following ground: "4. On the facts and in the circumstances of the case, learned CIT(A) has erred in deleting the disallowance of provisions debited for expenses on account of repairs, bad debts etc., amounting to Rs. 24,37,804 as against earning of income from technical assistance fee of Rs. 74,65,349." 13.2 The learned Authorised Representative further argued that similar addition made in asst. yr. 2002-03 by the learned AO in assessee's own case came up before this Tribunal and the same in ITA No. 426/Kol/2006 (Revenues appeal) Dt. 11th Sept., 2015 had held this issue in favour of the assessee. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 13.3 We have heard the rival submissions and perused the detailed paper book of the assessee and perused the materials available on record. We find that this issue is squarely covered by the decision of this Tribunal in assessee's....
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.... as irrecoverable in financial year 2002-03 relevant to asst. yr. 2003-04. The assessee produced copies of assessment orders for these two years passed by Delhi Sales-tax Authorities. Based on these evidences, the learned CIT(A) held that the action of the learned AO in adding back the amount of Rs. 6,41,636 on the ground that the liability to pay sales-tax neither related to the assessment year in question nor was crystallized during the year cannot be sustained and is deleted. Aggrieved, the Revenue is in appeal before us on the following ground: "5. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of advance written off during the financial year relevant to the asst. yr. 2003-04 to the extent of Rs. 6,41,636 on account of sales-tax demand deposited for financial years 1972-73 and 1973-74 in earlier years against the demand finalized by Delhi Sales-tax Authority on 26th Feb., 1990 and 30th June, 1987." 14.1 The learned Authorised Representative vehemently supported the order of the learned CIT(A). In response to this, the learned Departmental Representative vehemently supported the order of the learned AO. 14.2....
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....nditure @ 12 per cent was claimed by the assessee. Though the said interest on interest-free advances in the case of two subsidiaries viz., Lake Palace Hotel & Motels Ltd. and Mumtaz Hotels Ltd. on the interest-free loan amounting to Rs. 31,11,00,200." 15.1 We have heard the rival submissions. This issue has been elaborately dealt with in ground Nos. 8 and 9 raised by the assessee in this order. The decision rendered thereon will be equally applicable to ground No. 6 raised by the Revenue. Accordingly, ground No. 6 raised by the Revenue is dismissed. 16. Disallowance on account of staff welfare expenses - Rs. 50,00,000 The brief facts of this issue are that the assessee company is in the habit of providing free/subsidized meals to its employees on duty. The learned AO proceeded to disallow a sum of Rs. 50,00,000 on account of staff welfare expenses on an ad hoc basis based on the disallowances made in the earlier years i.e. asst. yRs. 2001-02 and 2002-03. On first appeal, the learned CIT(A) on the basis of earlier year's order of his predecessor deleted the addition made towards staff welfare expenses on an ad hoc basis with a finding that it is quite usual and standar....
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.... the learned CIT(A) on this issue. Accordingly, ground No. 8 raised by the Revenue is dismissed." 16.3 Respectfully following the Co-ordinate Bench decision of this Tribunal for the asst. yr. 2002-03 as stated supra, we find no infirmity in the order of the learned CIT(A) in this regard and accordingly, the ground No. 7 raised by the Revenue is dismissed. 17. Disallowance of repairs, renewals, replacement and advertisement-- Rs. 1,08,30,147 The brief facts of this issue are that the assessee has debited the following expenses in its P&L a/c: The learned AO observed from the assessment orders of earlier assessment years, the genuineness and allowability of the aforesaid expenditure is not free from doubt and accordingly, as in earlier years proceeded to disallow 2 per cent of the aforesaid expenditure. On first appeal, the learned CIT(A) deleted the disallowance. Aggrieved, the Revenue is in appeal before us on the following ground: "8. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of Rs. 1,08,30,147 @ 2 per cent of the total expenses incurred under the head Repairs, Renewal, Replacement, Advertisem....
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....iable and not related to the business and made disallowance of Rs. 1,01,42,417. On first appeal, the assessee pleaded that all the details were indeed filed before the learned AO and the observation of the learned AO is factually incorrect. It was also pleaded that out of Rs. 4,05,69,671, a sum of Rs. 3,99,61,272 debited in the Head Office relates to amounts paid to different associations like Hotel Association of India, World Economic Forum, membership fees and annual subscription for various Stock Exchanges. Based on these submissions, the learned CIT(A) deleted the addition. Aggrieved, the Revenue is in appeal before us on the following ground: "9. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of Rs. 1,01,42,417 being 25 per cent of the total expenses incurred under the head 'General Charges' by accepting assessee's explanation and other details which were not produced and not verified before the AO during the assessment proceedings." 18.1 The learned Departmental Representative vehemently supported the order of the learned AO and in response to this, the learned Authorised Representative referred ....
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....roceedings. Aggrieved, the Revenue is in appeal before us on the following ground: "10. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of expenses of Rs. 1,00,000 claimed before the AO during assessment proceedings for the financial year relevant to the asst. yr. 2003-04 by their letter Dt. 27th Jan., 2006 though the said expenses related to the financial year relevant to the asst. yr. 2004-05 as per Tax Audit Report not debited to the P & L a/c for the asst. yr. 2003-04." 19.1 The learned Departmental Representative vehemently supported the order of the learned AO and in response to this, the learned Authorised Representative vehemently supported the order of the learned CIT(A). 19.2 We have heard the rival submissions and perused the materials available on record including the relevant page of the paper book filed by the assessee. We find from the paper book that the assessee had genuinely made this claim before the learned AO based on the tax auditor reflecting a figure of Rs. 1,00,000 under prior period expenses in the tax audit report for asst. yr. 2004-05. It is not the case of the Revenue that the said e....
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....f the Act. (4) That the learned CIT(A) erred in enhancing the disallowance under s. 40(a)(i) by another Rs. 44,53,580 during the appeal proceedings for non-deduction of tax at source on commission paid to foreign travel agents ignoring the fact that such commission being not subject to tax in India required no tax withholding under s. 195. (5) That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs. 167,134,707 claimed by the appellant as overseas office maintenance, sales promotion, sales office expenses, aircraft maintenance and other matters for which remittances were made in foreign exchange and spent wholly and exclusively for the business purpose. (6) That on the facts and in the circumstances of the case, the learned CIT(A) erred in alleging non-compliance of detailed records/evidences of payments along with justification ignoring the fact that each and every item of details had been furnished before the AO which was communicated in the written submission before the learned CIT(A). (7) That on the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting ....
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.... Rs. 2,50,000 under s. 14A when no expenditure was actually incurred in relation to exempt dividend income. (16) That without prejudice to the ground as stated above, the addition of Rs. 2,50,000 made under s. 14A of the Act is highly excessive. (17) That the appellant craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated hereinabove either before or at the time of hearing of the appeal." 21. We find that most of the grounds raised by the assessee hereinabove are covered by the decisions rendered by us for the asst. yr. 2003-04 in ITA No. 57/Kol/2007. 22. The ground Nos. 1 to 4 raised by the assessee are similar to the ground Nos. 1 to 3 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except with certain changes in the names of the parties, change in place of those parties and change in amounts paid to those parties. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004....
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.... yr. 2004-05 also. 24.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 54, 61, 99, 108 and 109 of paper book 1 and pp. 291 to 294 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 5 in para 5 would apply with equal force for the ground No. 7 for the asst. yr. 2004-05. Hence, the ground No. 7 raised by the assessee is allowed. 25. The ground Nos. 8 and 9 raised by the assessee are similar to the ground Nos. 6 and 7 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except change in amounts and percentage of amounts disallowed. He argued that in asst. yr. 2004-05, 20 per cent of the impugned expenditure was disallowed by the learned AO as against 50 per cent disallowed in asst. yr. 2003-04. In response to this, the learned Departmental Representative also conceded that the facts are simila....
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....this issue are that the assessee debited a sum of Rs. 1,24,40,594 on account of legal expenses grouped under the head 'other expenses' in the P&L a/c. The learned AO observed that the assessee filed a list of persons and amounts paid. However, he observed that the necessity of incurring these expenses vis-`-vis the business of the assessee was not proved with any evidences. Accordingly, he resorted to make an ad hoc disallowance of Rs. 25,00,000 out of the same. This addition was upheld by the learned CIT(A) as he observed that the assessee did not bother to file any evidences even before him. Aggrieved, the assessee is in appeal before us on the following ground: "(13) That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in confirming the disallowance of Rs. 25,00,000 on account of legal expenses ignoring the fact that such disallowance was made purely on surmise and conjecture." 27.1 The learned Authorised Representative took us to the relevant pages of the paper book filed by the assessee and vehemently argued that the entire expenses were incurred only for handling the legal disputes arising out of the business of the ....
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.... CIT(A) was wrong in confirming the disallowance of Rs. 2,50,000 under s. 14A when no expenditure was actually incurred in relation to exempt dividend income. (16) That without prejudice to the ground as stated above, the addition of Rs. 2,50,000 made under s. 14A of the Act is highly excessive." 29.1 The learned Authorised Representative argued that the provisions of r. 8D of the IT Rules could be made applicable only from asst. yr. 2008-09 as has been held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing (2010) 234 CTR (Bom) 1 : (2010) 43 DTR (Bom) 177 : (2010) 328 ITR 81 (Bom) and fairly pleaded that since provisions of s. 14A of the Act has got retrospective application in the statute, disallowance thereon could be restricted to 1 per cent of exempt income as has been held by the Jurisdictional High Court in the case of CIT v. R.R. Sen & Brothers (P) Ltd. in G.A. No. 3019 of 2012 in IT Appeal No. 243 of 2012, Dt. 4th Jan., 2013. In response to this, the learned Departmental Representative fairly conceded to the submission of the learned Authorised Representative. 29.2 We have heard the rival submissions. The relevant assessment yea....
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....for the purpose of computation of deduction under s. 80HHD by observing that the provisions under Chapter VI-A have independent code of computation of relief available under relevant provisions and that there was no scope of importing any issue unless it was in the said sections and in doing so learned CIT(A) failed to appreciate the action of the AO that was based on the judgment of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau v. CIT 973 CTR (SC) 44 : (1973) 87 ITR 542 (SC) 3. That on the facts and in the circumstances of the case, learned CIT(A) erred in deleting the addition of Rs. 36,03,743 relating to excess provision made towards Technical Assistance Fees by relying on hon'ble Tribunal's decision Dt. 29th June, 2005 in the assessee's own case for asst. yr. 1999-2000 in ITA Nos. 891 & 801/Kol/2006 and not appreciating the AO's observation made in the relevant assessment order for arriving at the operational profit of the hotels under consideration. The assessee calculated its receipts @ 12.5 per cent of operational profit of several group hotels who in turn claimed provision for repairs as well as bad and doubtful debts. 4....
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....in amounts received in convertible foreign exchange from foreign airlines and embassies for the purpose of computation of allowable deduction under s. 80HHD of the Act. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 32.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 335 to 345 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 1 in para 11 would apply with equal force for the ground No. 1 for the asst. yr. 2004-05. Hence, the ground No. 1 raised by the Revenue is dismissed. 33. The ground No. 2 raised by the Revenue is similar to the ground No. 2 raised by the Revenue for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issue except change i....
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.... is absolutely no change in the issue except change in figures and change in parties with regard to the earlier year. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 35.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 314 and 315 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 6 in para 16 and for the ground Nos. 10 to 12 in para 27 for the asst. yr. 2004-05 would apply with equal force for the ground No. 4 for the asst. yr. 2004-05. Hence, the ground No. 4 raised by the Revenue is dismissed. 36. Disallowance on account of staff welfare expenses--Rs. 58,29,681. The ground No. 5 raised by the Revenue is similar to the ground No. 7 raised by the Revenue for asst. yr. 2003-04. The learned Authori....
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....tmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. A-1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 421 and 422 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 9 in para 19 would apply with equal force for the ground No. 7 for the asst. yr. 2004-05. Hence, the ground No. 7 raised by the Revenue is dismissed. In the result, the appeal of the Revenue in ITA No. 1876/Kol/2007 for asst. yr. 2004-05 is dismissed. ITA No. 299/Kol/2010--Asst yr. 2005-06--Assessee's Appeal 38. The assessee has raised the following grounds before us: "1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO under s. 40(a)(i) of the Act to the extent of Rs. 2,46,85,226 o....
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....ces of the case, the learned CIT(A) erred in not appreciating that payments for purchase of drawings are not taxable under India-Thailand tax treaty. 10. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO under s. 40(a)(i) of the Act of Rs. 1,50,10,962 paid to foreign company towards sales promotion services rendered outside India due to alleged non deduction of tax under s. 195 from such payment. 11. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating that Rs. 1,50,10,962 paid on account of sales promotion expenses is not taxable in India neither under the domestic law nor under the applicable tax treaty 12. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO of Rs. 67,62,092 being 10 per cent of total expenditure of Rs. 6,76,20,915 on account of aircraft maintenance and running expenses on an ad-hoc basis, based on mere surmise and conjecture; ignoring the fact that the aircrafts were exclusively used for the purpose of the business. 13. That on th....
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....6, 374 to 425 of paper book. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground Nos. 1 to 3 in para 3 and ground No. 4 in para 4 with regard to sales promotion expenses would apply with equal force for the grounds 1 to 11 for the asst. yr. 2005-06. Hence, the ground Nos. 1 to 11 raised by the assessee are allowed. 41. Disallowance towards repairs, running and maintenance of aircrafts-- Rs. 67,62,092 The ground No. 12 raised by the assessee is similar to the ground Nos. 6 and 7 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except change in amounts and percentage of amounts disallowed. He argued that in asst. yr. 2005-06, 10 per cent of the impugned expenditure was disallowed by the learned AO as against 50 per cent disallowed in asst. yr. 2003-04. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2005-06 also. 41.1 We have heard the riva....
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....s. 14,99,285 out of total general charges of Rs. 3,29,66,709 are not relatable to the business of the assessee. He had listed out the same in the assessment order. Accordingly, the learned AO disallowed a sum of Rs. 14,99,285 in the assessment. On first appeal, the learned CIT(A) restricted the said disallowance to Rs. 7,00,000 after holding that some expenses listed by the learned AO cannot be related to the business of the assessee. Aggrieved, the assessee is in appeal before us on the following ground: "16. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO under the head 'General Charges' to the extent of Rs. 7,00,000 as not being related to the business of the appellant." 43.1 The learned Authorised Representative argued that the disallowance confirmed by learned CIT(A) for Rs. 7,00,000 mainly represents gifts given to employees on various occasions resulting in higher output and productivity and gifts to VIP guests on special occasions with a view to generate goodwill and are incurred as a measure of commercial expediency. With regard to expenditure incurred on horse feeds, the sam....
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....d Representative argued that the provisions of r. 8D of the IT Rules could be made applicable only from asst. yr. 2008-09 as has been held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing (supra) and fairly pleaded that since provisions of s. 14A of the Act has got retrospective application in the statute, disallowance thereon could be restricted to 1 per cent of exempt income as has been held by the jurisdictional High Court in the case of CIT v. R.R. Sen & Brothers (P) Ltd. (supra). In response to this, the learned Departmental Representative fairly conceded to the submission of the lower authorities. 47.2 We have heard the rival submissions. The relevant assessment year under appeal is 2005-06 at which point of time, the provisions of r. 8D were not in force and the same were made applicable only from asst. yr. 2008-09 as decided in the decision of Godrej & Boyce Manufacturing. However, it is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence, disallowance is definitely warranted in terms of s. 14A which is brought in the statute book with retro....
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.... rendered by us for the asst. yr. 2004-05 for the ground No. 5 in para 37 would apply with equal force for the ground No. 1 for the asst. yr. 2005-06. Hence, the ground No. 1 raised by the Revenue is dismissed. 48.2 In the result, the appeal of the Revenue in ITA No. 196/Kol/2010 for asst. yr. 2005-06 is dismissed. To Sum up, the outcome of the aforesaid appeals are tabulated below: ============= Document 1 Professional Charges Consultancy Charges 4,95,97,116 2.49.99.455 Amounts remitted on behalf of head office by The Oberoi Grand, 4.51.65,514 Kolkata Amounts remitted on behalf of other units The Oberoi New Delhi Oberoi Grand Kolkata Oberoi Towers Mumbai The Oberoi Mumbai The Oberoi Bangalore CECIL Shimla EIH Delhi Udaivilas Udaipur Total 19,58,824 (Tax deducted wherever applicable) 1.49,914 (Tax deducted) 12.27.111 (Tax deducted) 4.84.906 (Tax deducted) 3.37.195 (Tax deducted) 1.13.655 (Tax deducted] 27.51.051 (Tax deducted) 31.72.561 (Tax deducted wherever applicable) 1,01,95,217 12,99,57,302 Document 2 Office maintenance Sales promotion expenses Remittance for sales office Remittanc....