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TaxTMI 
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2015 (12) TMI 1806
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....essional 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, 1961 (hereinafter referred to as the 'Act') on Pro....
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....nal 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 assessee is entitled to use the same whenever it is found beneficial to the asses....
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....ct 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. 1st June, 1976 by way of Explanation in s. 9(2) of the Act Now let us see whether the amendment i....
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....harged 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 retrospective legislation'." 2.6 We find that the genuinity of the expenditure has not been doubted by the Revenue. It is not the case of the Reven....
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.... 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 date-wise mentioning the names of the parties to whom payments were made together with the purpose of payments. He argued that all these payments were duly subjected to independent audit by ....
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....earned 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 account of flight kitchen services (sale of food and beverages) to outbound flights of Foreign Airlines and claimed deduction under s. 80HHC of the Act and proceeds received thereon in convertib....
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....fore 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 of sale or otherwise in a shop, emporium or any other establishment situate in India in exchange of Indian currency does not amount to export but for the purpose of getting benefit of deduction under s. 80HHC, if a transaction takes place by....
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....s 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 the said officer has certified that the provisions of the DGFT Circular No. 60/97-2002 Dt. 24th Dec., 1998 regarding treatment of the amounts received in rupees by a hotel company out of repatriable funds would also apply under the FEMA Regulations. In the absence of any evide....
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....s 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, repair and maintenance of the aircrafts was filed." 5.1 The learned AO not being satisfied with the aforesaid details held that no satisfactory explanation has been forwarded by the assessee which leaves ample scope for belief that there has been non-business use of the aircrafts by the directors or their relatives or family members.....
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....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 purposes. To this extent, the reliance on the Gujarat High Court decision in Sayaji Iron & Engg. Co. v. CIT (2002) 172 CTR (Guj) 339 : (2002) 253 ITR 749 (Guj) is well placed and supports the case of the assessee. We also find lot of force in the arguments of the learned Authorised Representative that if at all there is any personal element involved in the aforesaid ex....
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....f 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 loan and interest is charged on the same by the assessee. Amounts paid to Oberoi Kerala Hotels & Resort Ltd. - Rs. 40,00,000 The same is also a joint venture company and according to the agreement the company is required to advance on equity shares participation. During the course of assessment proceedings, the assessee mentioned the purpose of advancing monies to aforesaid parties and ple....
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....he 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 also brushing aside all the submissions of the assessee. In the instant case, the assessee had in fact made borrowings and utilised the same for the purpose of its business. The borrowed funds and the own funds in the form of share capital, reserves and surplus, cash profits derived during the year, etc., were inextricably mixed in the same bank account and hence, presumption could be drawn that interest-free advan....
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....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 (SC) (h) CIT v. Reliance Utilities and Power Ltd. (2009) 221 CTR (Bom) 435 : (2009) 18 DTR (Bom) 1 : (2009) 313 ITR 340 (Bom) (i) Recent decision of the Hon'ble apex Court in the case of Hero Cycles (P) Ltd. v. CIT (2015) 281 CTR (SC) 481 : (2015) 128 DTR (SC) 1 : (2015) 63 taxmann.com 308 (SC) Dt. 5th Nov., 2015." The operative portion of the aforesaid judgments are not reproduced herein for the sake of brevity. However, the principles laid down by the various Courts incl....
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.... 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) was not justified in confirming the disallowance of depreciation of Rs. 7,48,550 on addition to fixed assets despite the fact that all such additions were duly certified by the Chartered Accountant and invoice copies were produced at the time of assessment proceedings" 7.1 The learned Authorised Representative reiterated what has been stated before the lower authorities and referred to in the relevant pages of the paper book of the assessee numbering from pp. 307 to 362 in respect of the impugned issue containing the various details of all the fixed....
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.... 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 not justified in rejecting the appellant's plea that notional gain on foreign currency swap amounting to Rs. 4,15,36,381 having been taxed in asst. yr. 2002-03, the notional loss of Rs. 7,87,63,270 on account of currency swap incurred during the year should have been allowed as business expenditure." 8.4 The learned Authorised Representative 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 Represen....
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....s 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 provisions of s. 80HHD of the Act. The assessee company claimed total foreign exchange receipts of Rs. 194,45,11,547 for the purpose of computing deduction under s. 80HHD of the Act. Out of this, the learned AO observed that a sum of Rs. 12,90,46,618 made by the Foreign Embassies received in Indian Rupees and accordingly, held that the same should not be considered for deduction under s. 80HHD of the Act as the same was not received in foreign currency. Aggrieved, the assessee preferred an appeal before the learned CIT(A) who deleted the disallowance of the learned AO. Aggrieved, the Revenue prefer....
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....#39;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 by RBI and hence, the assessee is entitled for deduction under s. 80HHD of the Act in respect of amounts received in Indian Rupees from Foreign Airlines and Foreign Embassies. It is pertinent to note that the learned AG had granted deduction under s. 80HHD of the Act in the set aside assessment proceedings for the asst. yr. 1999-2000 on the same issue to the same assessee. Hence, in view of the aforesaid facts and circumstances and provisions of the Act, we direct the learned AO to grant deduction under s. 80HHD of the Act to the assessee. Hence, ground No. 1 raised by the assessee is allowed." 10.3 Respectfully fo....
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....rused 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) 290 ITR 667 (SC) wherein it was held that 'Sec. 80HHC(3) is a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business, the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under the Excess Profits Tax Act and it existed in the Business Profits Tax Ac....
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....spectfully 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 Udayvilas" and it relates to the period prior to the date of commencement of commercial production of the said hotels but after the setting up of the said hotels. The learned AO observed that in the books of accounts, these expenses were written off over a period of 5 years treating the same as deferred revenue expenses and for the purpose of income-tax had claimed the full amount as expenditure on the pretext that the same are only pre-commencement business expenditure incurred on training of employees, advertisement expenditure, etc., to make them fit for taking up the job on commencement of the activities for which the assessee also relied on certain decisions in its support. But the le....
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....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. (2007) 213 CTR (Del) 45 : (2009) 311 ITR 253 (Del) (d) CIT v. Relaxo Footwears Ltd. (2007) 293 ITR 231 (Del) - SLP by revenue against this order dismissed. The special leave petition filed by the Revenue against this order is dismissed by the Supreme Court in CC 12361/2007 Dt. 3rd Jan., 2008. (e) Delhi Tribunal Hotel Hans (P) Ltd. v. Asstt. CIT (2007) 15 SOT 348 (Del) (f) Kesoram Industries and Cotton Mills Ltd. v. CIT (1992) 196 ITR 845 (Cal). We hold that the expenditure were incurred for expansion of the same business and not for setting up of the new business. Instead these expenditures were incurred by the assessee after the business is set up. It is ultimately only a new unit of the assessee by way of two....
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....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 own case for the asst. yr. 2002-03 in ITA No. 426/Kol/2006 (Revenue's appeal), Dt. 11th Sept., 2015, wherein in para 13, it has been held as under: "13.4. We have heard the rival submissions and perused the materials available on record and we find lot of force in the arguments of the learned Authorised Representative that the income on account of technical services in respect of managed hotels are initially booked on provisional basis by the assessee for want of finalization of accounts of those managed hotels, and later based on Chartered Accountant's certificate the correct income is booked arid provision already made is adjusted accordingly. It may either be increased or reduced. Hence, we have no hesitation to delete, this addition made in the sum of Rs. 4,62,806. ....
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....sited 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 We have heard the rival submissions and perused the materials available on record including the relevant pages of the paper book filed by the assessee. We find that the sales-tax payments made for the financial years 1972-73 and 1973-74 by Oberoi Delhi which had been kept in 'advance payment account' has been written off during the financial year 2002-03 treating the same as irrecoverable. The same is also supported by the sales-tax assessment orders passed by the Delhi sales-tax Department. No doubt that any legitimate sales-tax paid by an assessee is entitled for reimbursement from the customers through sales invoices or otherwise, since the matter pertains to financial years 1972-73 and 1973-74, it is practically impossible to search the relevant customers and recover the sales-tax from them. Hence, i....
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....nt 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 standard practice in hotel business to provide meals to its employees and there was no dispute on the facts that expenditure on such meal was allowable business expenditure. Aggrieved, the Revenue is in appeal before us on the following ground: "7. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of Rs. 50,00,000 out of staff welfare expenses as against Rs. 10,62,83,448 debited under the head." 16.1 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 (Revenue's 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 ....
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....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, Advertisement, Passage and Travelling though the assessee failed to produce details of such expenses and prove the genuineness of the allowability of the business expenditure before the AO during the assessment proceedings for the year." 17.1 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 (Revenue's 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. 17.2 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 squarel....
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....tion 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 to the relevant page of the paper book which contained the details of the entire general charges. He further argued that no disallowance was made by the learned AO in the asst. yr. 2002-03 (earlier year) and asst. yr. 2005-06 (subsequent year) on this account and vehemently supported the order of the learned CIT(A). 18.2 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, the details of general charges are as follows: We also find that the assessee had submitted before the learned CIT(A) that the amounts debited in head office represents amounts paid to different associations like Hotel Association of India, World Economic Forum, membership fees and annual subscription for various Stock Exchanges. These are expenses incurred wholly and exclusively for the purpose of business of ....
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....r 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 expenditure is not incurred wholly and exclusively for the purpose of business of the assessee. The assessee in line with the mercantile system of accounting regularly employed by it, had sought to rectify its genuine omission and claimed the same in the assessment proceedings by way of a letter Dt. 27th Jan., 2006. We are aware at this juncture that any claim could be made only by filing a valid return as has been held by the Hon'ble apex Court in the case of Goetze India Ltd. (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC). But the same judgment states in the last para that the said finding is not applicable to appellate authorities more especially to Tribunals. Hence, respectfully following the judgment of the Hon'ble apex Court (supra) and in view of the fact that the said expenditure of Rs. 1,00,000 is genuinely incurred by the assessee for the purpose of its business, we hold that the action of the learned CIT....
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....d 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 the claim of the appellant for Rs. 4,001,630 under s. 80HHC of the Act on export of food and beverages to outbound flights of foreign airlines, payments for which were received in convertible foreign exchange. (8) That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs. 5,492,786 being 20 per cent of aggregate expenditure incurred on running and maintenance of aircraft ignoring the fact that the aircrafts were exclusively used for the purpose of business and there was total compliance before the AO so far as the submission of details was concerned and also there was a net profit of Rs. 9,158,600 from the business of chartering of aircrafts. (9) That the learned CIT(A) erred in not appreciating that the observation of the AO that the aircraft was used for personal purposes was a wild guess but not based on any specific finding. (10) That on the facts and in the circumstances of the case, the learned CIT(A) was no....
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....acts 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. 22.1 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. 66, 70, 71, 72, 97, 98, 105, 106 and 107 of paper book 1 and pp. 231, 232, 233, 234, 235 to 258, 286 to 289 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 Nos. 1 to 3 in para 3 would apply with equal force for the grounds 1 to 4 for the asst. yr. 2004-05. Hence, the ground Nos. 1 to 4 raised by the assessee are allowed. 23. The ground Nos. 5 and 6 raised by the assessee are similar to the ground No. 4 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 paid to those parties. In response to this, the learned Departmental Representative also conceded that the facts are similar to....
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....n 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. 2004-05 also. 25.1 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. 51, 56, 63, 99, 109 to 110 of paper book 1 and pp. 295 to 311 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 Nos. 6 and 7 in para 6 would apply with equal force for the ground Nos. 8 and 9 for the asst. yr. 2004-05. Hence, the ground Nos. 8 and 9 raised by the assessee are allowed. 26. The ground Nos. 10, 11 and 12 raised by the assessee are similar to the ground Nos. 8 and 9 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 change in names of the parties. He further ....
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....entire expenses were incurred only for handling the legal disputes arising out of the business of the assessee. In response to this, the learned Departmental Representative vehemently supported the orders of the lower authorities. 27.2 We have heard the rival submissions and perused the materials available on record including the paper books filed by the assessee. The relevant pages of the paper book on this impugned issue are pp. 59, 68, 102, 111 of paper book 1 and pp. 316 to 334 of paper book 2. We find that from the relevant pages of the paper book that the date wise and unit wise details regarding the name of the parties to whom payments are made, purpose of the payment, petition numbers in some cases, etc are available. However, it is not clear that whether the entire details of legal expenses were filed before the lower authorities for their verification. Hence, we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the learned AO to decide this issue afresh in accordance with law. The assessee is directed to submit all these details before the learned AO and such other evidences and documents as may be required in su....
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..... 29.2 We have heard the rival submissions. The relevant assessment year under appeal is 2004-05 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 retrospective effect from 1st April, 1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. The Hon'ble jurisdictional High Court in the case of CIT v. R.R. Sen & Brothers (P) Ltd. (supra) had held as under: "The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income-tax. The Tribunal has computed expenditure at 1 per cent of such dividend income, which, according to them, is the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed." Respec....
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....s bad and doubtful debts. 4. That on the facts and in the circumstances of the case, learned CIT(A) erred in restricting the addition made on account of interest-free loans to Rs. 4,00,03,060 by accepting the assessee's argument that only Rs. 33,33,58,828 represented interest-free loan advanced to M/s. Balaji Hotels and Enterprises Ltd. and the balance Rs. 17,83,91,145 was advanced not free of interest although the assessee had failed to substantiate its claim before the AO during assessment proceedings or subsequently and which, therefore, remained unverifiable. 5. That on the facts and in the circumstances of the case, learned CIT(A) erred in deleting the addition of Rs. 58,29,681 relating to Staff Welfare Expenses by placing reliance on the order of hon'ble Tribunal Dt. 8th Sept., 2006 in the assessee's own case for asst. yRs. 2000-01 and 2001-02 in ITA Nos. 833 & 1090/K01/05 and failing to appreciate the observations of the AO on the issue. 6. That on the facts and in the circumstances of the case, learned CIT(A) erred in deleting the disallowance/addition made by the AO of Rs. 81,43,698 on account of expenses towards Repairs, Renewals, Replacements, etc., by ....
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....ts in respect of exclusion of service tax, sales-tax and other indirect taxes 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. 33.1 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. 382 to 389 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. 2 in para 12 would apply with equal force for the ground No. 2 for the asst. yr. 2004-05. Hence, the ground No. 2 raised by the Revenue is dismissed. 34. Excess provision for technical fees--Rs. 36,03,743. The ground No. 3 raised by the Revenue is similar to the ground No. 4 raised by the Revenue for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely ....
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....gued that there is absolutely no change in the issue except change in figures. 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. 36.1 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. 346 to 349, 349A, 350 and 351 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. 7 in para 17 would apply with equal force for the ground No. 5 for the asst. yr. 2004-05. Hence, the ground No. 5 raised by the Revenue is dismissed. 37. Disallowance on account of expenses towards repairs, renewals and replacements--Rs. 81,43,698 The ground No. 6 raised by the Revenue is similar to the ground No. 8 raised by the Revenue for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the i....
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....s. 3,18,83,520 paid to non-residents. 2. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating the fact that under the domestic tax laws of India the payments made on account of services rendered from outside India are not subject to Indian income-tax and the principles laid down by the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries Ltd. v. Director of IT is valid even after the introduction of the Explanation introduced after s. 9(2) of the IT Act. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in holding that marketing commission payable to overseas agents for services rendered outside India is taxable in India. 4. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating that 'legal charges' is not covered by the definition of 'Fees for Technical services' and any remittance abroad on account of such legal fees rendered from outside India, being a professional charge should not be subject to Indian tax under the domestic tax laws of India. 5. That on the facts and in the circumstances of the case, the learned CI....
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....t amounting to Rs. 5,84,87,705 on advances given to the subsidiaries/associates companies solely for commercial expediency and related to the business interest of the appellant. 14. That without prejudice to the ground No. 13 hereinabove, the learned CIT(A) erred in not appreciating the fact that the rate of interest as considered by the AO, for notional disallowance of advances given to subsidiaries/associate companies solely for commercial expediency, is too high and arbitrary. 15. That without prejudice to the ground Nos. 13 and 14 hereinabove, the learned CIT(A) erred in not appreciating the fact that the advances made to the subsidiaries/associate companies were made wholly out of the owned funds and therefore, the question of disallowance of interest on borrowed funds did not arise. 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 of Rs. 1,93,558 on account of bad debts written off and offered to tax earlier." 39. 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. 40. Disallowan....
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.... before the learned AO/learned CIT(A) are enclosed in pp. 4, 5, 19, 27, 30, 37, 136 to 151, 244, 357 to 373 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. 6 and 7 in para 6 would apply with equal force for the ground No. 12 for the asst. yr. 2005-06. Hence, the ground No. 12 raised by the assessee is allowed. 42. Disallowance of interest on borrowed funds in respect of interest-free advances given by the assessee--Rs. 5,84,87,705. The ground Nos. 13, 14 and 15 raised by the assessee are similar to the ground Nos. 8 and 9 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 change in names of the parties. He further argued that these advances were made only for furthering the business interests of the assessee. He also pointed out to the relevant page of the paper book filed by the assessee wherein in respect of amounts due from certain parties, it only represents reimbursement of expenses and not any advances made to them. In response to this, the learned Dep....
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....pported the order of the learned AO. 43.2 We have heard the rival submissions and perused the materials available on record. We find from the details listed in the assessment order by the learned AO, the following expenses to be not attributable to the business of the assessee: In view of the same, we direct the learned AO to restrict the disallowance to Rs. 3,12,175 as not relatable to the business of the assessee. Hence, the ground No. 16 raised by the assessee is partly allowed. 44. Disallowance of Bad debts written off--Rs. 1,93,558 The learned Authorised Representative stated that in view of the smallness of the amount involved, he is not willing to press this ground. The learned Departmental Representative did not object to the same. 44.1 We have heard the rival submissions. In view of the above, the ground No. 17 raised by the assessee is dismissed as not pressed. 45. Disallowance under s. 14A of the Act towards proportionate management expenses--Rs. 20,08,159 The brief facts of this issue are that the assessee had claimed exempt income of Rs. 87,75,238 and claimed that no expenditure was incurred by the assessee for the purpose of earning this exempt income. During t....
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.... the case of CIT v. R.R. Sen & Brothers (P) Ltd. (supra) had held as under: "The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income-tax. The Tribunal has computed expenditure at 1 per cent of such dividend income, which, according to them, is the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed." Respectfully following the judicial precedent, we direct the learned AO to disallow 1 per cent of exempt income under this issue and accordingly, the ground No. 18 raised by the assessee is partly allowed. In the result, the appeal of the assessee in ITA No. 299/Kol/2010 for the Asst. yr. 2005-06 is partly allowed. ITA No. 196/Kol/2010--Asst yr. 2005-06 --Departments Appeal 48. The Revenue has raised the following ground: "1. That learned CIT(A) erred on facts and circumstances of the case and in law in allowing the claim of expenditure of Rs. 43,34,707 of staff welfare expenses because it was found during the course of assessment proceeding that a substantial part of the expenses booked under staff welfare expenses related to meals on duty and the assessee did not maintai....