TaxTMI 
TaxTMI 
2018 (7) TMI 2052
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....3.The grievances raised by the Revenue (in lead case, in ITA No.587/Kol/2016) are as follows: "1. The ld. CIT(A) has erred on facts in law in giving relief of Rs. 48,95,212/- being subscription fees paid by assessee without deducting any tax at sources violating the provision of sec. 194J of I.T. Act read with sec. 40(a)(ia) of the Act. 2. The Ld. CIT(A) has erred on facts in law in giving relief of Rs. 40,72,247/- being rent paid by assessee on hire computers without deducting any tax at sources violating the provision of sec.194I of I.T. Act read with sec. 40(a)(ia) of the Act. 3. The ld. CIT(A) has erred on facts and in law in giving relief of Rs. 8,64,239/- being indemnity insurance expense, not incurred exclusively for the purpose of business in contrary to the provision of u/s 37(1) of the Act. 4. The assessee craves leave to add, alter or amend any or all grounds of appeal on or before the date of hearing." 4. Ground No.1 raised by the Revenue in ITA No.587/Kol/2016 and Ground No.2 raised by Revenue in ITA No.588/Kol/2016 are identical and relate to subscription fees paid by the assessee without deducting tax at source u/s 194J of the A....
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....he basis / method of calculation of total subscription by DTT and DHS Mumbai and whether tax has been deducted. In response, the assessee, vide letter dated 18.02.2013, submitted that that withinthe global network, there was a local network of firms in India having affiliation with the global network of DTT. The gross subscription fees for India member firms and companies are paid by DHS Mumbai. The DHS Mumbai has deducted the tax on gross fees. The assessee has contributed its share to DHS Mumbai. The contribution for subscription fees has been made onthe basis of proportion of revenue earned by the respective member firm to the total revenue of Deloitte firms/companies in India. The contribution is made provisionally on the basis of revenue of the immediately preceding year. Subsequently, the contribution is worked out on the basis ofactual revenue of the year and the differential amount is contributed. During the year, total subscription fees of Rs. 20,24,62,439/- was paid to DTT by DHS Mumbai. The subscription fees share of assessee was Rs. 31,86,534/- based on the revenue share of 1.573889%. The subscription fees of Rs. 17,08,679/- being differential contribution of earlier....
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....sessee is free to make a transaction as and when required. At the same time application of the provisions of the Act cannot be ignored on the pretext of association. Assessee has no right to say that it was reimbursement to DHS Mumbai. It is for DHS Mumbai to decide whether the receipt from the assessee is income or expenses or reimbursement. For assessee, the payment was an expenditurewhich was debited in the profit and loss accounts. Hence the provisions of Chapter XVII of theIncome tax are applicable. From the Account of DHS Mumbai, which was submitted during thecourse of assessment proceedings, it is revealed that the receipt from the assessee was credited in the subscription account and net figure was debited in the profit and loss accounts. Being a member of local network assessee has enjoyed the same benefit as of global network. The payment was for the professional services/technical services rendered by the DHS Mumbai and assessee was required to deduct the tax u/s 194J of the I.T.Act, therefore, in view of the provisions of section 40(a)(ia) of the Act, the payment made to DHS Mumbai amounting to Rs. 48,95,212/-was disallowed andadded to the total income of assessee. 8....
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....s and Sells, Mumbai (DHS, Mumbai) for this purpose to DTT. However, as DHS, Mumbai makes the payment after deducting TDS and the assessee only reimburses its share of expenses, tax was not required to be deducted again in respect of its reimbursement of share of expenses of Rs. 48,95,212/- to DHS, Mumbai. We note that it is not the case of the AO that the expenses were not genuine. It is also not the case of the AO that the expenses were not incurred wholly and exclusively for the purposes of business or profession. The assessee has claimed the expenses in accordance with its cash system of accounting and the AO has not disputed the system of accounting. The AO has concluded that the assessee had paid for the professional services rendered by DHS, Mumbai without specifying the nature and details of services rendered by DHS, Mumbai. The assessee has furnished copies of debit notes issued by DHS, Mumbai mentioning the amount debited as "being your share of DTT Operational Budget (Subscription Fee) & Tech, Subscription Fees paid to Deloitte Touch Tohmatsu, New York" which have not been questioned by the AO. The assessee has also furnished evidence to prove that the assessee is a membe....
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....." Therefore, we note that the said amount of Rs. 48,95,212/- was towards the reimbursement of the expenses, which was in fact incurred on behalf of the assessee and there was no profit element. That being so, we decline to interfere with the order of Id. C.I T.(A) deleting the aforesaid addition. His order on this addition is, therefore, upheld and the ground No.1 raised by the Revenue in ITA No.587/Kol/2016 and ground No.2 raised by Revenue in ITA No.588/Kol/2016, are dismissed. 12. Ground No.2 raised by Revenue in ITA No.587/Kol/2016 and ground No.1 raised by Revenue in ITA No.588/Kol/2016 relate to addition on account of rent paid by assessee on hire computers without deducting TDS u/s 194J r.w.s. 40(a)(ia) of the Act. 13. The brief facts qua the issue are that during the assessment proceedings, the assessing officer, on verification of details submitted by the assessee, noticed that a sum of Rs. 40,72,247/- was debited in the profit and loss accounts as computer rent. The assessee was asked to explain whether tax has been deducted on the same. In response, vide letter dated 29.01.2013, assessee submitted that Deloitte Tousch Tohmatsu India Pvt. Ltd. (DTTI) has taken c....
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...., to the assessing officer to show that laptops were taken on rent by DTTIPL. There is no material on record to show that the assessee had taken the laptops on rent directly. That the payment has been made by the assessee to DTTIPL is also not disputed by the assessee. The details on record including the details of apportionment of rent on the basis of number of employees of the participating user entities goes to show that the essence of the transaction was obtaining on lease of laptops by DTTIPL for use by employees of various concerns forming part of the network in India and the rent was paid by DTTIPL to Rent Works India (P) Ltd. after deduction of tax at source at the applicable rate. The AO has held that tax was deductible at source presuming that the assessee had obtained the laptops on rent from DTTIPL which is not correct and cannot be inferred on the basis of the facts on record. Therefore, the assessee had reimbursed its share of the rent for the laptops to DTTIPL. In view of the legal position governing such reimbursement of expenses discussed in connection with reimbursement of subscription fees in para 11 of this order, no tax is deductible at source on such payments.....
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.... brief facts qua the issue are that the assessee has debited a sum of Rs. 8,64,239/- as insurance professional indemnity. During the assessment proceedings, the assessee was asked to explain the nature of expenses and how it is an allowable expenditure under the Act. In response, vide letter dated 29.01.2013, the assessee submitted that professional indemnity insurance(PII) has been taken from IFFCO-Tokio Insurance Company to protect their firm from loss arisingfrom any claim made against the assessee in connection with claim for damages. The professional indemnity insurance (PII) covers is taken every year. The insurance policy is valid for the period of one year and every year it isrequired to be renewed by paying premium every year. The liability for payment has been crystallized during the current year. It was submitted that there is inherent risk in the assessee's profession of client making claim for damages suffered due to alleged deficiency in the quality of professional service. The insurance taken is of nature of general insurance. The premium is paid annually. The expenditure incurred is wholly and exclusively for the purposes of profession. Thedeductibility does not....
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....guson Associates vs. ACIT in ITA No.6962/M/2012, wherein it was held as follows: "5. Ground No.2 relates to the disallowance on account of premium paid for professional indemnity insurance. The AO disallowed the insurance premium expenditure of Rs. 2,10,000/- observing that the said expenditure was made on the life insurance of the partners of the firm. Since the above payments were made on the personal insurance of the partners and the expenses were not related to the professional activity of the assessee firm he therefore disallowed the said expenditure. 6. The ld. CIT(A) making the same observations confirmed the said disallowance made by the AO. 7. We have heard the ld. representatives of both the parties and also have gone through the records. The ld. representative of the assessee submitted before us that the said expenditure was not incurred on the life insurance of the partners rather the same was in relation to professional indemnity insurance of the partners of the firm. 8. Since the firm is providing professional services and as such the professional indemnity insurance premium thus was related to the professional activity of the partn....