TaxTMI 
TaxTMI 
2019 (10) TMI 349
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.... (i) Disallowance of interest expenditure - Rs. 2,19,85,395/- (ii) Disallowance out of subscription payments - Rs. 79,37,189/- (iii) Disallowance of interest on service tax Rs. 4,24,283/-. 2.1 The assessee approached the Ld. first appellate authority against the said disallowances. The Ld. Commissioner of Income Tax (Appeals) gave relief to the assessee in respect of all the three disallowances and deleted the additions. Now, the Department is before the Tribunal and has challenged the action of the Ld. first appellate authority in deleting the disallowances made by the assessing officer. 2.2 In assessment year 2014-15, the return of income was filed declaring an income of Rs. 6,60,19,600/-. The assessee's return was initially processed under section 143 (1) of the Act and the case was subsequently selected for scrutiny under the CASS guidelines. The assessment was completed at an income of Rs. 10,96,56,092/- after, inter alia, making the following disallowances - (i) Disallowance of interest expenses - Rs. 2,27,87,141/- (Identical to assessment year 2013-14) (ii) Disallowance out of subscription payments - Rs. 80,22,170/- (Identical to assessment year 2013-14) (iii) Ad....
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....ld not be demonstrated by the assessee that the transaction with DTTIPL was in the nature of a business transaction. It was also submitted that the assessee would not establish the commercial expediency in giving interest free loans to its associated concern. 3.1 With respect to the second issue in dispute before us which is regarding the deletion of disallowance out of subscription expenses, the Ld. senior departmental representative submitted that the assessee could not give any specific details regarding the services received from the parties to whom the subscription fee had been paid. It was submitted that in absence of clear description of the services received, the assessing officer had no option but to make a disallowance. It was submitted that it could not be established that these expenses had been incurred wholly and exclusively for the purposes of business. It was submitted that 25% disallowance out of subscription expenses in both the assessment years was a reasonable disallowance given the facts and circumstances of the case. 3.2 With respect to the third issue in dispute in assessment year 2013 - 14 being disallowance of interest on service tax, the Ld. senior depar....
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.... It was further emphasised that no similar disallowance had been made in earlier assessment years. It was submitted that the Ld. first appellate authority had rightly deleted the disallowance in both the assessment years. 4.1 With respect to the second issue in dispute, i.e. the disallowance pertaining to subscription payments, it was submitted by the Ld. authorised representative that evidently this disallowance was in the nature of an ad hoc disallowance. The Ld. authorised representative submitted that the ITAT benches of Kolkata and Delhi have deleted similar disallowances in assessee's group concerns. It was further submitted that in assessment year 2010 - 11 also a similar disallowance had been made which had been deleted by the Ld. first appellate authority and the Department had not preferred further appeal against this deletion by the Ld. CIT (Appeals) and, thus, it was apparent that the Department had accepted this position. 4.2 With respect to the issue regarding interest on delayed payment of service tax it was admitted that the nature of interest was compensatory in nature and in this regard reliance was placed on the judgement of the Hon'ble Gujarat High Court in th....
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....late authority that the assessee has demonstrated that subsequently DTTIPL has raised debit notes on the assessee for services rendered and, thus, it has been amply demonstrated that DTTIPL and has provided services of its resources against which the advances made by the assessee were adjusted. It has also been observed by the Ld. first appellate authority that there was commercial expediency in giving advance to DTTIPL as both the assessee firm and DTTIPL were in the same line of profession. The Ld. first appellate authority has reached a conclusion that there was a business relationship between the assessee and DTTIPL and, therefore, the advances given by the assessee firm could not be said to be not having any link with the assessee business and, therefore, proportionate disallowance of interest was not warranted. Further the Ld. first appellate authority has also noted that it cannot be said that the assessee does not have a continuous business relationship with DTTIPL. The Ld. CIT (Appeals), while deleting the disallowance, has also placed reliance on the ratio of judgement of the Hon'ble Apex Court in the case of SA Builders (supra) wherein the Hon'ble Apex Court had held tha....
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....e assessee's firm being a member of this global network and having 'Deloitte' in its name brings in professional work in the form of reference by other member firms. The Ld. CIT (Appeals) has also noted that a similar disallowance had been made in assessment year 2010 - 11 which had been deleted by the Ld. first appellate authority. We also note that the Department did not file any further appeal against this deletion made by the Ld. CIT (Appeals) in assessment year 2010 - 11. We also note that an identical issue had come up before ITAT Delhi bench in assessment year 2009 - 10 and vide order dated 23/10/2018 in the case of assessee's related concern, ITAT Delhi bench, in the case of Deloitte Haskin & Sells vs. ACIT in ITA No. 2927/Del/2013 had deleted an identical disallowance after duly considering similar favourable decision of Kolkata bench in assessee's related concern in the case of Deloitte Haskins & Sells in ITA Nos. 587 & 588/Kol/2016 for AY 2010-11 and 2011-12 vide order dated 11/07/2018. Although the Ld. senior departmental representative has argued vehemently against the deletion of the said disallowance by the Ld. CIT (Appeals), he could not bring to our notice any cont....