TaxTMI 
TaxTMI 
2020 (11) TMI 367
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case and in law, the Hon'ble DRP has erred in holding that the expenses incurred on jobs completed in earlier years amounting to Rs. 4,82,26,872/- cannot be said to be prior period expenses, ignoring the fact that the assessee cannot claim expenses against the income which has not been earned during the year under consideration. ii) The Hon'ble DRP has erred in directing the AO to delete the disallowance of expenses incurred towards entrance fee and subscription amounting to Rs. 8,462/- ignoring the fact that the said expenses is not wholly and exclusively incurred for the business. 3. Appellant, M/s. Consulting Engineering Services (India) Pvt. Ltd. (hereinafter referred to as 'the assessee') by filing the present appeal sought to set aside the impugned order dated 24.12.2014 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143(3) read with section 144C of the Income-tax Act, 1961 (for short 'the Act') qua the assessment year 2010-11 on the grounds inter alia that:- "A. GENERAL GROUND 1 1.1. That the Ld. AOIDRP have erred on the facts and in law in making the total addition of INR 33,86,65,445/- under the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plicable to Income Tax proceedings. GROUND 5: DISALLOWANCE OF INR 6,50,891/- UNDER 40A(2)(b) 5.1. The Ld. AO/DRP have erred on facts of the case and in law in disallowing a sum of INR 6,50,891 as being covered under 40A(2)(b) of the Act without appreciating that these amounts were incurred wholly and exclusively for the purpose of business, based on conjectures and surmises. 5.2. The Ld. AO/DRP have erred on facts and in law in making the additions under section 40A(2)(b) without bringing on record any material that such expenditure is excessive or unreasonable and therefore not meeting the basic criteria for making disallowance u/s. 40A(2)(b). 5.3 The Ld. AO/DRP have erred on facts and in law in making the aforesaid addition on the basis of disallowance made in the preceding assessment year without appreciating that the principle of res judicata does not apply to Income Tax proceedings. 5.4 Without prejudice to the above sub-grounds, the Ld. AO/DRP have further erred on facts of the case in disallowing the sum of INR 50,891 paid by the appellant to persons who do not fall within the ambit of section 40A(2) of the Act. C. TRANSFER PRICING RELATED GROUNDS GROUND 6 6.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rchitectural project and also does the supervision of projects. During the year under assessment, the taxpayer entered into international transactions as under:- Name of the AE with whom the international transaction has been entered Nature of transaction Amount (INR) Consulting Engineering Services LLC, Oman Provision of consultancy in infrastructural architectural project and supervision at various sites in Oman and other sites in Middle East. 148,573,436 5. Assessing Officer (AO) by following the assessment order passed in taxpayer's own case for AY 2009-10 confirmed by the ld. CIT (A) made addition of Rs. 27,58,24,845/- on the ground that the taxpayer has undervalued the closing job in progress by Rs. 27,58,24,845/- for the year under consideration. 6. AO also made addition of Rs. 5,31,08,347/- on account of losses incurred on pre-2003 or post-2003 project completed during the current financial year again by following its own order confirmed by the ld. CIT (A) for AY 2009-10. 7. AO made disallowance of Rs. 6,50,891/- incurred by the taxpayer on behalf of its sister concern u/s. 40A (2)(b) of the Act on the ground that the same is not related to the business of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayer has offered income on the basis of bills raised during the relevant financial years for which the expenses were debited to the profit & loss account in preceding years and relied upon the decisions rendered by Hon'ble Supreme Court in CIT vs. Excel Industries Ltd. (Civil Appeal No. 125/2013), Hon'ble Delhi High Court CIT vs. Triveni Engg. & Industries Ltd. (2011) 196 taxman 94 (Delhi-HC), and coordinate Bench of the Tribunal in Accenture India (P) Ltd. in ITA No. 4541/Mum/2008 dated March 23, 2010. 17. However, on the other hand, ld. DR for the Revenue contended that this issue is identical to the issue before the AO as well as ld. CIT (A) in AY 2009-10 in ITA No. 1735/Del/2014 & 1444/Del/2014 vide order dated 29.05.2019 which has been remitted back to the AO by the Tribunal for de novo determination. 18. When we examine assessment order passed by the AO, it is observed that the taxpayer has made extensive submissions before the AO which have not been examined by the AO to decide the issue in controversy. AO rather decided the issue by following its own order for AY 2009-10 confirmed by the ld. CIT (A) and thereby made this addition on account of undervalued the clos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing an opportunity of being heard to the taxpayer. GROUND NO. 5 (ITA NO. 1245/DEL/2015) (TAXPAYER'S APPEAL) 23. AO/DRP have made/confirmed disallowance of Rs. 6,50,891/- claimed by the taxpayer as expenses having been incurred on behalf of its sister concern, namely, M/s. CES Technologies Pvt. Ltd., u/s. 40A(2)(b) of the Act being not related to the business of the taxpayer company. 24. Ld. AR for the taxpayer challenging the impugned disallowance contended inter alia that AO has failed to appreciate the fact that only amount of Rs. 6,00,000/- was paid to CES Technologies Pvt. Ltd. and remaining amount of Rs. 50,891/- was paid to other persons who are not related to the taxpayer; that the taxpayer has obtained a project of "Soil Health Card" from Anand Agriculture University, Government of Gujarat in FY 2004-05 and the estimated fee for the said project was Rs. 4,06,63,469/-; that out of the business expediency, the taxpayer has sub-contracted the said work to CES Technologies Pvt. Ltd. for a fee of Rs. 3,04,97,602/- being 75% of the total project amount as per letter dated May 1, 2007; that the payment made by the taxpayer to CES Technologies Pvt. Ltd. is not excessive as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure. At the same time, the AO has not stated categorically that he has been able to verify the claim of the taxpayer of incurring of expenditure. Under these facts, the Panel directs the AO to allow the claim on this account to the extent these are said to be non-verifiable. In case, the AO proposes any addition on account of non verifiable nature of such expenses, he shall record reasons as to how such expenses are not verifiable or how the genuineness of such expenses is in doubt. The Panel also mentions that the issue of the expenditure Of Rs. 6,50,891/- has already been discussed in detail vide Ground No. 1 and therefore, the AO shall not make any separate addition for the corresponding amount for the said project. For the sake of clarity it is mentioned that the said expenditure is appearing as direct expenses in post 2003 amounts added by the AO. 9.4.3 So far as the expenditure under the heads "direct time" and "indirect time" are concerned, the AO in the remand report has stated that these are nothing but allocation of salary expenses which has been claimed under the head 'Personnel' Expenses'. The AR of the taxpayer has explained to the Panel that such perso....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the AO to delete the addition which has been held to be extended by the taxpayer wholly and exclusively for the purposes of the business and also being in revenue domain. Under these facts and circumstances the Panel directs the AO to delete addition proposed by him on this account." 29. When in Annexure to Tax Audit Report Item No. 17D(1) it has been intimated that amount of Rs. 8,462/- is debited to P & L account being expenditure incurred at club entrance fee and subscription, causal observation made by the AO that same are not wholly and exclusively spent for business purpose, is not sustainable. So, keeping in view the meager amount and the fact that the same has been incurred as entrance fee and subscription for club has been rightly deleted by the ld. DRP. So, ground no. 2 of Revenue's appeal is determined against the Revenue. TRANSFER PRICING GROUNDS (ITA NO. 1245/DEL/2015) (TAXPAYER'S APPEAL) 30. Ld. TPO by invoking the Explanation to Section 92B subjected to delete the payment received by the taxpayer from its Associated Enterprises (AE) beyond 30 days, transfer pricing adjustment by using CUP and not on the LIBOR rate and thereby applied SBI PLR rate plus 300....