TaxTMI 
TaxTMI 
2021 (5) TMI 408
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....ounting to Rs. 33,07,76,535/- given by the assessee as it agreed and also opening 85 closing balances of advances to DTTIPL were same at the figure of Rs. 68,51,33,061/-. The assessee had not submitted any evidences as to what it had gained from DTTIPL. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance made u/s 40(a)(ia) of the Act to the tune of Rs. 1,07,83,531/- without considering the fact that the assessee had not proved that the payments were not in nature of room rent but other payments not attracting provisions of TDS. Since the amounts of hotel rent charges hired and paid was on regular basis and hence provisions of TDS U/s 1941 was clearly applicable on it. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT (Appeals) be set aside and that of the Assessing Officer be restored. 3. The first issue raised by the Revenue is that ''Ld.CIT (A)'' erred in deleting the addition made by the AO on account of interest free advances given by the assesse....
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....ee has advanced interest-free loans to its associated concern. Thus, the AO made the proportionate disallowance of the interest expenses amounting to Rs. 1,92,18,117/- only. However, the learned CIT (A) found that the assessee and group concerns are engaged in the similar line of activities and belongs to global professional network. The assessee was also availing the professional services from the group concerns to which the interest free advances were provided. Therefore, there was the commercial expediency in advancing interest-free loan by the assessee to its group concern. The learned CIT (A) besides the above also found that the assessee and the group concerns are paying the taxes on the maximum marginal rate and therefore there would not have been any impact on the Government Exchequer even in a situation if the assessee charges interest on the interest-free advances given to the group concern. Accordingly, there was no loss to the revenue for not charging any interest by the assessee from the group concern on the interest-free advances given to them. Thus, the learned CIT (A) was pleased to delete the addition made by the AO. 9.1 The first controversy that arises f....
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....expenditure is incurred for the purposes of the business, incidental benefit to some other person would not take the expenditure outside the scope of Section 37(1) of the Act. Further, it is settled law that the commercial expediency of a businessman's decision to incur a particular expenditure cannot be tested on the touchstone of strict legal liability to incur such expenditure. 9.4 In the backdrop of the above stated discussion, we note that the assessee was availing the services from the group concerns including M/S DTTIPL as evident from the MOU dated 1 April 2011 which is placed on pages 166 to 168 of the paper book. The relevant clause of the MOU reads as under: This memorandum of understanding (MOU) is made on this the first day of April 201 1 by and between; Deloitte Haskins & Sells, (Registration Number 117364W), firm of practicing Chartered Accountants, registered with the Institute of Chartered Accountants of India (1CA1), having its office at 31. Nutan Bharat Soceity, Near M.K. High School, Aikapuri,'; Baroda - 390 007 (hereinafter referred to as DHS B) .; And Deloitte louche Tohmatsu India Private Limited, having its offi....
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....aining ami expertise which shall be at least be equal to commercially reasonable standards applicable to such personnel for the purpose of providing-and performing the above services and that such employees shall perform the functions assigned to them in a manner acceptable to DHS B. Both .parties shall ensure full and complete compliance with all laws and regulations in force at any given point of time, as well as the rules and regulations laid down by the ICAl. Notwithstanding any thing contained herein but subject to any mutual understanding in this regard to the contrary, each of the parties herein shall be at liberty, in their own right to enter into any third party agreement required for providing services and additional services, if any, on a principal to principal basis. It is clearly understood by and between the parties hereto that no privity of contract shall arise between such third parties and the parties hereto by virtue of these presents and consequently no liability of any kind or on any account shall accrue to the parties hereto. If any function, responsibilities or tasks not specifically described or provided for in this MOU are required....
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....ins & Sells vide order dated 1 October 2019 has decided the issue in favour of the assessee. The relevant extract reads as under: 5.1 The first issue for our consideration, which is common / in both the assessment years under consideration, is the dispute regarding proportionate disallowance of interest on advances to assessee's related concern DTTIPL. The assessing officer had disallowed the interest mainly on the ground that the assessee firm had used interest-bearing funds for the purpose of providing interest free advances. The AO has also observed that the assessee has not provided evidences which could prove that the transaction with DTTIPL were in the nature of a business transaction and further the commercial expediency was also not established with respect to interest free advances. The Ld. CIT (Appeals), while deleting the disallowance has noted that the assessee firm and DTTIPL are members of global network of professional firms carrying on similar profession and that the objective of the global network was to ensure cooperation amongst members and thereby enhance their respective capability to carry on professional practice. It has been noted by the Ld. fir....
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..... Therefore, in our considered opinion, the disallowance with respect to interest in both the years under consideration has been rightly deleted by the Ld. first appellate authority and we find no reason to interfere on this issue. Accordingly, we dismiss the grounds relating to disallowance of interest in both the years under appeal. 9.8 In view of the above and after considering the facts in totality, we do not find any infirmity in the order passed by the learned CIT (A). Accordingly we uphold the same. Hence the ground of appeal of the revenue is dismissed. 10. The second issue raised by the revenue is that the ''Ld.CIT (A)'' erred in deleting the addition made by the AO for Rs. 1,07,83,531/- on account of nondeduction of TDS u/s 194-I r.w.s. 40(a)(ia)of the Act as detailed under: 11. The assessee in the year under consideration has made payments to the Hotels either without deducting the TDS or deducted TDS at the rate lower than the rate prescribed under the Act. The details of payments to the hotels stand as under. Sr.No. Name of the Hotel Total Hotel Payment(Rs.) Banquet Charges (A) (Rs.) TDS @ 2% on Banquet Charges u/s.194C(....
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....not to disallow the banquet charges of Rs. 60,51,027/-. 6.4. As far as room rent is concerned, the A.O. relied on question No. 20 of circular No. 715 dated 08-08-1995 which reads as under: "Q No. 20: Whether payment "made to a hotel for rooms hired during the year would be of nature of rent? Ans: Payment made by person other than individuals and HUF for hotel accommodation taken on regular basis will be in nature of rent subject to IDS under section 194-1" The appellant firm also relied on the same question but further stated that vide circular No. 5/2002 dated 30-07-2002 it is clarified that what is "regular basis: The same is reproduced here under: "2..... The meaning of 'rent' in Section 194-1 is wide in its ambit and scope. For this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on 'regular basis'. Where earmarked rooms are let out for a specified rate and specified period, they would be construed to 'be accommodation made available on 'regular basis'. Similar would be the ....
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.... the nature of a rate contract, it cannot be said to be accommodation 'taken on regular basis' as there is no obligation on the part of the hotel to provide a room or specified set of rooms. Consequently, the provisions of Section 194-1 while applying to hotel accommodation taken on regular basis would not apply to rate-contract agreements. First the A.O. has not brought on record any evidence that there is agreement between the appellant firm and Hotel for providing room at specified rate and for specified period. From the copy of the bills submitted by the appellant, it is crystal clear that room was taken for some conferences or seminar which is on occasional basis. There may be only rate agreement for getting room at concessional rate, so in that case question No. 20 of circular No. 715 dated 08-08-1005 would not apply in view of subsequent clarification issued vide circular No. 05/2002 dated 30-07-2002. Hence, no tax was required to be deducted u/s. 1941 of the Act on the rent of room paid to three Hotels. In substantially similar case, the Hon'ble Mumbai ITAT in case of Red Chillies Entertainment Pvt. Ltd vs ACIT (IDS), Mumbai 92/Mum/ 2015, on which the....
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....he Hotel for the accommodation taken on regular basis. However in the case on hand, the payment made by the assessee to the Hotel does not represent the payment on regular basis and therefore the same is outside the purview of the provisions of TDS as specified under section 194-I of the Act. 15.5 In the backdrop of the above stated discussion, the 1st question arises for our adjudication with respect to the banquet charges paid by the assessee amounting to Rs. 60,51,027/-, in this connection we note that the provisions of section 40(a)(ia) of the Act provides for the specified expenses will not be allowed as deduction if the assessee failed to deduct the TDS or after deducting taxes the assessee failed to deposit the same in account of revenue on or before the due date filling return of income as specified under section 139(1) of the Act. However the issue on hand is short deduction of taxes. The question arises for our adjudication whether the provision of section 40(a)(ia) can be imported in the case where tax has been deducted but same is deducted in wrong section or deducted less than the rate specified under the relevant section. In this regard we find pertinent to refer t....
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....ading of this provision shows that deduction under a wrong provision of law will not save an assessee from section 40(a)(ia). [Para 9] 15.7 Thus there are conflicting observations made by both the above nonjurisdictional Hon'ble high courts in similar fact and circumstances, also none of party i.e. either assessee or revenue brought before us any judgment of Hon'ble Jurisdictional High Court judgment on the issue on hand. Therefore in this situation where there is conflicting observation made by the non-jurisdictional High Courts, then the judgment favoring the assessee shall be adopted. In this connection we find support from the judgment of the Hon'ble Apex Court in case of CIT vs. Vegetable Products Ltd reported in 88 ITR 192, where the Hon'ble Apex Court have laid down that in case of conflicting view of the provision of the Act the view favoring to the assessee should be relied upon. The relevant finding of the Hon'ble Apex court reads as under: The duty of the Court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a facto....
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....ividual representing a company (like a consultant, auditor, etc.) makes a payment for hotel accommodation directly to the hotel as and when he stays there, the question of tax deduction at source would not normally arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure. Furthermore, for purposes of section 194-I, the meaning of 'rent' has also been considered. "'Rent' means any payment, by whatever name called, under any lease . . . or any other agreement or arrangement for the use of any land. . . ." [Emphasis supplied]. The meaning of 'rent' in section 194-I is wide in its ambit and scope. For this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on 'regular basis'. Where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on 'regular basis'. Similar would be the case, where a room or set of rooms are not earmarked, but the hotel has a le....