TaxTMI 
TaxTMI 
2017 (1) TMI 1751
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....013 (AY: 2009-10), dated 15.04.2016 4. Brief facts of the case are that the AO during the course of assessment proceedings noticed that the assessee has charged to the profit and loss account Rs. 168.49 lakhs on account of secondment charges under the head "Personnel cost". The AO called upon the assessee to justify the allowability of secondment charges having regard to the Joint Venture partners, namely GAIL and British Gas which was replied by the assessee vide letter dated 6.2.2013. The assessee submitted before the AO that the secondment charges were on the employees seconded by GAIL and British Gas to work in Mahanagar Gas Ltd and therefore there was no mark up in the payments made to them which was proved by the assessee by furnishing a copy of the secondment agreement and other evidences which provided that all taxes in India of the employees seconded to Mahanagar Gas Ltd have been deducted from the salary and paid to the Government tax exchequer. The assessee also produced before the AO a letter dated 1.9.1997 issued by the ITO (TDS), authorizing the assessee not to deduct tax at source. Further on the basis of said letter the AO held that the said exemption was granted o....
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....bona fide reason to believe that the tax was not deductible at source under section 194J of the Act and, therefore, the Assessing Officer was not justified in invoking section 40(a)(ia) of the Act and disallowing the business expenditure by way of transaction charges incurred by the assessee. The transaction charges paid by the assessee to the stock exchange constitute "fees for technical services" covered under section 194J of the Act and, therefore, the assessee was liable to deduct tax at source while crediting the transaction charges to the account of the stock exchange. However, since both the Revenue and the assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the Assessing Officer under section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. Hence appeal disposed off" In the instant case also appellant and Department were under the bona fidebelief that no tax is deductible by Mahanagar Gas CO. Ltd. for the reimbursem....
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....deducting the tax at source under section 194J of the Act and consequently, no action could be taken under section 40(a)(ia) of the Act. It is relevant to note that from the assessment year 2006-07 the assessee has been deducting tax at source while crediting the transaction charges to the account of the stock exchange though not as fees for technical services but as royalty. It is further relevant to note that it is not the case of the Revenue that on account of the failure on the part of the assessee to deduct tax at source, the Revenue has suffered presumably because, the stock exchange has discharged its tax liability for the assessment year in question. In any event, in the facts of the present case, in view of the undisputed decade old practice, the assessee had bona fide reason to believe that the tax was not deductible at source under section 194J of the Act and, therefore, the Assessing Officer was not justified in invoking section 40(a)(ia) of the Act and disallowing the business expenditure by way of transaction charges incurred by the assessee. 32. Accordingly, we hold that the transaction charges paid by the assessee to the stock exchange constitute "fees for technic....
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....r or authorized signatory or nominee of the assessee made it inconsistent with an agreement for providing technical services. In view of the above facts and circumstances, we dismiss this issue of revenue's appeal." Respectfully following the order of co-ordinate bench, we dismiss the ground no.1 raised by the revenue. 8. The issue raised in ground no.2 is against the deletion of Rs. 30 lakhs made by the AO on estimated basis on account of compensation from customers without appreciating the facts that the assessee was following mercantile system of accounting, and hence, the compensation receivable from the customers was required to be accounted on accrual basis. 9. The ld. AR submitted before us that the co-ordinate bench in ITA No.1945/Mum/2013 (supra) vide para 9 of the order sent back the issue to the file of the AO to decide the issue in term of the principles laid down in the order passed in ITA No. 6832/Mum/2011 for Asst. Year 2008-09 dated 27.02.2013. The ld. AR submitted that the issue be restored back to the file of the AO to be decided in accordance with the said decision. On the other hand , the ld. DR also fairly agreed to the submissions of the ld.AR. 10. We fi....
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....see after rejecting the contentions of the assessee by observing and holding as under : . "6.1 The facts of the case were that the A.O. had disallowed Rs. 10,47,OOO/- u/s.14A of the Act. 6.2 During appellate proceedings the appellant submitted as under: "The learned AO wrongly took the entire financial expenses including bank charges for disallowance under section 14A instead of only the interest figure. This has led to the increase in disallowance. The entire calculation sheet of 14A is enclosed for your ready reference. The interest amount as per the Schedule 0 is Rs. 8,13,419/- plus Rs. 64,34,152/ - totaling to Rs. 72,48,204/ - instead of Rs. 1,87,34,611/- as taken by the Ld.AO. What has been done is to take the entire schedule of interest and finance charges instead of only the interest amounts. We request you to kindly give directions to the Ld AO to amend the amount taken for disallowance." 6.3 I have considered appellant's submissions. The appellant's main contention is that A.O. had included bank charges in computation of sec.14A which appellant objects. When we examine sec.2(28A) interest includes other charges paid for the interest. Bank charges is also ....