TaxTMI 
TaxTMI 
2021 (7) TMI 1286
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.... "1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld CIT(A) is bad in law and void ab-initio. 2. Disallowance of lease line connectivity charges (VSAT uplinking charges) amounting to Rs. 1,16,28,390/- paid by the appellant. 2.1 That on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in not providing an adequate opportunity to the appellant of being heard and explained before treating the lease line charges as royalty liable to tax in breach of the principles of natural justice. 2.2 (a) Without prejudice to the above, that on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in treating the lease line connectivity charges (VSAT uplinking charges) amounting to Rs. 1,16,28,390/- as royalty under Explanation 6 to Section 9(1)(vi) of the Income Tax Act, 1961 ("the Act") without providing any reasons and without appreciating that the amendments in the Act cannot be read into the Indo-US DTAA. 2.2 (b) That on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in treating the payment of lease line connectivity charges as liable for....
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.... the case in deleting the addition of Rs. 24,61,83,809/- made by the AO on account of ALP adjustment for royalty. 2. The ld. CIT (A) erred in law and on the facts of the case in deleting the addition of Rs. 2,36,48,060/- made by the AO on account of global accounts adjustment and deleting Rs. 1,82,94,611/- on account of lease line expenses." 7. In ITA No. 3513/Del/2017, following grounds have been raised by the revenue: "1. The ld. CIT (A) erred in law and on facts in deleting the addition of Rs. 35,43,86,010/- made by the AO on the working of TPO made on account of CUP method was used to determine ALP of In fra Group Services as "Royalty". 2. The ld. CIT (A) erred in law and on facts in deleting disallowances of Rs. 3,19,94,651/- for u/s 40(a)(ia) of the Act. The judgment of the Hon'ble High Court relied upon is under challenge in SLP." 8. In ITA No. 5538/Del/2018, following grounds have been raised by the revenue: "1. The ld. CIT (A) erred in law and on the facts of the case in deleting the addition of Rs. 32,79,49,164/- made on account of Arm's Length Price. 2. The ld. CIT (A) erred in law and on the facts of the case in deletin....
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....lty: 13. The assessee contended that the international transactions undertaken by the assessee justified under the TNMM using 6 comparables in the similar line of business. OP/OC of the assessee is 8.23% as against 5.15% of the comparables. The assessee has also argued that the payment of royalty should be treated as justified. The assessee has also contended that these services are essential in a logistics support company and if some companies in the comparable list are not paying for such services, then, they will end up paying it in some other form either by incurring such expenses themselves by hiring such services from third parties. The fact that the PLI of the assessee is over and above the comparables show that the payments of these services made by the assessee is cheaper compared to the market price of such services. 14. The assessee had relied on the decision of Mumbai Bench of the ITAT in the case of Dresser-Rand India Pvt. Ltd. vs. Addl. CIT (ITA No. 8753-Mum-2010) wherein it has been held that how an assessee conducts his business is not for the revenue authorities to decide what is necessary for an assessee and what is not. Further, the above decision has uphel....
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....ppeal be fore the Tribunal for the assessment year 2005-06 in ITA No. 2128/Del/2011 order dated 17.12.2020. 18. The relevant portion of the order of the Co-ordinate bench is as under: "17. We find that CIT(A) while deciding the issue in favour of the assessee has given a finding that assessee had received the services received from its US parent company to whom the royalty was paid by the assessee. She has further given a finding that the TPO's conclusion that "when the Revenue was split on the basis of FAR analysis, then no further payment would have been made by the assessee. Therefore, I am holding that ALP of royalty payment as nil" was without any basis or analysis on record. She has further given a finding that no evidence or analysis was made by TPO to hold that the arm's length price for royalty transaction stands subsumed by the gross pro fit split on revenue received from logistics services on a predetermined basis. She has further given a finding that TPO has not providing any analysis or evidence to support his findings that no material bene fit has been received by the assessee and no evidence has been brought on record to demonstrate that assessee's busine....
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....assessee on account of global customers. 21. The AO considered these expenses as payment of salary to non-resident and accordingly held that the same is liable to withholding tax under section 192 of the Act. In the absence of tax withholding, AO disallowed the expense under section 40(a) of the Act. 22. The Assessee has submitted that the payment to be classified as salary, it is necessary to have an employer employee relationship between the payer and the payee. The principles according to which the relationship between employer and employee or master and servant is to be determined are well- settled, one of them being existence of a right of control on the manner in which the work is to be done. Assessee has relied on the decision of the Hon'ble Supreme Court in the case of State of Gujarat v. Raman Lal Keshav Lal Soni (AIR 1984 SC 161) and submitted that the payment cannot be considered as responsible for withholding any tax from these payments under section 192 of the Act. It was argued that the payment is a reimbursement by the assessee to other group companies on account of allocated expenses incurred by the GAM team. There are various judicial precedents wherein it ha....
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....uired to be disallowed in view of provisions of Section 40a of the Income Tax Act because no TDS has been deducted or paid to the Government Account. The revenue further held that communication VSAT, uplinking charges, the same are in the nature of consultancy charges/technical fee having been remitted out of India on which no TDS was deducted by the assessee. Revenue mentioned that they have not accepted the version of Hon'ble Delhi HC and has filed an SLP before Hon'ble Apex Court. 28. The similar issue has been adjudicated by the Tribunal in the case of the assessee in ITA No. 2128/Del/2011 A.Y. 2005-06 vide order dated 17.12.2010 wherein it was held that the payment of lease rent charges do not fall in the category of FTS. In the absence of any material change in the factual as well as the legal aspect of the assessee, we hereby hold that the disallowance made by the AO is directed to be deleted. ITA No. 5994/Del/2017 A.Y. 2010-11(Ground No. 3) Capital Advance: 29. During the AY 2010-11, the Assessee purchased software from So ft line Software Service Private Limited ("Softline") amounting to INR "YY" for the purpose managing fixed assets database, cheque pr....
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....ed as follows: "5. A plain reading of the above provision indicates that tax withholding requirements under section 194H apply in respect of 'commission or brokerage', which, in turn, is de fined by Explanation to Section 194 H No doubt, this definition is inclusive but the fundamental question that we really need to consider in the first place is as to what are the connotations of expression 'commission or brokerage ' in common parlance, and then proceed to deal with the inclusions thereto by the virtue of specific provision of law. 6. We find that the expression 'commission' and 'brokerage' have been used together in the statute. It is well settled, as noted by Maxwell in Interpretation of Statutes and while elaborating on the principle of noscitur a sociis, that when two or more words which are susceptible to analogous meaning are used together they are deemed to be used in their cognate sense. They take, as it were, their colours from each other, the meaning of more general being restricted to a sense analogous to that of less general. 37. The Assessee has relied upon the order of DCIT versus Laqshya media (P) Ltd in ITA No. 1297/MUM/2014 for AY 2010- 11 da....
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....ect of money borrowed. Here, processing fee definitely falls within such definition and, therefore, it cannot be reckoned as payment for rendering of any managerial services by the bank as held by the AO. This has been reiterated by the ITAT Pune Bench in the following cases: i) Chintamani Hatcheries (P.) Ltd v DCIT, reported in [2000] 75 ITD 116 (Pune) (SMC) and ii) Ghatge Patil Ltd. Vs ACIT, reported in [2011] 11 taxman.com 168 (Pune) Despite such a payment to the Nationalized Bank falls within the ambit of "interest" under section 2(28) but the TDS provisions under section 194A are not applicable, because it falls within the exclusionary provisions as laid down in sub- section (3) of section 194A, specifically sub-clause (iii)(a) which envisages that, the income credited or paid to any banking company to which Banking Regulation Act, 1949 applies, the provision of section 194A(1) will not apply. In other words, the assessee is not required to deduct TDS on such payment of income paid to any banking company. 5157/M/14(11-12) Laqshya Media Accordingly, the finding of the ld. CIT(A) deciding in favour that the payment of processing fee does not require de....
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....se and respectfully following the order of the Hon'ble Mumbai ITAT in the case of Kotak Securities Ltd and DCIT versus Laqshya media (P) Ltd (supra) the ground of appeal is decided in favour of the assessee by the ld. CIT (A). The addition made by the AO is dismissed. 39. On going through the reason given by the ld. CIT (A) and the judgments relied upon, we find the same are cogent and relevant and hence decline to interfere with the order of the ld. CIT (A). ITA No. 2242/Del/2015 A.Y. 2009-10(Ground No. 6) ITA No. 17/De l/2021 A.Y. 2010-11(Ground No. 1) ITA No. 18/De l/2021 A.Y. 2011-12(Ground No. 1) ITA No. 19/De l/2021 A.Y. 2012-13(Ground No. 1) ITA No. 20/De l/2021 A.Y. 2014-15(Ground No. 1) Education Cess: 40. The assessee has taken up additional grounds pertaining to deduction of Education Cess before the ld. CIT (A). The ld. CIT (A) did not allow the grounds holding that it doesn't emanate from the assessment order. 41. Before us, it was argued that a legal ground can be taken up any time before the higher authorities. The ld. AR relied on the judgment of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 38....
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....her observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Incometax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. KaramchandPremchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd.. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to b....
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.... 40(a)(ii) of the I.T Act - clarification regarding. Section 40(a)(ii) - Recently a case has come to the notice of the Board where the ITO has disallowed the 'cess' paid by the assessee on the ground that there has been no material change in the provisions of Section 10(4) of the old Act and Section 40(a)(ii) of the new Act. 2. The view of the ITO is not correct. Clause 40(a)(ii) of the IT Bill, 1961 as introduced in the Parliament stood as under: "(a) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains." When the matter came up before the Select Committee, it was decided to omit the word 'cess' from the clause. The effect of the omission of the word 'cess' is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided." 50. The similar issue of allowability of cess u/s 37 has been examined by the Co-or....
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....education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word 'Cess' is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. 55. Further, we are guided by the judgment of the Constitutional bench which was also referred in the case of Dewan Chand Builders & Contractors Vs Union of India & Others in Civil Appeal No. 1830 of 2008 dated 18.11.2011. 56. The Constitution Bench of this Court in Hingir Rampur Coal Co. Ltd. Vs. State of Orissa2 was faced with the challenge to the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, levying Cess on the petitioner's colliery. The Bench explained different features of a `tax', a `fee' and `cess' in the following passage: "The neat and terse definition of Tax which has been given by Latham, C.J., in Matthews v. Chicory Marketing Board (1938) 60 C.L.R. 263 is often cited as a classic on this subject. "A Tax", said Latham, C.J., "is a compulsory exaction of money by public authority for public purposes enforceable by la....
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.... an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession." 59. From the above, we find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income 'Tax' is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. ....