TaxTMI 
TaxTMI 
2022 (4) TMI 1408
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..... Aggrieved by the adjustments proposed in the draft assessment order, the assessee filed its objections before the Dispute Resolution Panel (DRP). The DRP vide its directions dated 18th September, 2017 disposed of the assessee's objections. Pursuant to the DRP's directions, the AO passed the final assessment order dated 12.10.2017. In the final assessment order, the learned AO made the following adjustments / additions:- Sl. No. Nature of disallowance Amount (Rs.) A. Transfer Pricing 1. Adjustment for interest free loan to Associated Enterprises (AE) 5,48,04,95,014 2. Adjustment towards corporate guarantee fee 1,22,24,28,300 3. Adjustment on purchase of raw materials from Whyte & Mackay 68,60,16,563 B. Corporate Tax 4. Disallowance under section 14A of the I.T.Act r.w.r 8D. 48,04,00,000 5. Disallowance u/s 36(1)(iii) of the Act. 1,40,46,63,276 6. Disallowance of payments for promotion and advertisement expenses. 44,33,55,403 7. Disallowance based on Project Spirits Report 54,49,10,000 As a result, the AO recomputed the total income of the assessee at Rs.15,19,93,90,755 as against the income of Rs.4,93,71,22,200 declared in the r....
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....n the disposal, though the same .-' was disposed as per Office of Fair Trade in the United Kingdom. Advances made were Quasi-equity in nature 1.7. The learned TPO/Hon'ble DRP ought to have appreciated that the advances made by the Appellant were in fact quasiequity and accordingly, no interest should be computed on the same. 1.8. The learned TPO erred in holding that the Appellant is camouflaging the transaction which would otherwise not be justifiable as the transactions were routed through more than one subsidiary. Loans were made in earlier years 1.9. The learned TPO has erred in law by imputing notional interest on advances made in earlier years. 1.10. Notwithstanding and without prejudice to the above, the learned TPO/ Hon'ble DRP has erred in imputing interest at rates prescribed by CRISIL for long term debts but should have rather computed the same based on the borrowing rate prevalent in the recipient's country. 1.11. Notwithstanding and without prejudice to the above, having concluded that the funds given to AE's were diversion of funds the learned TPO has erred treating the transactions as an advance and imputing an interest on the same....
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....s in relation to the years 2007 and 2008 and there was no inference in the report with respect to the purchase transaction made in FY 2012-13. 3.3. The learned TPO ought to have appreciated that the purchases made during the year were through proper import channels and not diversion of funds 4. Disallowance of expenditure under section 14A of the Income-tax Act, 1961 ('the Act') - Rs. 48,04,00,000 Erred in law by invoking section 14A read with Rule 8D 4.1. The learned AO/ DRP has erred in law while disallowing a sum of Rs. 48.04 crores under section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 ("Rules") merely for the reason that no separate books of accounts are maintained by the Appellant. Erred in law by considering the entire interest expenditure incurred during the year was for making investments 4.2. The learned AO/ Hon'ble DRP has erred in law and on facts while holding that the interest cost was incurred on account of earning tax free income. 4.3. The learned AO/ Hon'ble DRP failed to appreciate that there is no nexus between the borrowed funds and the funds utilized for investments. 4.4. The learned AO/ Hon'ble DRP ought....
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....uting disallowance under section 14A of the Act, when the subject interest is already a matter of disallowance under section 36(1)(iii) and the interest disallowed in relation to Project Spirit report. Investments arising on restructuring included 4.12. Notwithstanding and without prejudice to the above, the learned AO / Hon'ble DRP erred failed to appreciate that the investments which arose as a result of corporate restructuring and not involving the usage of borrowed funds ought to be excluded for computing disallowance under section 14A. 5. Disallowance of interest payments on borrowing under section 36(1)(iii) of the Act - Rs.140,46,63,276 Erred in law by invoking provisions of section 36(1 )(iii) 5.1. The learned AOI Hon'ble DRP has erred in law and on facts by disallowing interest incurred by the Assessee to the extent of Rs. 140,46,63,276 under section 36(1)(iii) of the Act by concluding that borrowed funds had been utilized for the purpose of advancement of interest free loans to related parties. 5.2. The learned AO / Hon'ble DRP has erred in concluding that the borrowings made by the Assessee were not utilized for the purpose of business. 5.3. T....
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.... 5.11. Notwithstanding and without prejudice to the above grounds, the learned AO has erred in computing the amount of disallowance of interest under section 36(1)(iii) of the Act by including non-interest free loans to related parties. 5.12. Notwithstanding and without prejudice to the above grounds, the learned AO has erred in not computing the interest from the date of advancement of loans to related parties/ subsidiaries. 5.13. Notwithstanding and without prejudice to the above grounds, the methodology adopted by the learned AO to disallow interest expenditure is in fact imputing an interest income in the hands of the Appellant and accordingly incorrect 5.14. Notwithstanding and without prejudice to the above grounds, the learned AO has erred in law and on facts in making a protective assessment and computing disallowance on loans granted to certain related parties, as the learned TPO has already imputed notional interest income on these loans granted to such related parties during the year under consideration resulting in double taxation of the same income. 6. Disallowance of payments made to Royal Challengers Sports Private Limited, United Racing & Bloodstock Breede....
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.... to the above entity has been incurred for brand promotion and consequently provides an enduring benefit of brand identity. 7.5. The learned AO / Hon'ble DRP has erred in not appreciating the fact that the expenditure was to be incurred on year on year basis and hence purely revenue in nature. The learned AO has erred in law in concluding that the subject expenditure is not allowable under section 37(1) of the Act. 7.6. The learned AO / Hon'ble DRP have erred in law by not accepting jurisdictional High Court ruling 7.7. Notwithstanding and without prejudice to the above grounds, the learned AO and the DRP has erred in not granting depreciation on the aforesaid expenditure, merely because no asset was recorded in the books of the accounts of the Appellant. 8. Disallowance of payments based on Project Spirit report- Rs.54,49,10,000 8.1. The learned AO has erred in making disallowance without giving any reasons for the same without appreciating the contents of the said report and making an arbitrary disallowance. 8.2. The Hon'ble DRP has failed to adjudicate on this objection filed by the Appellant. 8.3. The Hon'ble DRP and the learned AO erred in making....
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....imed by the Appellant, resulting in a short credit of Rs. 17,23,384 without providing any reasons for the same. 11.2. The learned AO ought to have appreciated that the TDS/TCS claimed by the Appellant was as per Form 26AS. The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal. For the above and any other grounds, which may be raised at the time of hearing, it is prayed that necessary relief may be provided" 5. The assessee has also raised additional grounds, which reads as follows:- "Ground no. 12: Claim of deduction in respect of 'education cess on income-tax' and 'secondary and higher education cess on income-tax' for the year under consideration 12.1. The learned AO has erred in not allowing a deduction for the 'education cess on income-tax' payable for the year under consideration. 12.2. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, 'education cess on income-tax' for the year under consideration, ought to be allowed as a deduction while a....
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....ew of the TPO / DRP that interest needs to be imputed on the loans in question. However, the Bangalore Bench of the Tribunal directed the TPO to examine the claim of the assessee as to the computation of arm's length price by considering the judgment of the Hon'ble Apex Court in the case of Vaibhav Gems Limited (Civil No.30849/2018). 7.5 The learned AR reiterated the submission that Chapter X cannot be invoked in absence of real income. Without prejudice it was submitted that when a loan is extended with intend of converting the same to equity, interest is not to be imputed. In this context, it was contended that the loan advanced had in fact been converting to equity on 21.09.2020 (The evidence of same was placed as additional evidence). Further, the learned AR relied on the order of Bennett Coleman & Co. Ltd. reported in (2021) 129 taxmann.com 397 and contended that notional interest cannot be computed when loan transaction was for the purpose of acquiring share of another entity so as to further the assessee's business interest. Without prejudice to all the above contentions, it was submitted that interest ought to be restricted to LIBOR. 7.6 The learned DR submitted that th....
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....o examine the applicability of the transfer pricing provisions to the loan transactions in this year. Further, the Finance Act, 2012 has amended the provisions of sec.92B by inserting an Explanation under it, wherein the definition of the expression "International transactions" has been inserted. The same is defined in an inclusive manner and was also given retrospective effect from1.4.2002. As per the definition of the expression "International Transaction", it shall include capital financing, including any type of long-term or short-term borrowing, lending or guarantee etc. Hence, TPO has examined the interest free loan given by the assessee to its AE, as the same falls under the definition of "International Transaction" and made Transfer Pricing adjustment in this year. 27. We shall now deal with various arguments advanced by the assessee. The Ld A.R submitted that Chapter X dealing with determination of Arms Length price of international transactions is a machinery provision and the same cannot acquire primacy over the charging provisions like sec.4,5, 15 etc. Accordingly, he submitted that the "income" should have accrued to the assessee and then only the provisions of Cha....
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....n international transaction is not at arms length, the AO is entitled to compute the total income by substituting the actual income with the arms length income. In effect, under Chapter X also, the Income tax Act has introduced a legal fiction/deeming provision. As stated earlier, while computing "total income", the legal fictions/deeming provisions included under the Act should be given effect to. 29. The Chapter X is titled as "Special Provisions relating to Avoidance of Tax" and same includes sec. 92 to 94A. We have earlier noticed that the expression "international transactions" has been defined to include capital financing, loan transactions etc. Hence there should not be any dispute that the impugned interest free loan given by the assessee to its AE shall fall under the definition of "International transaction". However, it is the case of the assessee that there is no requirement of determining ALP of transactions, when there is no "income" at all from the international transactions. This argument was rejected by the Ld DRP by following the decision rendered by the Special bench of ITAT in the case of Instrumentarium Corporation Ltd (supra) and the Ld DRP has extracted fol....
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....in the context of the other set of legal provisions. 38. As for the assessee' s claim that the loan being extended free of interest was in the nature of shareholder service, this plea is being taken up for the first time before us and the assessee has not even furnished basic evidences for the factual elements embedded in this proposition. Such facts cannot be inferred or assumed; there has to be some material on record to demonstrate, or even indicate, the existence of these facts. The references to OECD report and BEPS report is in the context of benefit test, but then the benefit test is not really relevant in the context of Indian transfer pricing legislation. Learned counsel has not explained as to how these inputs are relevant in interpreting the scope of the statutory provision before us, nor do we see any relevance of this material in the present context and given the fact situation above. It is also important to bear in mind the uncontroverted findings of the Assessing Officer that the interest was all along charged by the assessee on its loans to Datex but, for some unexplained reasons, the assessee has stopped charging interest in the assessment year 2003-04. The c....
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....le of producing the income chargeable to tax as it was in the capital field. This is evident from the observation of Hon'ble Bombay High Court to the effect that, "In this case, the revenue seems to be confusing the measure to a charge and calling the measure a notional income. We find that there is absence of any charge in the Act to subject issue of shares at a premium to tax". Undoubtedly, learned counsel is right in interpreting this decision to the extent that what is not in the nature of income cannot be turned into income so as to make ALP adjustment therein, and then bring the ALP adjustment to tax, since the computation is of income and it is only the price at which transaction is entered into that is to be taken as an arm's length price in computation of that income. The ALP adjustments cannot be treated as income per se. However, the assessee does not derive any support from this decision since consideration for a loan, i.e interest, is inherently in the nature of income. There is no, and there cannot be any, dispute or controversy about this character of income. The point of dispute is whether zero interest, or no interest, is good enough for computing the incom....
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.... price paid by the assessee for the said purchase is not at arms length, i.e., if it is more than the arms length price, then the AO is required to substitute actual purchase price with the arms length price. By substituting so, the total income of the assessee under the Income tax Act gets increased by such excess amount. In fact, the purchase transaction, being international transaction, has not produced any income. At this stage, it is relevant to refer to the Explanation below sec.92(1), which reads as under:- "Explanation:- For the removal of doubts, it is hereby clarified that the allowance for any expenses or interest arising from an international transaction shall also be determined having regard to the arms' length price." The argument of the assessee that income should arise out of the international transaction contradicts the above said Explanation, because "allowance for any expenses" per se cannot produce any income. However, if the said claim for any expense falling under international transaction is not at arms' length, then the same shall produce "income" to the extent of payment made in excess of arms' length price. As observed by the Special bench, if the tran....
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....given to a holding company and the proposed acquisition of a foreign company was proposed to be executed through Special Purpose Vehicles. Thus we notice that there appears to be multiple layers in the proposed scheme. There was no contractual obligation or option for converting the loan into equity as existed in the case of Cadila healthcare Ltd (supra). It is a fact that the TPO/DRP did not deal with the contentions of the assessee regarding quasi-equity. However, it is stated that the assessee has intended to convert the loan into equity. When the loan transactions remained as loan transactions in the books, in our view, the contention of any such intention cannot be recognized. Under these set of facts, we are unable to appreciate this alternative contention of the assessee. 34. The Ld A.R submitted that the AO/TPO was not right in adopting yield rate applicable to bonds rated by CRISIL agency. He submitted that the impugned loan has been given to a foreign AE and hence the LIBOR rate should have been applied by the TPO. He also placed his reliance on the decision rendered by Hon'ble Rajasthan High Court in the case of Vaibhav Gems Ltd (supra). He also submitted that the ....
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....n in assessee's own case in IT(TP)A No 489/Bang/2017 for the AY 2012-13 and confirm the action of the AO/TPO in making TP adjustment in respect of interest free advances to its AEs. 7.7.4 As regards the applicability of LIBOR, the assessee relied on the judgment of the Rajasthan High Court in the case of CIT v Vaibhav Gems Ltd [2017] 88 taxmann.com 12. The SLP was dismissed by the Supreme Court. The applicability of LIBOR has also been restored by the Tribunal to the file of the AO for the AY 2012-13. Following the ITAT's order in assessee's own case for assessment year 2012-2013, we restore this issue to the file of AO/TPO. The TPO is directed to follow the direction given at para 34 of decision in assessee's own case in IT(TP)A No 489/Bang/2017 for the AY 2012-2013. The TPO shall ascertain the applicable LIBOR during the year under consideration and make the adjustment. 7.8. In the result, ground 1.1 to 1.13 are partly allowed for statistical purposes. Fee imputed on corporate guarantee extended to subsidiaries (ground 2) (TP Adjustment) 8. The assessee had extended corporate guarantee during the financial year 2007-2008 to its subsidiaries, i.e., USL Holdings UK Limited, wh....
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....corporate guarantee fee was determined in range of 0.5% instead of 3% as arrived by the TPO in the instant case. 8.5 The learned Departmental Representative supported the orders of the TPO and DRP. 8.6 We have heard rival submissions and perused the material on record. The assessee provided corporate guarantee to USL Holdings Ltd, BVI and USL Holdings UK Ltd without charging any guarantee commission. The TPO computed the TP adjustment of Rs. 122,24,28,300 calculated at 3% of corporate guarantee given amounting to Rs. 4074,76,10,000. The DRP confirmed the TP addition made by the TPO. The learned AR argued that corporate guarantee was not an international transactions, it was given out of commercial expediency and as a part of shareholder activity. It was thus argued that TP adjustment should not be made for the corporate guarantee given. It was also argued that without prejudice, the TP adjustment should be restricted to 0.5% of the corporate guarantee given. The assessee also relied on the decision of the Bombay High Court in CIT v Asian Paints India Ltd [2016] 75 taxmann.com 152 and contended that the adjustment if any should be restricted to 0.2% as held in the above decision. ....
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....efore the ITAT. The submission of the learned AR are summarized as follows:- (i) The TPO has erred in relating the findings in the internal funds diversion report with the international transaction of purchase of raw material from Whyte & Mackay. The TPO has relied on the data which pertains to the years 2007 and 2008 and has no relevance to transactions undertaken during the relevant financial year 2012-2013 (page 172 of the paper book). (ii) The assessee further submits that as per the audited financial statements for assessment year 2013-2014, the outstanding balance of Whyte & Mackay as on 31st March, 2013 was Rs.10,428 million, whereas, the value of the impugned transaction is only Rs.686.02 million (refer page 1088 of the paper book capturing the relevant page of the annual report for the year). Therefore, the allegation of the TPO that the assessee has not purchased the raw materials was incorrect and accordingly the disallowance made is not in line with the facts of the case. (iii) The assessee also submits that the purchases made during the year were stored in the warehouse for maturation and hence, at the end of the year, the same was considered in the closing stock....
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....ed for statistical purposes. Disallowance under section 14A of the Act (Ground 4) (Corporate Tax Issues) 10. Brief facts in relation to the issue are as follows: During the relevant assessment year 2013-2014, the assessee had earned dividend income from the following sources:- Source Amount ( Rs. In crore) Remarks Overseas subsidiary 2.539 Offered to tax Mutual Funds / Dividend from domestic companies 2.299 Exempt by virtue of section 10(34) and 10(35) of the Act. Total 4.838 10.1 During the course of assessment proceedings, the AO proposed to apply the provisions of section 14A read with rule 8D. The AO had proposed to make the subject disallowance of Rs.90,89,00,000. 10.2 Aggrieved, the assessee filed objection before the DRP. The DRP upheld the proposed disallowance, however, with specific directions to exclude overseas investments, the income from which was offered to tax in India (para 2.12 page 45 of the paper book). 10.3 Based on the DRP's direction, the AO excluded the investments in overseas subsidiaries and recomputed the disallowance at Rs.48,04,00,000 in the final assessment order. 10.4 Aggrieved by the final assessment order, the ....
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....een the interest expenditure and its utilization for specific purposes, no interest disallowance is called for. In this regard, it is stated that it has paid interest on security deposits, cash credits/overdrafts, working capital demand loan, bill discounting facilities. When the disallowance is worked out under rule 8D(2)(ii), this contention of the assessee would loose its significance. (c) The Ld A.R submitted that, for the purpose of computing average value of investments, the AO should consider only those investments which have actually yielded exempt dividend income. We notice that this argument of the assessee finds support from the decision rendered by the Special bench in the case of Vireet Investments P Ltd (165 ITD 27)(Delhi-SB). Accordingly, we direct the AO to exclude investments, which did not yield exempt income, while computing average value of investments. (d) The Ld A.R also contended that the disallowance should not exceed the amount of exempt income. In this regard, he placed his reliance on the decision rendered by jurisdictional High Court in the case of Pragathi Krishna Gramin Bank vs. JCIT (2018)(95 taxmann.com 41). We direct the AO to take into consider....
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.... extended out of commercial expediency and out of own interest free funds. 11.4 The learned Departmental Representative relied on the findings of the AO and the DRP. 11.5 We have heard rival submissions and perused the material on record. The AO made a disallowance of Rs.138,05,93,276 under section 36(1)(iii) for the reason that the interest bearing funds have been given as interest free loans to various related parties including AEs. The DRP upheld the disallowance made by the AO with a direction that the disallowance of interest by the AO to the extent of TP adjustment in relation to this interest free loan should be only on protective basis. Following the directions, the AO in the final assessment order, made an addition of Rs.140,46,63,276 and a protective addition of Rs. 26,77,06,867 under section 36(1)(iii) of the I.T.Act. 11.5.1 The Tribunal in appellant's own case for the AY 2012-13 in IT(TP)A No. 489/B/2017 order dated 29.5.2020 considered similar issue and held as follows:- "42. We heard Ld D.R and perused the record. From the arguments of the ld A.R, we notice that the own funds available with the assessee is in excess of the aggregate amount of interest free advanc....
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.... no depreciation can be allowed. 12.3 The final assessment order was passed by the AO in accordance with the directions of the DRP. 12.4 Aggrieved, the assessee has raised this issue before the ITAT. The learned AR submitted that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case for A.Y. 2012-2013 wherein the Tribunal has held that payment of these expenses on sponsorship are revenue expenditure. The said issue has been discussed by the Tribunal in para 43 to para 49 on page 28 to page 38 of its order. (The findings of the Tribunal are recorded in para 45 to para 49 on page 30 to 38 of the order). In view of the foregoing, the AR submits that the brand promotional expenses be allowed as business expenditure u/s 37(1) of the Act. 12.5 The learned Departmental Representative supported the finding of the AO and the DRP. 12.6 We have heard rival submissions and perused the material on record. The AO disallowed the sales promotion and advertisement expenses totally amounting to Rs. 44,33,55,403 [36,91,12,995 + 7,42,42,408] for the reason that these expenses are brand promotion expenditures of USL logo, it promotes the brand the ass....
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....td.(115 ITR 659) of the honorable Delhi High Court, the FAA allowed the appeal filed by the assessee. 3.1.a. With regard to management fee, the FAA observed that there was no doubt about the genuineness of expenditure, that the expenditure was incurred for availing infrastructure facilities administrative support, like manpower recruitment, HR services, uses of computer, telephone, photo copiers, infrastructure set up etc. in order to carryout business operations smoothly, that the parent company had allocated a certain amount to the account of the assessee in the ratio of its turnover. He finally held that expenditure had to be allowed as revenue expenditure. 3.2. Before us, the DR supported the order of the AO and the AR relied upon the order of the FAA. We find that the assessee group had entered into an agreement with India Win, that it was a co- sponsor of Mumbai Indian IPL team, that it had incurred similar expenditure in the subsequent two years, that out of the total expenditure the assessee had claimed a very small proportion under the head sponsorship expenses. Such an expenditure is for advertising the brand name of the Group. Being a recurring expenditure, it had to....
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....ground, that the expenditure was benefitting all the entities across the globe and hence, it could not be said to have been incurred wholly and exclusively for the business of the assessee. 89. The learned counsel for the assessee submitted that the said disallowance was unwarranted since the said expense was incurred in view of the fact that major viewership of cricket is in the Indian subcontinent. He also referred to various newspapers reports which demonstrated the popularity of the sport in India to support the aforesaid contentions. It was also submitted that the assessee company has consistently promoted its range of products using cricket as an advertising platform. It was also to our notice that payment of sponsorship fees to ICC was remitted by the assessee after deduction of tax at source as instructed by the Income Tax Department. Further, the assessee had obtained the approval of the Ministry of Youth Affairs and Sports for sponsoring the events covered under the agreement. Copy of the order under section 195 of the Act and the approval received from the Ministry of Youth Affairs and Sports has been enclosed at pages 247 to 249 and 224 of the paperbook respectively. ....
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.... transfer pricing adjustments has been made on this score and benefit is arising to the other AEs also. What is relevant for an expense to be allowable as revenue expense is that, whether it has been incurred during the course of business and is for the purpose of business. Benefit factor to other related parties is relevant under transfer pricing provision and not while allowability of business expense u/s 37(1). It is well known fact that companies use sports event as a platform to advertise their range of products as it has a very high viewership. Any such incurring of expenditure is ostensibly for promotion of business only and hence, no disallowance is called for. Accordingly, Grounds No.7 to 7.3 in ITA No.1044/Del/2014 pertaining to A.Y. 2009-10 are allowed." 47. We notice that the co-ordinate benches are consistently holding the view that the expenditure incurred on sponsoring of sports events are intended to promote business only and hence the same is allowable as expenditure. The allowability of brand promotion expenses was examined by Hon'ble Delhi High Court in the case of Modi Revelon P Ltd (supra) and the relevant discussions made by the High Court are extracted....
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....ales promotion and publicity are activities aimed at gaining goodwill in the market. They need not be confined to media propaganda but can involve indirect approaches. The judgment of a Division Bench of this Court in CIT v. Adidas India Marketing (P.) Ltd. [2010] 195 Taxman 256 (Delhi) has recognized that brand promotion exercises undertaken through media campaigns, schemes, programmes etc are essential for propagation of the brand. The necessity (or lack of it) is not something which income tax authorities can go into; as long as it is voluntarily undertaken by the business enterprise for profit earning, it would be entitled to claim relief under section 37(1). 23. In the present case, the AO was conscious of the fact that brand promotion expenses are a necessary ingredient in marketing strategies. Therefore, he allowed about 50 per cent of those expenses. However, the reasoning for disallowance of the rest, i.e. that the assessee could claim only a proportion of such expenses, since advertising expenses were to be borne by the sister concern dealer, and that the proportion was in respect of its territory, was not upheld. This Court does not see any fallacy in the Tribunal'....
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....ave perused the judgment. We find ourselves in agreement with the learned counsel appearing for the respondent/assessee. It would be relevant to reproduce the relevant observation made by the Supreme Court, in the said judgment, which, in our opinion, support the case of the respondent/assessee to contend that the expenditure of Rs. 10 lakhs would be on revenue account. The relevant observation in the case of Empire Jute Co. Ltd. (supra) reads thus: 'The decided cases have, from time to time, evolved various tests for distinguishing between capital and revenue expenditure but no test is paramount or conclusive. There is no all embracing formula which can provide a ready solution to the problem; no touchstone has been devised. Every case has to be decided on its own facts, keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. But a few tests formulated by the Courts may be referred to as they might help to arrive at a correct decision of the controversy between the parties. One celebrated test is that laid down by Lord Cave L.C. in Atherton Vs. British Insulated & Helsby Cables Ltd. (1925) 10 Tax Cases 155 (HL),....
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....to use the court yard, no other rights were created in favour of assessee. In other words, the amount paid to the Trust was for the use of the court yard under the MOU for an indefinite future, and therefore, it would be on revenue account. In other words merely because the advantage may endure for an indefinite future would not mean that the expenditure would be on capital account and not revenue. The advance of Rs. 10,00,000/-, in the present case, consists merely in facilitating the assessee's business operations, enabling the management to conduct their Hotel business more efficiently and profitably. We are, therefore, satisfied that the view taken by the Tribunal in answering this question in favour of Assessee and against the Revenue is correct and deserve no interference by this Court." 49. Respectfully following the above cited decisions, we set aside the order passed by AO on this issue and direct him to allow the impugned sponsorship expenses as revenue expenditure." 12.6.2 Following the above order the ITAT in assessee's own case for assessment year 2012-2013 (supra), we allow deduction of sales promotion and advertisement expenses of Rs. 44,33,55,403. As the enti....
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.... the assessee, the disallowance of the expenses is unwarranted and bad in law. * With respect to the remaining transactions, the assessee submitted that the disallowance based on the Project Spirit Report has been made without providing the reasons for making such disallowance and on an arbitrary basis without adjudicating on the objections filed by the assessee. In this connection, it was submitted that various Courts have repeatedly held that there must be something more than bare suspicion to support an addition or disallowance in an assessment. No disallowance can be made which are based on mere conjectures and surmises. In this context, it was submitted that the assessee being a victim of such fraud would in fact be eligible to claim such sums a deductible bonafide business loss as highlighted in the following judicial pronouncements:- (i) Baridas Daga v. CIT (34 ITR 10 (SC) (ii) Sassoon J David & Co. P. Ltd. v. CIT (1975) 98 ITR 50 (Bom.) (iii) CIT v. Parmanand Makhan Lal (1983) 15 Taxman 12 (Patna) (v) Ramchandar Shivnarayan v. CIT (1978) 111 ITR 263 (SC) (vi) Khaitan & Co. v. CIT (1979) 1 Taxman 280 (Calcutta) (vii) Churakulam Tea Estates (P) Ltd. v. CIT (1995....
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....t relate to the assessee. Considering the material on record and for the aforesaid reasoning, we set aside the impugned addition and restore this issue to the file of the AO for proper examination of all the facts relating to the said issue. The assessee shall provide all documentary evidence relating to its claim and the AO also shall make a proper enquiry in this regard. All contentions are left open to be considered by the AO in accordance with the law. 13.4.1 Hence grounds 8.1 to 8.8 are allowed for statistical purposes. Interest u/s 234B of the I.T.Act (ground 9) 14. The above ground is only consequential and the same is dismissed. Interest u/s 234C of the I.T.Act (ground 10) 15. The limited submission of the assessee is that interest u/s 234C of the I.T.Act should be calculated on the return income and not on the assessed income of the assessee. In this context, the learned AR relied on the Bangalore Bench order of the Tribunal in the case of SAP India Private Limited reported in (2014) 41 taxmann.com 7 (Bangalore - Trib.). 15.1 We have heard rival submissions and perused the material on record. The Bangalore Bench of the Tribunal in the case of SAP India Private Limi....