TaxTMI 
TaxTMI 
2023 (4) TMI 188
X X X X Extracts X X X X
X X X X Extracts X X X X
....15 2 ITA No. 2172/Ahd/2015 2009-10 Assessee 04.06.2015 3 ITA No. 3465/Ahd/2015 2010-11 Revenue 21.09.2015 4 C.O. No. 12/Ahd/2016 2010-11 Assessee 21.09.2015 5 ITA No. 2267/Ahd/2016 2011-12 Revenue 30.06.2016 6 C.O. No. 163/Ahd/2016 2011-12 Assessee 30.06.2016 7 ITA No. 2443/Ahd/2017 2012-13 Revenue 31.08.2017 8. C.O. No. 34/Ahd/2019 2012-13 Assessee 31.08.2017 2. Since common issues are involved in the above appeals the same are disposed of by this common order and the issues in Assessment Year 2009-10 it taken as the lead case. The brief facts of the case is that the assessee is a Company engaged in the business of Generation of Electrical Energy. For the Assessment year 2009-10, the assessee filed its Return of Income on 30.09.2009 declaring total income of Rs.213,80,37,081/-. Regular assessment u/s. 143(3) was completed on 30.03.2013 making various disallowances and determining the total income at Rs. 293,68,54,031/-. 3. Aggrieved against the various disallowances, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) called for Remand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 10(15)(vi)(f) of the Act, hence TDS is not required to be deducted under Section 195 of the Act was rejected on the ground that Assessee has failed to submit loan agreement approved by Central Government as referred in said Section. So far as professional fees charged by BLB, it was argued that provisions of Section 194A(3) do not apply to foreign bank, hence Assessee was required to deduct TDS on such payment. During the course of appellate proceedings, Assessee submitted loan agreement with BLB as approved by Department of Economic Affairs, Ministry of Finance, Government of India, as envisaged in Section 10(15)(v)(ia) of the Act along with letter dated 8" December, 1994 issued by Government of India for granting exemption from tax on the payment of interest, management fee, commitment fee, arrangement fee/advisory fee. These evidences were forwarded to Assessing Officer for his comments wherein Assessing Officer has stated that certificate is issued in the name of State Bank of India, Frankfurt and not to BLB State Bank of India was only the arranger of the loan, hence it was contended that said certificate does not allow Assessee for not deducting TDS on payment made to BLB.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e loan being State Bank of India whereas repayment of loan and interest payment is made to BLB, the lead manager of the loan. However, terms and conditions of certificates like amount of loan commitment fee, rate of interest, management fees, arrangement fees agency fees, repayment of loan, etc, duly match with the terms and conditions as mentioned in loan agreement as approved by the Central Government as per relevant provisions of the Act and such agreement clearly states that State Bank of India is arranger of the loan and BLB is main lender of the loan. It is settled legal practice that repayment of loan along with interest is always made to lender of loan and not to the arranger of the loan. When Appellant is making repayment of loan or paying interest to BLB, there is no reason why Appellant would obtain tax exemption certificate in the name of State Bank of India, Frankfurt. As stated herein above, the terms and conditions mentioned in certificate issued on 8 December, 1994 matches with terms and conditions of loan agreement with BLB and State Bank of India. Appellant is not required to deduct any TDS under Section 195 on payment made to BLB. Further, payment of agency fees ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P.) Ltd. reported in [2012] 346 ITR 467 (Karnataka) wherein it has been held as follows: "... Where a Dutch company rendered technical services to assesses, without making available any technical expertise so as to enable assessee to use those services independently in future, payment made for services in question could not be termed as 'fee for technical services." 4.8. Further reliance is placed in the case of Director of Income-tax vs. Guy Carpenter & Co. Ltd. [2012] 346 ITR 504 (Delhi) wherein it has been held as follows: "... Amount received by international reinsurance intermediary (broker) for services rendered to insurance company in India in process of re-insurance of risk placed by Indian Insurance company with international re-insurance companies would not amount to 'fees for technical services." 4.9. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and case laws filed by the assessee. The assessee cannot be denied the TDS Exemption on the ground that the original certificate was not produced by the assessee. The Ld. D.R. could not produce before us any evidences to uphold th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llant to submit why TDS is not deducted under Section 195 of the Act for payment made to KFW. The submission of the Appellant is reproduced in Assessment Order and same is accepted by Assessing Officer while passing the Assessment Order for said Assessment Year. It is, therefore, disallowance under Section 40(a) made for payment to KFW for Rs. 6,90,21,681/- is not justified and directed to be deleted. This ground of appeal is allowed." 5.3. The Ld. D.R. supported the order passed by the Assessing Officer on the disallowance made u/s. 40(a)(i) on interest payment to KFW and pleaded to uphold the same. 5.4. Per contra, Ld. Senior Counsel brought to our attention that for the subsequent assessment years, the very same Assessing Officer has not made any disallowance under section 40(a)(i) for interest payment to KFW. Therefore the disallowance for present the Assessment Year 2009-10 is liable to be deleted which has been done by the ld. CIT(A). 5.5. We have perused the materials available on record and we found that the ld. CIT(A) after calling for a Remand Report that the A.O. accepted the payment made to KFW is as per certificate issued by Central Government vide letter date....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under Section 201(1) and 201(1A) read with Section 195 was passed on 8 November. 2011 by ITO. International Taxation-II, Ahmedabad, and even he has not considered above payment as payment liable for deducting TDS under Section 195 of the Act. It is, therefore, disallowance under Section 40(a) made for payment to BNP Paribas for Rs.4,18,64,708/- is deleted. This ground of appeal is allowed." 6.3. Heard rival submissions, the contention of the Assessing Officer that BNP is a foreign bank and exemption provided under Section 194A(3) do not apply to foreign bank. Thus assessee ought to have deducted TDS on payments made to the bank. During the Appellate proceedings, the assessee submitted copy of the non-deduction certificate dated 26.03.2008 issued by Asst. Director of Income Tax (International Taxation), Mumbai without to receive interest and other payment without TDS. Though the Assessing officer accepted this view in the Remand Report but however submitted original certificate not produced before the A.O. 6.4. We are of the considered view, this cannot be a good ground to denying the exemption given by the Department to the assessee. Therefore the disallowance made by the Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... subject matter of TDS. Further, I have perused the Assessment Order passed in the case of Appellant for AY. 2010-11 wherein Assessing Officer at para 3 has issued Show Cause Notice and asked the Appellant to submit why TDS is not deducted under Section 195 of the Act for payment made to IFCI. The submission of the Appellant is reproduced in Assessment Order and same is accepted by Assessing Officer while passing the Assessment Order for said Assessment Year. It is, therefore, disallowance under Section 40(a) made for payment to IFCI for Rs. 2,14,26,036/- is not justified and directed to be deleted. This ground of appeal is allowed." 7.3. We found that the Assessing Officer has not accepted IFCL is covered by any financial corporation established by Central, State or Provincial Act but made a disallowance u/s. 40(a)(i) for interest amounting to Rs. 2,14,26,036/- paid to IFCL Ltd. The Ld. CIT(A) held that IFCL is a public financial institution and necessary amendment was made by Central Government in its notification and for the Assessment year 2010-11, the Assessing Officer has not made any such disallowance. Therefore he deleted the disallowance made under section 40(a)(i) for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges paid to Solomon & Solomon. The Ld. CIT(A) in the appellate proceedings under section 201(1) and 201(1A) read with Section 195 of the Act held that the scope work included for remittance of Rs.19,59,688/- made to Solomon & Solomon and came to conclusion that no technical knowledge, skill, experience, knowhow or process is made available to assessee Company in terms of Article 12(b) of the India-US Treaty and Assessee has not defaulted in deducting TDS under Section 195 of the Act. Therefore the disallowance is unwarranted. Further the Ld. D.R. could not produce before us, the Revenue is on appeal before the Tribunal as against the appellate order passed by the Ld. CIT(A) in the 201(1) and 201(1A) proceedings. In the absence of the same, the disallowance made by the Assessing Officer is liable to be deleted. Thus the ground no. 6 raised by the Revenue is hereby dismissed. 9. Ground no. 7 addition of Rs. 32,65,04,845/- on account of reimbursement of assessee's tax liability. 9.1. The brief facts of the issue is that the Assessing Officer in the Assessment Order has observed that during the course of Assessment Proceedings Assessee was asked to explain as to why amount of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f other provisions is already included in the gross income of Rs. 2226.90 crores shown in profit and loss account. The contention of Appellant that actual tax liability can be worked out only at the time of filing of return is found to be correct and on this basis Appellant's actual tax liability has been worked out at Rs 32.65 crores and on this basis Chartered Accountant has issued certificate confirming that income tax liability that would be reimbursed from GUVNL by Appellant pursuant to PPA is Rs. 32.65 crores. However, the Assessing Officer is incorrect in holding that as Assessee has raised debit note for recovery of such taxes along with certificate of Chartered Accountant, income of Rs 32.65 cores, appellant was required to offer such amount as income in the year under consideration because while I making this observation Assessing Officer has ignored the fact that Appellant has already made provision for such income at Rs. 100.33 crores in its audited accounts. It is observed that when Appellant has already offered income pertaining to MAT tax liability to be recovered from GUVNL at Rs. 100.33 crores, which is higher in comparison with actual MAT tax liability of Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see has also relied upon decision of Hon'ble Ahmedabad I.T.A.T., in its own case for A.Y. 2006-07 wherein similar disallowance was deleted. 10.2. After considering the submissions of the assessee, the Ld. CIT(A) held as follows: "The issue whether payment made by Appellant to GUVNL for early payment of charges for power supplied by it as rebate is in the nature of interest or not is already decided in favour of Appellant by Hon'ble Ahmedabad I.T.AT., in A.Y. 2006-07 in ITA 1031/Ahd/2010 vide its order dated 20th September, 2013 wherein it was held as under: "19. AO noticed that Assessee had paid Rs 10,64,06,649/- to GUVNL as "rebate" for early payment charges for power supplied to it. He was of the view that the rebate was in the nature of interest and therefore the Assessee should have deducted TDS u/s 194A. Since the Assessee had not deducted TDS u/s 194A, the entire expenditure was disallowed us 40(a)(ia). Aggrieved by the order of AO, Assessee carried the matter before CIT(A) CIT(A) decided the issue in favour of Assessee by holding as under: 9.5 I have considered the facts and submission of the Ld. AR carefully. The rebate allowed by the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red in upholding the addition u/s 40(a)(i) on payment made to Norton Rose for Rs.1,08,39,146/-. 4. In law and on the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred upholding the addition of Rs.2,08,946/- u/s. 40(a)(i) without appreciating the fact that payment made to CLP Power India Pvt. Ltd. is in nature of reimbursement of expenditure and on such payment, TDS is not required to be deducted. 12. In support of the grounds filed by the assessee, the Ld. Counsel pleaded that various documents were filed for the first time before the Tribunal for claim of non-deduction of TDS. The assesse was not able to locate the copies of the invoices and agreements along with supporting documents which were filed along with the payment vouchers and hence could not retrieve the documents from its record. Therefore the same were not produced before the Assessing Officer as well as before the Ld. CIT(A). Hence the additional evidences may kindly be admitted in the interest of natural justice and fair play, and the additional documents were sent back to the Ld. CIT(A) for fresh adjudication. 12.1. The Ld. D.R. appearing for the Revenue though objected to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see had made huge investment and has claimed exemption on dividend income of Rs. 50,000/-. As per the Profit and Loss A/c., the assessee has claimed interest payment to the loans and incurred other expenses. However the assessee has not deducted such interest payment/expenses relating to the investment in shares for earning interest. Therefore the Assessing Officer invoking Section 14A read with Rule 8D disallowed Rs. 3,43,25,371/- as follows: (i) The amount of expenditure directly relating to income which does not form part of total income 0 (ii) In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with following formula, namely - A X B/C- where A amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year: 76899000 13776621 B the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as follows: "...There is a delay of 159 days delay in filing the present petition which is not satisfactorily explained. Notwithstanding the same, we have gone into the merits of the case and do not find any substance in the special leave petition. The special leave petition is dismissed on the ground of delay as well as on merits." 22.2. Thus the Ld. Senior Counsel submitted that as per the Jurisdictional High Court judgment, the disallowance u/s. 14A is to be restricted to the dividend income of Rs. 50,000/- received by the assessee during the financial year. Thus the Revenue appeal is to be dismissed. The Ld. Senior Counsel also has raised a ground in C.O. NO. 12/Ahd/2016 and the disallowance should be restricted to the dividend income earned by the assessee. 23. We have given our thoughtful consideration and perused the materials available on record. The Hon'ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. (cited supra) as well as in Vision Finstock Ltd. in Tax Appeal No. 486 of 2017 has held that the disallowance made u/s. 14A are restricted to the extent of exempt income earned by the assessee during the financial year. Now the issue has....