TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 873
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....g finding of facts recorded by the Assessing Officer (the AO) that the assessee company has earned some exempt income during the year? 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 63,11,221/- on account of disallowances of staff welfare expenses by ignoring finding of facts recorded by the Assessing Officer (the AO) that the assessee company has incurred expense of non-business nature in lieu of staff welfare expense during the year? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 5,12,23,226/- on account of disallowance of service fee paid to AE by ignoring finding of facts recorded by the Assessing Officer (the AO) that the assessee company the nature of services being offered by M/s Mitsui & Co (Asia Pacific) pte Ltd., Singapore, to the assessee is quite vague, Assessee has not furnished any detail regarding the actual service being provided to the assessee? 4. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 51,27,74,699/- on account of non-deduction ....
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....to why disallowance u/s 14A of the Act should not be made. In response thereto, the assessee made an exhaustive reply. However, the AO did not accept the contention of the assessee and proceeded to make disallowance u/s 14A of the Act. The AO by invoking the provision of Rule 8D(ii) of the Income tax Rules, 1962 made disallowance amounting to INR 1,45,94,554/-. Further, the AO made disallowance on adhoc basis amounting to INR 63,11,221/- out of staff welfare expenses. The AO also made addition of INR 5,12,23,226/- in respect of remuneration paid to Mitsui & Co. India Pvt. Ltd. on the basis that the assessee could not substantiate rendition of any service for which remuneration was paid. The AO further made disallowance by invoking the provision of section 40(a)(i) of the Act on the ground that the assessee was liable to deduct tax of INR 12,60,84,939/- at the payment made to Mitsui Japan of INR 51,27,74,699/-. Thus, he assessed the income of the assessee company at INR 89,14,27,020/- against the disclosed income at INR 30,65,23,320/-. 4. Aggrieved against the assessment order, the assessee carried matter in appeal before Ld.CIT(A), who partly allowed the appeal. Thereby, the Ld.CI....
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....have any exempt income during the year under consideration. The appellant has relied on the following judgments of various High Courts wherein it has been held that no disallowance can be made in the absence of any exempt income:- * Principal Commissioner of Income-tax-04 v. IL & FS Energy Development Company Ltd [2017] 399 ITR 483 (Delhi); * CHEMINVEST LIMITED VERSUS COMMISSIONER OF INCOME TAXVI [2015] 378 ITR 33DELHI HIGH COURT; * PR COMMISSIONER OF INCOME TAX 18 VERSUS OIL INDUSTRIES DEVELOPMENT BOARD 2018 (2) TMI 1861-DELHI HIGH COURT; * CIT v. Holcim India Pvt. Ltd. in ITA No. 486/2014 and 299/2014 dated 05.09.2014; * Commissioner of Income Tax (li) Kanpur Versus M/s. Shivam Motors (P) Ltd., 88 of 2014-ALLAHABAD HIGH COURT * Commissioner of Income Tax -I Versus Corrtech Energy Pvt. Ltd., 2014 (3) TMI 856 GUJARAT HIGH COURT. 5.2.2. The above judgments are squarely applicable in case of the appellant since it has not earned any exempt income in the year under consideration. Therefore, the addition made u/s 14A of the Act is directed to be deleted. Ground No. 3 and 4 are allowed." 9. The Revenue has not brought any adverse material contradicting the findings of Ld.....
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....company are of non-business nature. He submitted that both the authorities below have made and confirmed the addition purely on adhoc basis based on surmises which is clearly unwarranted. In support of this, he relied upon various case laws. Further, it is contended that the assessee had submitted the relevant evidences. The lower authorities have not brought any material to prove that the expenses were incurred for non-business purposes. Moreover, the total expenditure incurred by the assessee in this regard merely constitute only 1% of the total revenue which cannot be treated as excessive or higher. The expenses are made to maintain a healthy relationship between the company and its staff and therefore, incurred on account of business expediency thus, the allowable expenditure. He further relied upon following case laws:- * "Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram Vs CIT 37 ITR 288 (SC); * Hon'ble Delhi High Court in the case of CIT Vs Ms. Shehnaz Hussain 267 ITR 572 (Del.); * ACIT Vs M/s. Modi Rubber Limited, ITA No.1952/Del/2014 (ITAT Delhi); * ACIT versus Precision Pipes & Profiles Co. Ltd., No.- ITA No.4257 & 4258/D/2012 [ITAT Delhi]; ....
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....ciaries. The AO in the year under consideration by relying on the said findings of DRP for AY 2011-12 made the disallowance of 20% in respect of total staff welfare expenses without looking into fact that whether it is related to dining charges, shifting charges or not. The appellant has submitted the bifurcation of staff welfare expenses along with supporting bills. The expenses amounting to Rs. 1,20,14,739/- is related to hotel, dining charges, shifting charges etc. However, Expenses amounting to Rs. 2,20,41,369/- is related to medical insurance and social security expenditure for which no observation has been made by the DRP in its order for AY 2011-12. There cannot be any doubt regarding the commercial expediency of expenses of medical insurance and social security expenditure being incurred for business purpose. These expenses are purely for the purpose of welfare of the employees. Even the AO has not brought anything on the record to justify his claim that part of these expenses are not for the business purpose. Further it is noticed that the case of the appellant is not a case where the incurrence of the expenses are in doubt. The AO in the assessment order has not taken his....
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.... Pte.Ltd. located at Singapore. He submitted that the the AO disallowed the service fee holding to be non-business nature. He submitted that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee's own case for Assessment years 2009-10 & 2010-11 in ITA Nos. 813/Del/2014 & 1795/Del/2015. The order of the Tribunal is enclosed at pages 509 to 548 of the Paper Book Volume II. 20. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has deleted the addition by observing as under:- 5.4.2. "I have examined the finding of the AO, submission of the appellant. I have also perused the orders of DRP, CIT(A) and ITAT placed before me on the same issue in the case of the appellant. It is noticed that the same issue pertaining to service fees paid to Mitsui & Co. (Asia Pacific) Pte Itd. Singapore, was raised by the AO the assessment-year 2010-11 and 2011- 12. The issue was first adjudicated by the DRP in the AY 2011-12 in the appellant's own case in its favour. The DRP in its directions u/s 144C(5) of the Act dated 14.....
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....ment of service fee paid to M/s West Japan Logistics Division of Mitsui & Co. Ltd., Japan and M/s Mitsui & Co. (Asia) Pte. Ltd., Singapore on the ground that the aforesaid expenditure has not been incurred wholly and exclusively for the purpose of business and on the ground that the assessee has merely submitted copies of the agreement of the assessee with the aforesaid companies and no evidence is available on the file. The AO has rejected the submissions made by the assessee company to justify the aforesaid expenditure. Keeping in view the fact that in the succeeding year, AY 2011-12, the DRP vide order dated 14.12.2015 has decided this issue in favour of the assessee and deleted the entire addition of service fee paid to the same parties to whom this fee was paid. So in view of the matter, this issue is required to be restored to the AO to decide afresh in the light of the order dated 14.12.2015 passed by the DRP qua AY 2011-12 in assessee's own case after providing an opportunity of being heard to the assessee. Consequently, this ground is determined in favour of the assessee. 5.4.4 The issue has been adjudicated in the AY 2010-11 by CIT(A)-44 wherein the CIT(A) has relie....
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....vision of Mitsui & Co. Ltd., Japan and M/s. Mitsui & Co. (Asia) Pte Ltd., Singapore on the ground that the aforesaid expenditure has not been incurred wholly and exclusively for the purpose of business and on the ground that the assessee has merely submitted copies of the agreement of the assessee with the aforesaid companies and no evidence is available on the file. The AO has rejected the submissions made by the assessee company to justify the aforesaid expenditure. Keeping in view the fact that in the succeeding year, AY 2011-12, the DRP vide order dated 14.12.2015 has decided this issue in favour of the assessee and deleted the entire addition of service fee paid to the same parties to whom this fee was paid. So in view of the matter, this issue is required to be restored to the AO to decide afresh in the light of the order dated 14.12.2015 passed by DRP qua AY 2011-12 in assessee's own case after providing an opportunity of being heard to the assessee. Consequently, this ground is determined in favour of the assessee." 22. The Revenue has not contradicted the fact that in earlier years, identical ground was raised by the assessee for AY 2009-10 & 2010-11. We therefore, taking....
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....i& Co. Ltd (Japan) to the appellant company. Accordingly, there is no question of deduction of tax on the same. 5.5.4 Further the issue is covered by this office order dated 25.07.2019 in the case of the appellant itself for the A.Y. 2009-10. In view of the same, the disallowance made by the AO under section 40(a)(i) of the Act, is directed to be deleted. These grounds of appeal are allowed." 27. From the above findings of Ld.CIT(A), it is clear that the issue related to deduction of tax has been examined in earlier years. There is no change into facts and circumstances of the case and the decision of the Tribunal in earlier years related to AYs 2009-10 & 2010-11 in ITA Nos. 813/Del/2014 & 1759/Del/2016 have been affirmed by the Jurisdictional High Court. In view of the binding precedent, we do not see any merit in the grounds of appeal. Ground Nos. 4 & 5 raised by the Revenue are thus, dismissed. 28. Ground No.6 raised by the Revenue is general in nature, needs no separate adjudication. 29. In the result, the appeal filed by the Revenue is dismissed. ITA No.467/Del/2020[Assessment Year : 2014-15] 30. Now, we take assessee's appeal wherein the assessee has raised following g....
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....case of CIT vs Ms. Shehnaz Hussain 267 ITR 572 (Del.); * ACIT vs M/s. Modi Rubber Limited, ITA No.1952/Del/2014 (ITAT, Delhi); * ACIT vs Precision Pipes & Profiles Co.Ltd., ITA No.4257 & 4258/D/2012 (ITAT Delhi); * Sonic Biochem Extractions P.Ltd. vs ITO (2013) 23 ITR 447/59 SOT 4 (URO)(Mum.)(Trib.); * Seasons Catering Services P.Ltd. vs DCIT [2010] 127 ITD 50 (Delhi)/43 DTR 397 (Del). 35. Further, it is contended that the bills and invoices of staff welfare expenses were duly submitted to lower authorities. The AO has not pointed out any defect or discrepancy in respect of the expenditure claimed for staff welfare. The expenditure is otherwise, 1% of total Revenue which is not excessive. The expenditure is related to staff welfare measures to and instill of feeling of team work. The Ld. Counsel for the assessee relied upon the decision of the Co-ordinate Bench of the Tribunal rendered in the case of British as India (P.) Ltd. vs DCIT, 2011 (4) TM 877 dated 08.04.2011 and Chrys Capital Investment Advisors India (P.) Ltd. vs DCIT, Circle-3(1), New Delhi [2012] (8) TMI 730 dated 18.03.2011 wherein it has been held that the expenditure incurred for lunch and dinners is allowa....