TaxTMI 
TaxTMI 
2023 (8) TMI 873
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..../s 14A of the Income Tax Act 1961 (the Act) by ignoring 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 d....
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....he Act as it had made in the last year. Therefore, the assessee was asked to show cause as 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....
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....iii) of the Rules. Total disallowance made by the AO is Rs. 1,45,94,554/-. Admittedly, the appellant do not 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, th....
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....he total staff welfare expenses incurred by the assessee company without pointing out any defect in evidences, submitted by the assessee and by holding the expense incurred by the assessee 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 ....
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....penditure. I have also perused the finding of the DRP for AY 2011-12 which is relied on by the AO for making 20% adhoc disallowance. The DRP in its order for AY 2011-12 for the purpose of making disallowance of 20% has observed that the bills of hotel function and food expenses has not any mention of beneficiaries. 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 emp....
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....orted the assessment order. 19. On the other hand, Ld. Counsel for the assessee submitted that during the Financial Year 2013-14 relevant to Assessment year 2014-15. The assessee has paid a sum of INR 5,12,23,226/- for availing services from its Associated Enterprises ("AE") i.e. M/s. Mitsui & Co. (Asia Pacific) 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 th....
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.... 5.4.3 The above order of the DRP has been upheld by the Hon'ble ITAT, Delhi Bench in ITA No. 813/Del/2014 for AY 2009-10 and ITA No. 1795/Del/2015 for AY 2010-11 dated 24.05.2016 where it has been held as follows:- 35. The AO made an addition of Rs. 40,78,906/- by disallowing the same u/s 37(1) claimed by the assessee company as expenditure on account of payment 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 r....
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..../2015 for Assessment years 2009-10 & 2010-11 and the order of Ld.DRP for AY 2011-12 dated 14.12.2015. For the sake of clarity, the relevant contents of the Tribunal's order are reproduced as under:- 35. "The AO made an addition of Rs. 40,78,906/- by disallowing the same u/s 37 (1) claimed by the assessee company as expenditure on account of payment 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....
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....ant extract of the order of ITAT quoted above) wherein the observations of the AO that the Mitsui India Pvt. Ltd. (appellant company in the instant case) is a Dependent PE agent of Mitsui& Co. Ltd (Japan) have now been decided by the ITAT. The ITAT has already held that the appellant is not the PE of Mitsui& Co. Ltd (Japan), hence in view of said findings of the ITAT there is no question of attribution of any profit of Mitsui& 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 C....
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....ation of part disallowance of expenses. The submissions of the Ld. Counsel for the assessee in this regard are that the lower authorities have made and confirmed the addition purely on adhoc basis. Such approach of the lower authorities is contrary to the settled legal position. In this regard, the assessee has relied upon following case laws enumerated as under:- • 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 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 ....
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....elfare 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 observations to any logical conclusion so as to justify his action of disallowance of 20% of the expenditure related to medical insurance and social security expenditure. Regarding Expenses relating to hotel, dining charges, shifting charges etc. in Rs. 1,20,14,739/-, the facts of the case in identical to the facts of the ....