TaxTMI 
TaxTMI 
2022 (4) TMI 1558
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....2012-13)- Assessee Appeal & ITA No.1887/Mum/2018 (Assessment Year : 2012-13)-Revenue Appeal These cross appeals in ITA Nos.797/Mum/2018 & 1887/Mum/2018 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-58, Mumbai in appeal No.CIT(A)-58, Mumbai 10041/2016-17 dated 22/12/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/04/2016 by the ld. Asst. Commissioner of Income Tax, LTU-(1), Mumbai (hereinafter referred to as ld. AO). Since certain issues are identical all the appeals are taken up together and disposed of by this common order for the sake of convenience. 2. The ground No.1 raised by the assessee for A.Y.2012-13 is challenging the disallowance made u/s. 40 (a)(ii) in respect of state taxes paid in overseas countries. 3. We have heard rival submissions and perused the materials available on record. At the outset both the parties before us agreed that this issue is already covered by the Co-ordinate Bench decision of this Tribunal in assessee's own case for A.Y.2009-10 in ITA No.5713/Mum/2016 dated 30/10/2019 wherein it w....
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.... Reliance Infrastructure Ltd. (supra). While interpreting the provisions of section 2(43) of the Act, vis- a- vis section 40(a)(ii) of the Act, the Hon'ble Court held that the tax which has been paid abroad would not be covered within the meaning of section 40(a)(ii) of the Act, since, the meaning of the word "tax" as defined under section 2(43) of the Act would mean only the tax chargeable under the Act. Thus, as per the aforesaid decision of the Hon'ble Jurisdictional High Court, taxes levied overseas which are not eligible for relief either under section 90 or 91 of the Act, would not come within the purview of section 40(a)(ii) of the Act. It is the specific plea of the assessee that the State tax is not covered either under Indo-US or Indo-Canada tax treaty, hence, not eligible for any relief under section 90 of the Act. Pertinently, unlike section 91 read with Explanation-(iv), section 90 does not provide for inclusion of tax levied by any State/ local authority of that country within the expression 'income tax'. In view of the aforesaid, we direct the Assessing Officer to verify whether the State taxes paid by the assessee overseas are eligible for any relief....
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....n the issue. However, as regards experience certainty expenditure amounting to Rs. 5.28 crore, it appears that learned Commissioner (Appeals) has held it to be of capital nature on the basis that the assessee itself admitted so. However, before us, leaned Sr. Counsel for the assessee has vehemently argued that no such admission was made by the assessee before learned Commissioner (Appeals) and under a misconception, learned Commissioner (Appeals) has come to such conclusion. The leaned Sr. Counsel submitted, the experience certainty campaign was also for the purpose of advertisement only and in this context, he has furnished before us the details of such expenditure through additional evidences. Since, the additional evidences furnished by the assessee will have a crucial bearing in determining the nature of expenditure, we are inclined to admit the additional evidences. However, considering the fact that these evidences were not furnished before the Departmental Authorities, to afford a fair opportunity to the Department to verify the authenticity of assessee's claim vis-a-vis the additional evidences furnished before us, we restore the issue to the Assessing Officer for de no....
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....ted to tax abroad but exempt from payment of tax in India, he did not grant relief either under section 90 or 91 of the Act. The assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority. 28. Learned Commissioner (Appeals), after considering the submissions of the assessee and taking note of the decision of the Hon'ble Karnataka High Court in Wipro Ltd. v/s DCIT, [2015] 62 taxmann.com 26 (Kar.) bifurcated the foreign tax credit into three parts i.e., tax paid in USA, tax paid in other DTAA countries and tax paid in non-DTAA countries. Thereafter, he directed the Assessing Officer to allow tax credit in respect of tax paid in USA even on the income which is exempt from tax in India under section 10A / 10AA of the Act. However, in respect of tax paid in other DTAA and non- DTAA countries, learned Commissioner (Appeals) held that no tax credit will be available in respect of income which is exempt from tax in India under section 10A / 10AA of the Act. While the assessee has challenged the decision of learned Commissioner (Appeals) on non-grant of tax credit in respect of taxes paid in other DTAA countries and non-DTAA countri....
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....der MAT computation, the assessee should be allowed full credit for taxes paid overseas in respect of section 10A/10AA eligible income. In support of his contention, the learned Sr. Counsel put strong reliance upon the decision of the Hon'ble Karnataka High Court in Wipro Ltd. (supra).The learned Sr. Counsel submitted, when no decision of the Hon'ble Jurisdictional High Court is available on the issue and the only decision of a High Court which is available is that of the Hon'ble Karnataka High Court, even though, the decision is of a non-jurisdictional High Court, however, this being the only decision available on the issue, it will be binding when there is no contrary decision of another High Court is available. For such proposition, he relied upon the following decisions:- i) CIT v/s Smt. Nirmalabai K. Davekar, [1990] 186 ITR 242 (Bom.) Tata Consultancy Services Ltd. ii) CIT v/s Highway Construction Co. Pvt. Ltd., [1996] 217 ITR 234 (Gauhati); and iii) CIT v/s Maganlal Mohanlal Panchan (HUF), [1994] 210 ITR 580 (Guj.). 30. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer submit....
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....TAA, the assessee is entitled to such tax credit only in respect of that income which is taxed in USA. In similar context, the Court also referred to the tax treaty with Canada where the provisions does not allow credit for tax paid in Canada if the income is not subjected to tax in India. With regard to country's with which India does not have any agreement for avoidance of double taxation, the Court observed that as per section 91 of the Act, the assessee would be eligible to avail tax credit. Thus, on a careful reading of the aforesaid judgment of the Hon'ble Karnataka High Court, it becomes clear that where the respective tax treaty provides for benefit for foreign tax paid even in respect of income on which the assessee has not paid tax in India, still, it would be eligible for tax credit under section 90 of the Act. Like Article 25 of the Indo-USA treaty, treaties with various other countries such as Indo-Denmark, Indo-Hungary, Indo-Norway, Indo-Oman, Indo-US, Indo-Saudi Arabia, Indo-Taiwan also have similar provision providing for benefit of foreign tax credit even in respect of income not subjected to tax in India. However, Indo-Canada and Indo-Finland treaties do n....
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....laced reliance on the provisions of Section 80HH of the Act and also argued that the language of Section 80HH and Section 10AA are pari materia in as much as both the sections provide that in computing the total income of the assessee, deduction shall be allowed at certain percentage of profits and gains derived from business. The expression "profits and gains" derived was subject matter of adjudication by the Hon"ble Supreme Court in the case of Vijay Industries Ltd., reported in 103 taxmann.com 454 wherein the Hon"ble Apex Court observed that the profits and gains referred to commercial profits without deducting depreciation and investment allowance as per the Act. Since this aspect was not raised by the assessee before the lower authorities, accordingly, the lower authorities did not have an occasion to give their finding on the same. Hence, in the interest of justice and fair play, we deem it fit and appropriate to remand this issue raised in the additional ground to the file of the ld. AO for denovo adjudication in the light of the decision of the Hon"ble Apex Court in Vijay Industries Ltd., referred to supra and decide the controversy in accordance with law. Accordingly, the ....
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....use as well as for trading purpose, the amount paid is liable for disallowance under section 40(a)(i) of the Act. Accordingly, he disallowed the entire amount of Rs. 78,39,58,321. The assessee challenged the aforesaid disallowance before the first appellate authority. 9. Learned Commissioner (Appeals) following the order passed by the Tribunal in assessee's own case for the assessment year 2005-06, held that the expenditure incurred on software products acquired for internal use is a capital expenditure, hence, the assessee is entitled to depreciation thereon. However, in respect of payment made towards software products acquired for re-sale / trading purpose, learned Commissioner (Appeals) agreed with the Assessing Officer that it is in the nature of royalty, hence, the assessee was required to deduct tax at source." 7.2. We find that the ld. AR argued that the amendment brought out by the Finance Act, 2012 will not have any retrospective effect based on the principle of "impossibility of performance", since assessee cannot be expected to deduct tax at source in respect of transactions effected in earlier years. This argument has to be dismissed as the year under c....
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....then be applied. UNION OF INDLA V. AZADI BACHAO ANDOLAN [7003] 763 1TR 706 (SC) relied on. The expression "copyright" has not been defined separately in the definitions section of the Copyright Act, 1957, yet, section 14 makes it clear that "copyright means the "exclusive right", subject to the provisions of the Act, to do or authorise the doing of certain acts "in respect of a work". In the case of computer programmes, section 14(b) specifically speaks of two sets of acts: the seven ads enumerated in clause (a) and the eighth act of selling or giving on commercial rental or offering for sale or for commercial rental any copy of the computer programme. All the seven acts set out in clause (a) delineate how the exclusive right with the owner of the copyright may be parted with. In essence, such right is referred to as copyright, and includes the right to reproduce the work in any material form, issue copies of the work to the pub tic, perform the work in public or make translations or adaptations of the work. The definition of an "in fringing copy" contained in section 2(m) of the 1957 Act, in relation to a computer programme, i. e., a literary work, means reproduc....
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....r only receives a right to use the soft-ware and nothing mare. The end-user does not get any of the rights that the owner continues to retain under section 14(b) of the 1957 Act read with .cub-clauses (i) to (vii) of clause (a) thereof Thus. the conclusion that when com-puter software is licensed for use under an end-user licence agreement, what is also licensed is the right to use the copyright embedded therein, is wholly incorrect. The licence for the use of a product under an end-user licence agreement cannot be construed as the licence spoken of in section 30 of the 1957 Act, as such end-user licence agreement only imposes restrictive conditions upon the end-user and does not part with any interest relatable to any rights mentioned in section 14(a) and (b) of the 1957 Act. The ownership of copyright in a work is different from the ownership of the Physical material in which the copyrighted work may happen to be embedded. Any ruling on the more expansive language contained in the Explanations to section 9(vi) of the Income-tax Act, 1961 would have to be ignored if it is wider and less beneficial to the assessee than the definition cont wined in the DTAA, in terms of sec....
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....transfer of "all or any rights", it expressly includes the granting of a licence in respect thereof; and it states that such transfer must be "in respect of" any copyright of any literary work. However, even where such transfer is 'in respect of" copyright, the transfer of all or any rights in relation to copyright is a sine qua non under Explanation2 to section 9(1)(vi) of the Act. in short, there must be transfer by way of licence or otherwise, of all or any of the rights mentioned in section 14(b) read with section 14(a) of the 1957 Act. Indian tax laws use the expression "in respect of" as synonymous with the expression "on" the expression "in respect of", when used in a taxation statute, is only synonymous with the words "on" or "attributable to". This accords with the meaning to be given to the expression "in respect of" contained in Explanation 2(v) to section 9(1)(vi) of the income-tax Act, 1961 and would not in any manner make the expression otiose. STATE OF MADRAS V. SWASTIX TOBACCO FACTORY [1966] AIR 1966 SC 1000; [1966] 3 SCR 79 relied on. While Explanation 2(v) to section 90Xvi) of the Ad, when it speaks of "all of any rights...in respect....
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....uter software" was inserted in the statute. Likewise, even qua section 2(o) of the 1957 Act, the term "computer software' was introduced for the first time in the definition literary work, and defined under section 2(ffc) only in 1994. It is equally Ludicrous for the amendment which also inserted Explanation 6 to section 9(i)(vi) of the Act, to apply with effect from June 1, 1976, when technology relating to transmission by a satellite, optic fibre or other similar technology was only regulated by Parliament for the first time through the Cable Television Networks (Regulation) Act, 1995, much after 1976. For all these reasons, it is clear that Explanation 4 to section 9(1)(vi) of the Act is no clarificatory of the position as of June 1, 1976, but in fact, expands that posit ion to include what is stated therein, by the Finance Act, 2012. Notification No, 21 of 2C'12 dated June 13, 2012 being issued after Explanation 4 was inserted could not be invoked to assert that Explanation 4 clarifies the legal position as it always stood. It is only when the non-resident is liable to pay income-tax in India on income deemed to arise in India and no deduction of tax at Source ....
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....30 cannot be read out of context. The logic behind article 30 of the DTA.4 is for reasons connected with the municipal taxation laws of the United States of America and has nothing to do with Indian municipal law governing the liability of persons to deduct tax at source under section 195 of the Income-tax Act. This is reinforced by the fact that the OECD Commentary on articles 30 and 31 acknowledges the fact that the "entry into force" provisions, unlike the rest of the provisions in the OECD Mode! Tax Convention on Income and on Capital, depend on the domestic laws of contracting States. Persons are not obligated to do the impossible, i.e., to apply a provision of a statute when it was not actually and factually on the statute book. Thus the "person" mentioned in section. 195 of the Act cannot be expected to do the impossible, namely, to apply the expanded definition of "royalty" inserted by Explanation 4 to section 9(1 Xvi) of the Act, Or the assessment years. at a time when such Explanation was not actually and factually in the statute. CIT v. NGC NETWORKS (INDIA) Pvt Ltd, 120211432 ITR 326 (Born) approved. After the 1999 amendment of section 141))(ii....
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.... for parting with copyright is concerned. The OECD Model Tax Convention speaks of the importance of the OECD Commentary. The term "royalties" is defined in all the DTAAS in a manner either identical with or similar to the definition con tamed in article 12 of the OECD Model Tax Convention. The OECD Commentary on royalty payments under article 12 states that in a transaction where a distributor makes payments to acquire and distribute software copies (without the right to reproduce the software), the rights in relation to these acts of distribution should be disregarded in analysing the character of the transact ion for tax purposes. Payments in these types of transactions would be dealt with as business profits. From the positions taken by India (in the capacity of an OECD non-member) with regard to article 12 of the OECD Model Tax Convention and the OECD Commentary, which use the language "reserves the right to" and "is of the view that some of the payments referred to may constitute royalties", it is not at all clear what exactly the nature of these positions is. This is in contrast with the categorical language used by India in its positions taken with respect to other ....
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.... a foreign, non-resident seller, resold it to resident Indian distributors or end-users; and d) cases where the computer software was affixed onto hard ware and sold as an integrated unit or equipment by foreign, non-resident suppliers to resident Indian distributors or end-users, on the question. whether amounts paid in/ the persons resident in India to non-resident, foreign-n software suppliers, amounted to royalty, and whether it constituted taxable income deemed to accrue in India under section 9(I)(vi) of the Income-tax Act, 1961 thereby making it incumbent upon all such persons to deduct tax at source and pay such tax deductible at source under section. 195 of the Act; Held, (i) that in all these cases, the licence" that was granted under the end-user licence agreement, was not a licence in terms of section 30 of the 1957 Act, which transferred an interest in all or an of the rights contained in sections 14(a) and 14(b) of the 1957 Act, but a licence" which imposed restrictions or conditions for the use of computer software. Thus, none of the end user licence agreements was referable to section 30 of the 1957 Act, inasmuch as section 30 'that Act spoke of grantin....
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....and did not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Act were not liable to' deduct any tax at source under section 195 of the Act. Decision of the Delhi High Court in CIT v. ALCATEL LUCENT CANADA [2015] 372 ITR 476 (1.)(Delhi) affirmed. Decisions of the Karnataka High Court in CIT v. SAMSUNG ELECTRONICS Co. Ltd. 12012J 345 ITR 494 (Karn) and CIT v. SUNRAY COMPUTERS P. LTD. [2012] 348 ITR 196 (Karn) and ruling of the Authority for Advance Rulings in CITRIX SYSTEMS ASIA PACIFIC Pry. LTD., In re (2012] 343 ITR 1 (AAR) reversed. The real nature of the transaction must be looked at upon reading the agreement as a whole. 7.6. In view of the above, the ground No.1 raised by the Revenue is hereby dismissed. 8. The ground Nos. 2 & 3 raised by the Revenue are challenging the deletion of disallowance u/s.14A of the Act for the A.Y.2012-13. 8.1. We find that assessee had claimed an amount of Rs. 53,70,92,090/- as dividend income exempt u/s.10(34) of the Act. The assessee made voluntary disallowance of expenses of Rs. 51,58,068/- in the return of income. The ld. AO merely observed that h....
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.....14A of the Act has been rightly deleted by the ld. CIT(A) for want of recording of objective satisfaction with cogent reasons. Accordingly, the ground Nos. 2 & 3 raised by the Revenue for the A.Y.2012-13 are hereby dismissed. 9. The ground No.5 raised by the Revenue for the A.Y.2012-13 is challenging the deletion of disallowance of payment made towards Tata Brand equity subscription which was treated as capital expenditure. 9.1. We have heard rival submissions and perused the materials available on record. We find that assessee had incurred an expenditure in respect of payment towards Tata brand equity and claimed the same as "business expenditure" u/s37(1) of the Act. The assessee had made payment towards subscription fee for carrying out normal business activities of the company. The assessee submitted that the Tata brand always belong to Tata Sons and accordingly, the assessee has made payment to Tata Sons after due deduction of tax at source u/s.194J of the Act. The assessee also submitted that this payment is required to be made annually by all the subscribee's to Tata Sons towards subscription on the basis of their profitability. There is no question of capitalizing th....
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....zation. • The assessee company has derived huge benefits in the form of increase sales and also other operational efficiencies. • In the past assessment years the similar payment has been allowed as deduction. The Assessee relied on the decision in the case of Radhasoami Satsang Vs. CIT (1992)193 ITR 321(SC)". 4. The A.O. did not find merit in the above submissions made by the assessee on this issue for the following reasons given in the assessment order:- • "The assessee company was incorporated on 17.10.1995 with the name Tata Autocomp Systems Ltd. Therefore, the assessee company had been using the name TATA since then. It is not a case where prior permission was required to use the "TATA" name at the time of incorporation. • The aforesaid arrangement of payment of subscription towards brand equity was entered only on 04.06.2001 i.e. more than five years after the incorporation. By using TATA word in its name since then itself gives the assessee right to use TATA brand. • Further, it is seen that the major holding (74%) of the assessee company is with Tata Industries Ltd. Tata Motors Ltd, and Tata Sons Ltd.....
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....gh various media including electronic /telecommunication/satellite communication media (e.g. TATA Website) etc. printing and publishing of promotional material and such other activities as in the opinion of the Board of Directors of the Proprietor Company, will enhance the TATA Brand Equity and correspondingly benefit the business of the Subscriber. c) To co-ordinate major campaigns involving the promotion and development of the Business Name Marks and Marketing Indica. d) to engage the services of specialist agencies both National and International as the need may be to energise and enhance the Overall TATA Brand Equity which eventually could result in a greater market share for the products and services of the Subscriber and help in the preservation and vindication of the trust and confidence reposed by customers, business associates, stockholders and the society in general. e) To engage profession consultants for conducting industry/organizational studies/research for the formulation of Group business strategies and policies that would assist the subscribing companies to emerge as business leaders in the evolving markets. f) For the attainment....
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....tions. 5. Community Services. o) For the purposes of promoting the business of the Subscriber to provide assistance in accessing the network of domestic and international business contacts and availing the services of the domestic and overseas offices of the Proprietor and the Group Companies. p) To institutionalise mechanisms to share and propagate best management practices amongst the Subscribing companies. q) To manage and supervise the implementation of the Scheme and ensure compliance with the terms of this Agreement and the Code". The ld. counsel for the assessee has also invited our attention to the relevant portion of the agreement dtd 4th June, 2001 at page 218 containing subscription clause whereby the assessee was obliged to pay the subscription at the stipulated rate to Tata Sons Ltd. for the services rendered in connection with maintaining and promoting the entire brand and image of TATA group. 6. As further submitted by the ld. counsel for the assessee, M/s Rallis India Ltd., another company belonging to TATA group had also entered into a similar agreement with M/s Tata Sons and the subscription paid as per the sai....
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....overed in favour of the assessee by the decision of the co-ordinate Bench of this Tribunal in the case of Rallis India Ltd. which has also been accepted by the department. Respectfully following the said decision of the Tribunal, we delete the disallowance made by the A.O. on account of subscription paid by the assessee to Tata Sons Ltd. towards brand equity and promotion scheme and allow ground No. 1 of assessee's appeal. 9.3. Respectfully following the same, we find no infirmity in the order of the ld. CIT(A) allowing the said expenditure as a Revenue expenditure. Accordingly, the ground No.5 raised by the Revenue for the A.Y.2012-13 is dismissed. 10. The ground No.6 raised by the Revenue is challenging the deletion of disallowance of expenditure on commission paid to non-residents which was disallowed for non-deduction of tax at source u/s.40(a)(i) of the Act. 10.1. We have heard rival submissions and perused the materials available on record. We find that assessee always submitted that it had made payment of commission to non-resident agents who are operating outside India. It was specifically submitted that no part of the agents" income arises in India. The payments a....
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....m "total turnover" also, while computing deduction u/s.10AA of the Act. 11.2. We find that this issue is no longer res integra in view of the decision of the Hon"ble Jurisdictional High Court in the case of CIT vs. TCS Limited (assessee's own case) in Income Tax Appeal No.1778 of 2016 dated 18/03/2019 for A.Y.2005-06, wherein it was held as under:- 10] Coming to the revenue's contention in relation to the computation of benefit of section 10A of the Act, this issue is squarely covered by the judgement of Supreme Court in the case of Commissioner of Income Tax Vs. HCL Technologies, reported in 404 ITR 719. in which the Court held that the total turnover for the purpose of section 10 of the Act cannot be understood as defined for the purpose of section 80 HHE. It was further held that thus the expenses which are to be excluded from the export turnover, would also have to be excluded for the purpose of computing total turnover. 11.3. Respectfully following the same, the ground No.7 raised by the Revenue for A.Y.2012-13 is dismissed. 12. The ground No.5 raised by the assessee is with regard to transfer pricing adjustment made in respect of provision of software co....
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....see in its TP study report mentioned that the margins earned by AE were better than that earned from AEs and non-AEs collectively and accordingly, the transactions were at arm's length. 12.3. The assessee also made a comparable analysis in the TP study report to justify that its margin are better than the peers i.e. Wipro, Infosys, HCL Technologies, Patni Computers etc., to state that its transactions are at arm's length. The ld. TPO used the same set of comparables as were used by him in assessee's own case for A.Y.2006-07 and considered the AEs as the tested party. The ld. TPO selected companies based in US and considered the same set of US companies as comparable to all other AEs operating in different geographic region. The ld. TPO also computed the margins from the consolidated financials of the said comparable companies instead of looking into stand alone financials. The assessee state that the said comparable companies have got significant related party transactions and there is a huge difference in the scale of operations and hence not comparable with that of the assessee. However, these provisions were not considered and ultimately, the ld. TPO processed to make an adju....
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....istribution and marketing risk are being taken by the AEs. On examination of the financials of the subsidiaries it is revealed that some subsidiaries are still making loss at net level which signifies that some risk is being borne by the AEs. It has further been brought on record that the manpower base of AEs performed various functions relating to marketing as well as client co-ordination. The AEs have developed sufficient competency to handle the marketing work independently. The entire contract related work is performed by the AEs, though, in cooperation with the assessee. Thus, it is quite natural that for being a sufficiently motivated work force, the AEs are compensated at return on sales and not merely on value added costs. Therefore, learned Commissioner (Appeals) was justified in directing the Transfer Pricing Officer to adopt the PLI of gross margin on sales. As regards consideration by the Transfer Pricing Officer, the outsourcing / sub-contracting cost to assessee as a pass through cost, learned Commissioner (Appeals) was absolutely correct in observing that the decision of the Transfer Pricing Officer to exclude such costs while computing the margin of the AEs is incor....
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....pect of provision of loans to Associated Enterprises (AEs). 13.1. We have heard rival submissions and perused the materials available on record. We find that assessee had provided loans to its Associated Enterprises as under:- S. No. Name of the Associated Enterprise (AE') Currency Denomination extended prior to subject AY Loan given during the year Loan repaired/ converted to equity during the year Amount outstanding as on 31 March 2012 1 TCS Iberoamerica USD 59,140,000 Nil 49,740,000* 9.400,400 2 FNS Australia AUD 46,500,000 Nil Nil 46,500,000 3 TCS Morocco USD 1,163,835 Nil Nil 1,163,835 * USD 49,740,000 converted to equity during the year. 13.2. The ld. TPO disregarded the commercial rationale for the loans and the fact that the said loans were provided, to enable the AEs to pay the consideration for acquisition of downstream subsidiaries or as quasi equity and further infusion of capital by the AEs into other companies as well as entering into joint ventures with overseas parties. The TPO disregarded the fact that the said loans were to achieve an optimal funding structure to facil....
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....ing to USD 9.-^00,000 were converted in loan during FY 2012-13. Copies of board resolution for conversion are attached as Annexure 26.1 and 26.2. This substantiates our contention that the said loan is quasi equity in nature. (Explained in greater detail below). III. TCS FNS Pty Limited ("FNS Australia") a. The appellant has given this loan to support its AB, FNS Australia to acquire and run the business of a downstream subsidiary i.e. in the nature of infusion to equity/ quasi equity. Loan outstanding as on 1s1 April, 2011 to FNS Australia AUD 46,500,000. During the year under consideration, there is no further amounts advanced to the FNS Australia. Particulars Date Amount in USD Opening Balance 1-Apr-11 46,500,000 Loan given Nil Closing Balance 31 -Mar- 12 46,500,000 The assessee has given this loan to support its AE, FNS Australia to acquire and run the business of a downstream subsidiary i.e. in the nature of infusion to equity / quasi equity. Further, we would like to submit that out of the amount outstanding as on 31 March, 2010, during FY 2012-13, a loan amounting to AUD 36,258,815/-, which consist major p....
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....sue was restored to the file of the ld. AO for denovo adjudication by observing as under:- "37. We have considered rival submissions and perused the material on record. We have also carefully gone through the case law cited before us. Notably, right from the stage of transfer pricing proceeding itself the assessee has taken a stand that loans and advances to the AEs are in the nature of quasi equity, hence, cannot be treated as loan simpliciter. It is relevant to observe, the transfer pricing adjustment made on account of interest is in respect of loans advanced to four overseas AEs. From the details available on record, it is noticed that major portion of loans advanced to TCS Ibero America, is for acquisition of downstream subsidiary and about 20% of the advance was for working capital. Money advanced to TCS FNS Pty. Ltd., Australia, was purely for acquisition of downstream subsidiary. Similarly, advance to TCS Asia Pacific Pty. Ltd., is for acquisition of downstream subsidiary. Only the advance made to TCS Morocco is for working capital requirement. It is further noted, major part of advances made to TCS Ibero America, TCS FNS Pty. Ltd. and TCS Morocco have been convert....
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....ure of the advances made to the AEs. He should also examine the applicability of the ratio laid down in the case of DLF Hotel Holdings Ltd. (supra) and any other case laws which may be cited before him. The assessee must be afforded reasonable opportunity of being heard. Ground is allowed for statistical purposes." 13.8. Respectfully following the same, the ground No.6 raised by the assessee is allowed for statistical purposes. 14. The ground No.7 raised by the assessee is challenging the transfer pricing adjustment made in respect of provision of guarantee. The ground Nos. 10-12 raised by the Revenue for A.Y.2012-13 are also in respect of transfer pricing adjustment made in respect of provision of guarantees in respect of partial relief given by the ld. CIT(A). 14.1.We have heard rival submissions and perused the materials available on record. We find that assessee during the year under consideration had provided guarantees in the nature of performance, financials and lease for or on behalf of its various AEs. 14.2. The assessee submitted that with respect to performance guarantee, part of the activity was performed by the assessee itself while the remaining services w....
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....4.1.1 to 4.1.5. in respect of procedure adopted by the lower authorities are not pressed. Accordingly, the same is reckoned as a statement made from the Bar and the ground Nos. 4.1.1. to 4.1.5. raised by the assessee for A.Y.2012-13 in respect of transfer pricing adjustment are dismissed as not pressed. ITA No.1769/Mum/2018 (A.Y.2013-14) - Assessee Appeal & ITA No.2431/Mum/2018 (A.Y.2013-14) - Revenue Appeal 16. All the grounds and additional grounds raised by the assessee for A.Y.2013-14 are identical with those raised by it in A.Y.2012-13. Hence, the decision rendered hereinabove for A.Y.2012-13 shall apply mutatis mutandis to this assessment year also except with variance in figures. 17. All the grounds raised by the Revenue for the A.Y.2013-14 except ground No.8 in respect of year end provision are identical with those raised by it in A.Y.2012-13. Hence, the decision rendered hereinabove for A.Y.2012-13 except ground No.8 shall apply mutatis mutandis to this assessment year also except with variance in figures. 18. Now, we proceed to adjudicate the ground No.8 raised by the Revenue for A.Y.2013-14, wherein the Revenue has challenged the deletion of disallowance of e....
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....(ia) is by identifying a default in complying with provision relating to TDS. The explanation before Assessing officer is that provision is created in books in accordance with accounting principle and reversed next year. This is a consistent method of accounting followed by the assessee. Here a provision created by book entry is disallowed by invoking section 40(a)(ia). If at all Assessing Officer had to make a disallowance under section 40(a)(ia) the entry(ies) must be split up by identifying (a) to whom payable (b) whether the sum credited is one where tax is deductible at source (c) under which section tax is deductible at source and (d) whether same exceeds threshold limits specified In section. Identification of violation in respect of specific entry or a set of entries in tax deduction at source was a fundamental exercise keeping in view provisions of XVll-B was the first step before invoking section 40(a)(ia). This exercise is not carried out. As no default in deduction of tax at source is recorded, the question of disallowance does not arise. Hence on this count assessee succeeds on part I of the ground. 18. Part II is the disallowance of whole of the sum created a....
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....oncerned vendor was not available with the assessee whereas the services had already been provided by the vendor to the assessee. In respect of these items, the assessee had made provision for expenses in its books as per the applicable accounting standard and as per the generally accepted accounting principles on accrual basis. Since the concerned vendor account is not credited by the assessee they are not identifiable for want of bills, the assessee has credited provision for expenses and had not deducted tax at source for the same, as according to the assessee, only when the party name is identifiable, the provisions of 40(a)(ia) of the Act would come into operation. Accordingly, it pleaded that no liability of TDS could be fastened on the assessee when the payee is not identifiable. We further find that the very same issue has been the subject matter of adjudication of this Tribunal in the case of Mahindra and Mahindra Ltd., vs DCIT in ITA No.8597/Mum/2010 for A.Y.2006-07 dated 2006-07 dated 06/06/2012 wherein this ground has been adjudicated as under:- "19.Next ground of appeal is about addition made under section 40a(ia) in respect of year-end provision of Rs. 4,25,5....