TaxTMI 
TaxTMI 
2024 (2) TMI 921
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....e Bombay High Court and decision of various benches of Tribunal in Otis Elevator (195 ITR 682). The ld. AR of the assessee submits that the assessee claimed total expenses of Rs. 3,52,200/- out of which, the Assessing Officer allowed Rs. 52,000/- paid to Devas Office and rest of the amount of Rs. 2,99,500/- for subscription fees, annual contribution and membership of various club and other expenses paid on club were disallowed. The ld. CIT (A) granted part relief restricting the disallowance to Rs. 2,65,000/-. The ld. AR of the assessee submits that the issue is stand covered by the decision of jurisdictional High Court in Otis Elevator (supra). 14. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 15. We have considered the submission of both the parties and perused the record and find that the Hon'ble Bombay High Court in Otis Elevator (supra) held that the payment made to clubs are revenue in nature and are allowable as such. We have further noted that in assessee's own case for Assessment Year 1996-97, 1997-98 & 1998-99, the co-ordinate bench of Tribunal in ITA No. 4976, 4977 & 4978/Mum/2005 vide order dated 26.03.2009 allowed similar....
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....ant submits that the learned AO-DRP erred in this respect in not following the binding order of this Hon'ble Tribunal in the Appellant's own case for the Assessment Years 2000-01 to 2002-03, viz., the Order dated 8th June, 2012 of the Hon'ble Mumbai Bench 'E', in I.T.A. Nos. 3957, 3958 & 3959 / M um / 2006 2.4. without prejudice to the foregoing grounds, the Appellant submits that, in making their determinations in respect of the disallowance under Section 14-A, the learned AO-DRP erred in the following respects: (1) The learned AO-DRP erred in holding that the amount disallowed under Section 14-A was not allowable under Section 36(1)(iii) of the Act (2) The learned AO-DRP erred in holding that a part of the Appellant's borrowed funds had been used for the purpose of making investments in shares, particularly in view of the fact that the Appellant's Own Funds (Rs. 294.23 Crores) were far in excess of the Appellant's Total Investments ( Rs. 133.67 Crores). (3) The learned AO-DRP erred in holding that a part of the Appellant's borrowed funds had been used for the purpose of making Investments in shares, for the reason also that the lear....
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....t the learned AO-DRP ought to have excluded the average cost of such of the Appellant's investments as had not yielded any dividends during the year under consideration ("Non Dividend Yielding Investments"). (3) The findings of the learned DRP [in paragraph 19 (at page 6) and paragraph 20 (at page 7) of its Directions] to the effect that there is expenditure incurred in respect of the Appellant's investments by way of costs involving decision-making, direct supervision and funding, are based on conjectures and surmises and are unsupported by any evidence on record and, consequently, are perverse. 4. During the year under reference, the appellant has earned exempt income of Rs. 4, 52, 05,031/-. The appellant has not incurred any expenditure for earning the exempt income. The appellant's Owned Funds aggregated to Rs. 31,048.70 Lakhs which comprise of Share Capital amounting to Rs. 2,153.80 Lakhs and Reserves and Surplus amounting to Rs. 29,048.70 Lakhs. The Annual Accounts of the appellants are placed at Page 12 of the Paper Book (Corporate Grounds). 5 The value of total investments as on 31 March 2008 is Rs. 23,726.67 Lakhs. Attention is invited to page 56 of the P....
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.... Power Ltd [2009] 313 ITR 340 (Bom) (Page 52 to 55) (iii) HDFC Bank Ltd vs. DCIT 383 ITR 529 (Bom. HC) (Page 56 to 68) 8. Alternatively and without prejudice to the above, it is submitted that interest expense of Rs. 1144.02 Lakhs includes interest aggregating to Rs. 1041.99 Lakhs which is in relation to (EPC) Export Packing Credit and Pre Shipment Credit in Foreign Currency incurred for the purpose of export/ import business of the appellant. The appellant is prohibited, under Reserve Bank of India's Regulations, from using any part of such credit for any purpose other than the appellant's export business. Hence, such interest has to be excluded while computing the amount of disallowance. The details of interest expenditure are submitted at Page 57 of Paper Book (Corporate Grounds). 9. The appellant submits that the disallowance under Rule 8D(2)(iii) may be restricted to 0.5% of only those investments which have yielded income i.e 0.5% of Rs. 2352.53 Lakhs which will come to Rs. 11.76 Lakhs. The appellant places reliance on decision of Special Bench in case of ACIT Vs. Vireet Investment Pvt. Ltd. (SB) (2017) 165 ITD 27 (Para 11.16 of the Order). (Page 69 to 99) 10. Co....
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....ed AEs, that bank guarantee commission is not the appropriate benchmarking tool for determining the arm's length price of the "Income" accruing to the Appellant from the issue of each of the LOCs aforesaid. 3.4. without, prejudice to the foregoing grounds, and assuming whilst denying (1) that any Transfer Pricing Adjustment was required to be made to the Total Income returned by the Appellant in respect of the Appellant's non-recovery of any fees or commission from its concerned AEs and (i) that the rates of bank guarantee commission charged to the Appellant by its Bankers are relevant for making any such Adjustment, the Appellant submits that, having regard to the fact that the rates of such bank guarantee commission ranged from 0.30% per annum to 2.0% per annum [Paragraph 57, at Page 19 of the learned DRP's Directions), it is the lowest of those rates, i.e., 0.30% per annum, which ought to have been applied in making any such Adjustment. 3.5. Without, prejudice to the foregoing grounds, and assuming whilst denying that any Transfer Pricing Adjustment was required to be made to the Total Income returned by the Appellant in respect of the Appellant's non....
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....ssee did not incurred any cost. The issuance of Letter of Comfort by assessee have no bearing on the profit, income or loss as the assessee did not incur any cost or expenditure for issuing such Letter of Comfort and it does not constitute international transaction under section 92B of the Act. The Id. CIT (A) concluded that there is a fundamental gap between guarantee and Letter of Comfort. Guarantee is a legally enforceable; however, Letter of Comfort is not. We have noted that Hon'ble Karnataka High Court in United Braveries (Holding) Ltd. vs. Karnataka State Industrial Investment and Development Corporation (supra) held that Letter of Comfort merely indicates the appellant's assurance that respondent would comply with the term of financial transaction without guaranteeing performance in the event of default. The co- ordinate bench of Tribunal in India Hotels Co. Ltd. (supra) on similar ground of appeal by following the decision of Hon'ble Karnataka High Court held that Letter of Comfort does not constitute international transaction. So far as contention of Id. DR for the revenue that after amendment in Explanation to section 92B is concerned, we have noted that co- ....
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....d on this the TPO proposed an adjustment of Rs. 5, 75, 38,800/- be made to the total income of the appellant. The adjustment was computed on the value of the LOCs issued by the appellant to its AE's as against the actual draw down of funds from the bank by the AE's. ii. The AO under Section 143(3) of the Act passed the assessment order in conformity with the addition proposed by the TPO incorporating the proposed addition of Rs. 5,75,38,800/- to the returned income of the appellant. iii. The appellant has filed detailed submissions distinguishing a letter of comfort with intra-group credit guarantees together with other related issues. iv. In view of the facts of the case and position of letter of comfort 1 am not inclined to treat letter of comfort (LOC) at par with intra-group credit guarantees or equivalent to guarantees as averred by the TPO. The reasons for this are summarized as under a) the LOC is a unilateral letter issued by the appellant and does not constitute an agreement or contract It is not accepted by the Banker to whom it has been issued, b) it is not enforceable by law as in an event where the AE were to default in respect of the loan given ....
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.... in the appellant's case, the adjustment of Rs. 5,75,38,800/- is therefore deleted. viii Thus, this ground of appeal is allowed. 12. We find that the Tribunal in A.Y.2005-06 has decided this issue in favour of the assessee after observing as under:- Ground No.6 to 9 relates to Transfer Pricing Adjustment with respect to issuance of "Letter of Comfort". This issue is interconnected with the grounds of appeal raised by revenue in its cross appeal. The Id. AR of the assessee submits that Id. CIT (A) deleted the adjustment against which the revenue has filed its cross appeal. The Id. AR of the assessee submits that the assessee issued Letter of Comfort to Bankers of Associated Enterprises (AE) of assessee. The assessee not reported this transaction (issuance of Letter of Comfort) in its Transfer Pricing Study Report (TPSR). The Assessing Officer made reference to Transfer Pricing Officer (TPO) for computation of Arms Length Price (ALP) of transaction reported by assessee with its AE in its report furnished under Form 3CEB. The TPO noted that the assessee has not reported about issuance of Letter of Comfort to the Banker of AE. The TPO issued show cause notice for determina....
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....herefore, as precedence, following the aforesaid decision, we uphold the order of the ld. CIT (A) and consequently grounds raised by the Revenue are dismissed. 15. Since in the earlier assessment years namely 2005-06, 2006-07 and 2007-08 issue has been discussed and examined by the Coordinate Benches and revenue is not able to bring anything adverse on record to deviate from the earlier views, we respectfully follow the decisions of Coordinate Benches in earlier years and allow the ground taken by the assessee. In the result, AO is directed to delete the addition made on this count. 4.1. The learned AO-DRP erred in making an addition of Rs. 20, 79,633/- to the Total Income returned by the Appellant, as and by way of a Transfer Pricing Adjustment in respect of the rate of interest charged by the Appellant from some of its AEs for the extended period agreed to between the Appellant and such AEs for remittance by such AEs to the Appellant, of the sale proceeds of exports made by the Appellant to such AEs. 4.2. without prejudice to the foregoing ground, and assuming whilst denying that any Transfer Pricing Adjustment was required to be made to the Total Income returned by the Ap....
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.... Naturals (I) (P) Ltd. [2015] 231 Taxmann 401 (Del.) and held as under: "The question whether the interest rate prevailing in India should be applied, for the lender was an Indian company/assessee, or the lending rate prevalent in the United States should be applied, for the borrower was a resident and an assessee of the said country, must be answered by adopting and applying a commonsensical and pragmatic reasoning. The interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has to be repaid. Interest rates should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. Interest rates applicable to loans and deposits in the national currency of the borrower or the lender would vary and are dependent upon the fiscal policy of the Central bank, mandate of the Government and several other parameters. Interest rates payable on currency specific loans/ deposits are significantly universal and globally applicable. The currency in which the loan is to be re-paid normally determines the rate of return on the money lent, i.e. the rate of interest. [....
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....d the treatment on this issue given by the assessee. In view of above, ground raised by the assessee is allowed and AO is directed to delete the addition made on this count. 5. the Learned AO-DRP in disallowing expenditure aggregating Rs. 1, 74,544/-, by way of payments made to the Tata Public School, Devas Madhya Pradesh. 20. This ground of appeal is not pressed by the AR of the assessee, hence the same is dismissed. 6. the learned AO-DRP erred in disallowing expenditure aggregating 17, 76,270/-, by way of Additional Sales Tax paid. 21. This ground relates to disallowance of expenditure incurred by way of "Additional Sales Tax" amounting to Rs. 17,76,270/-. During the assessment proceedings, the appellant was asked to produce the orders passed by the concerned revenue authorities in respect of following amounts debited as Additional Sales Tax-Leather Division. Nature or Purpose for which Expenditure incurred Amount - Rs ENTRY TAX PAID AFTER APPEAL ORDER 1999-2000 13, 97, 240 DEMAND AFTER ASSESSMENT ORDER 1999-2000 SALES TAX 2,40,000 APPEAL AGAINST ASSESSMENT ORDER 99-00 CENTRAL 1,39,030 Total 17,76,270 22. The appellant could not furnish the relevant orders and....
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....ndia from its various office locations across the country like Delhi, Mumbai, Chennai & Kolkata. (ii) A contact person was made available to address all day-to-day matters and serve appellant's needs, interact with the Company's key personnel. (iii) Responsibilities for public relations including proactive strategy sessions for image building and product & market related public relations. (iv) Responsibilities for the appellant's output to the media/external audiences. The Scope of work is reproduced hereunder: 26. The appellant has explained the nature of services rendered and has submitted the agreement alongwith copies of invoices raised by the said party for monthly retainer ship fees. Alternatively, and without prejudice to the above, the arrangement was for rendering of services as "Retainer" and therefore, it is submitted that it is not necessary for the appellant to show that commensurate services had been rendered. A similar issue had been considered by Hon'ble ITAT Mumbai in case of appellant's group company viz. M/s Tata Sons Pvt Ltd for Assessment Year 2009-10 in ITA No. 4637/Mum/2016. A copy of said order was handed over at the time of hear....
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....ence, in view of the aforesaid observations and applying the principle of consistency as has been held by the Hon'ble Supreme Court in the case of Radhasoami Satsang reported in 193 ITR 321 (SC), in allowing such claim to the assessee in earlier as well as in subsequent years, we hold that there is absolutely no case made out by the revenue for disallowing this sum of Rs. 12.66 Crores during the year under appeal. Hence, the ground No.5 raised by the assessee is allowed and ground No.3 raised by the revenue is dismissed." 28. The appellant has also incurred similar expenses in earlier years wherein no disallowances were made. We also give here below the year wise amounts paid to M/s Vaishnavi Corporate Communications Pvt. Ltd. and whether allowed/disallowed by AO in the Assessment Order. Sr. No. Assessment Year Amount Remarks 1 2006-07 23,72, 232 No Disallowance 2 2007-08 27, 67, 812 No Disallowance 3 2008-09 36, 32000 Disallowed 4 2009-10 29,88,367 Disallowed 5 2010-11 38,76,282 Disallowed 6 2011-12 21, 6000 No Disallowance Considering the above decision where the facts remained the same, it is submitted that the disallowance made by the AO in re....
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....diture by way of Professional Charges Paid 30. During the year under consideration, the Assessee had incurred expenditure in a sum of Rs 36,32,040/-, representing fees paid to Vaishnavi Corporate Communications Pvt. Ltd. ("VCCPL"), for Media and Public Relations Services. Upon being required by the Id AO to furnish details of the said sum, the Assessee submitted to the Id AO that VCCPL had provided to it, the following services: (i) Public Relations services in India from its various office locations across the country like Delhi, Mumbai, Chennai & Kolkata. (ii) A contact person was made available for addressing all the day to day matters and serves the Assessee's needs; interact with its key personnel. (iii) Responsibilities for public relations including proactive strategy sessions for image building and product and market related public relations. (iv) Responsibilities for the Assessee's output to the media/external audiences. 31. The Assessee also furnished to the Id AO, a copy of its Media and Public Relations Services Agreement with VCCPL, which was valid for the period 1st November, 2006 to 31st October, 2011 The Assessee submitted to the Id AO that....
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....that case. We find that the facts & circumstances with regard t the payment made to the assessee company is similar. The evidence does not substantiate the payments made. In view of the above, we decline to interfere with the disallowance of payments made in Vaishnavi Communication. The ground is rejected." 30. We have gone through the submissions of the assessee alongwith the findings of AO and Ld. DRP. It is found that assessee is substantially failed to adduce any evidence of services rendered in the category of professional fee. We have gone through the contents of agreement also reproduced (supra), nowhere it looks like an agreement for rendering professional services. Assessee's argument that for earlier 2 years, the same expense was allowed and they are relying on the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) is not applicable here based on the facts of the case. Principle of consistency should have been followed as far as possible and permitted by the facts of the case, but as the concept of res-judicata is also there, to be considered before any adjudication. Hence, in the present situation we also asked the AR of the assessee to substan....
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....O erred in charging from the Appellant, an amount of 29,08,689, as "Interest u/s 244A", having regard to the fact that no amount under Section 244- A whatsoever has ever been paid to the Appellant in respect of the year under consideration. 34. Ground 9 mentioning amount of Rs. 2, 77, 01,822/- as amount already refunded. In the computation sheet attached to the Assessment Order, the AO has mentioned that amount of Rs. 2, 77, 01,822/- has been refunded to the appellant. The appellant has not received any refund for the Assessment Year under reference. A copy of Indemnity Bond filed with the Ld. AO is enclosed herewith. (Pages 143 & 147). In view of the above, the appellant requests to give necessary direction to grant relief after verification. 35. Ground 10, charging an amount of Rs. 67, 32,000/- as additional tax payable on account of dividend distribution tax. The AO in the computation sheet attached with the Assessment Order has computed an amount of Rs. 67, 32,000/- as payable by the appellant as additional tax on account of distribution of the dividend. The appellant during the year under reference distributed dividend of Rs. 4,00,00,000/- and has paid dividend distribution....