AI Drafter 
TaxTMI 
TaxTMI 
2024 (4) TMI 743
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.... grounds on 28-11-2023 which read as under: - Disallowance under section 36(1)(iii) 1. The Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) erred in sustaining the addition I disallowance of Rs. 96,49,617/- made in the assessment out of interest paid alleging diversion of interest bearing borrowals to the appellant's Group Companies invoking section 36(1)(iii) of the Act. 2. The Commissioner (Appeals) erred in not taking proper note of the information I clarification set out in the Grounds of Appeal and Written Submissions dt. 07.07.2022 / 20.12.2022 and the following judicial decisions cited in the present appellant's favour: i) S.A. Builders Limited vs. CIT (2007) 288 ITR 1 (SC) ii) CIT (LTU) vs. Reliance Industries Ltd (2019) 410 ITR 466 (SC) iii) CIT vs. Hotel Savera (1999) 239 ITR 795 (Mad) 3. The appellant submits that it had interest free funds to the tune of Rs. 60 Crores against the Balance due from the Group Companies of Rs. 7,32,75,428/- and on such facts I as per judicial decisions it must be presumed that the moneys due were relatable to interest free funds. On the aforesa....
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....ribunal be pleased to allow the expenditure of Rs. 1,59,03,000/- as claimed or, in the alternative, allow the entire expenditure of Rs. 4,64,31,000/- in determining the income of the year. 9. The Commissioner (Appeals) NFAC erred in dismissing the claim for full and proper credit for tax deducted at source - vide Para 6.5@ Page 25 of the Appellate Order. 10. The appellant submits that while it had claimed tax credit of Rs. 36,28,815/- as per Form 26AS the assessing officer has allowed credit of Rs. 21,25,187- only; in fairness, the Commissioner (Appeals) should have given a direction to the Assessing Officer to allow proper credit after verification. As is evident, three issues fall for our consideration i.e., (i) Disallowance of interest expenditure u/s 36(1)(iii); (ii) Disallowance of relaunch expenses; & (iii) Short Credit of TDS. 2. The Ld. AR filed issue-wise chart along with supporting documents and case laws. The Ld. AR made arguments supporting the case of the assessee. The Ld. Sr. DR, on the other hand, supported the assessment framed by Ld. AO. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The ....
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....presumption would be that the moneys advanced came only out of its own funds. However, Ld. CIT(A) chose to confirm the disallowance against which the assessee is in further appeal before us. 3.4 Upon perusal of assessee's financial statements, it could be seen that the assessee uses mixed funds for the purpose of its business. The Share capital and free reserves are Rs. 217.20 Crores whereas loan funds are to the extent of Rs. 135.61 Crores. It is also seen that the secured loans are for specific purposes i.e., project loans, vehicle loans etc. only and the same could not be diverted for other purposes. In such a situation, unless the nexus of borrowed funds vis-à-vis the loans advanced by the assessee is established by Ld. AO, a presumption could be drawn in assessee's favour that the advances were funded out of own funds and not out of borrowed funds. We find that no such exercise has been carried out by Ld. AO and therefore, it was to be presumed that funds were advanced first out of interest free funds available with the assessee. This is as per the decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. (supra). The decision of Hon'ble Madra....
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....ress Newspapers (Mumbai) Ltd. (IENML) founded by late Shri Ramnath Goenka, was publishing a number of newspapers, including its flagship newspaper "Indian Express". After death of Shri Ramnath Goenka on 05-10-1991, there were numerous litigations amongst his heirs and a decree was passed by Hon'ble Madras High Court on 16-04-1997 in terms of the settlement reached. This settlement was modified and IENML became the absolute owner of the registered titles of the newspapers and magazines which it was publishing and the assessee was not to use or adopt any of those titles, except in five southern States. The assessee was permitted to use the expression "New Indian Express" for publication of an English daily newspaper in those states. Under the first agreement the name "New Indian Express" could be used by assessee to publish an English Language daily subject to the condition that the expression "New" was on the same line and of the same size wherever the title "New Indian Express" appeared. The assessee received non-compete and forbearance capital fees of Rs. 56 Crores. It was also agreed between the parties to the agreement that the expression "New" need not be of the same size and i....
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....e could not be branded as capital expenditure merely on account of the fact that the benefit would flow in more than one year. 4.6 The Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. (3 Taxman 69) held that there may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a, commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not certain or conclusive test and....
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....), considering the explanation to Sec.14A, as introduced by Finance Act 2022, confirmed the disallowance The said explanation provided that disallowance would be attracted even if no income has accrued to the assessee. 8.2 It is the submission of Ld. AR that the assessee has not earned any exempt income during the year. We find that this issue is covered in assessee's favor by the decision of Hon'ble High Court of Madras in the case of CIT vs. Chettinad Logistics P. Ltd. (80 Taxmann.com 221) holding that Section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. Respectfully following the same, we direct Ld. AO to verify the same. If no exempt income has been earned by the assessee, the impugned disallowance shall stand deleted. The Explanation to Sec.14A, as referred to by Ld. CIT(A), in our considered opinion, is prospective in nature and the same is not applicable in this year. The corresponding grounds raised by the assessee stand allowed for statistical purposes. 8.3 This issue arises in assessee's appeal for AY 2012-13 also. Facts being pari-materia the same, the corresponding grounds raised in that year stand allowed for st....
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....overed against the assessee by the decision of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. Vs CIT (143 Taxmann.com 178). Respectfully following the same, we dismiss the corresponding grounds raised by the assessee. 10.2 This issue arises in assessee's appeal for AY 2012-13 also. Facts being pari-materia the same, the corresponding grounds raised in that year stand dismissed accordingly. 10.3 The assessee's appeal for AY 2011-12 stands partly allowed. 11. Assessment Year 2012-13 The issue in assessee's appeal are relaunch expenses, disallowance u/s 14A, disallowance of prior period expenses and disallowance of late payment of Employee's contribution to PF / ESI. All the issues have been adjudicated by us at appropriate places in preceding paragraphs. In the result, the assessee's appeal stands partly allowed. 12. Revenue's Appeal for AY 2012-13 This appeal has been field with a small delay of 81 days, the condonation of which has been sought by the revenue. No objection has been raised by the assessee and therefore, the delay stand condoned. The grounds raised by the revenue read as under: - 1. The order of the ld. CIT(A) is contrary to....
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....t Fees for Technical Services means managerial, technical and consultancy services but do not include payments considered as salary by the recipient of such income. Journalism is the process of collection, analyzing and disseminating information in public interest. This means it is a profession with a strong element of social responsibility. The Article- 5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA allows for exempting the payments made from taxation if there is no permanent establishment of the contracting entities. Therefore, the impugned disallowance was deleted. Aggrieved, the revenue is in further appeal before us. 13.3 Admittedly, none of the payee has permanent establishment in India. As noted by Ld. CIT(A), Fees for Technical Services means managerial, technical and consultancy services. The process of gathering information is nothing but a profession and these kind of services are covered under specific Article-5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA which are applicable to the facts of the present case. These articles exempt such payment from taxation in the absence of any permanent establishment. The provisions of DTAA, being....