TaxTMI 
TaxTMI 
2025 (8) TMI 447
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.... u/s 40(ba). 2. On the facts and circumstances of the case and in law, learned Assessing Officer has erred and was not justified in disallowing a sum of Rs. 27,50,000/- paid to Mohinder Verma, Dy Project Manager by arbitrarily & wrongly holding that same are not allowable u/s 40(ba) as per joint venture agreement and in total disregard to the mandate under the provisions of the Act. 3. On the facts and circumstances of the case and in law, learned Assessing Officer has erred and was not justified in disallowing a sum of Rs. 80,34,570/- being the tax payable in India on the salary of Mr. Harjit Dhillon, as Project manager [whose gross salary was never claimed by appellant] and such tax component borne by the appellant were allowed in all preceding years and thus learned AO arbitrarily & wrongly held that same are not allowable u/s 40(ba) as per joint venture agreement in total disregard to the provisions of the Act. 4. On merits, facts and circumstances of the case and in law, that above stated impugned amounts paid to members on account of reimbursement of legal & professional fee, exgratia and tax component of seconded employees of members of JV, were no....
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.... assessee took assistance of legal professionals of FCC for the settlement of disputes and finalization of the arbitration and made payment of Rs. 2,31,80,000/- to the FCC during the relevant year. However, the Assessing Officer ('AO') did not allow the same on the reasoning that the assessee had not brought any material on the record to substantiate its claim vis-à-vis such services rendered by the FCC. Thus, the AO disallowed the legal & professional fee of Rs. 2,31,80,000/- as under: "4.4 The assessee has claimed that the payment to M/S Foundation under the head Legal & professional Fee is a reimbursement of the cost incurred by M/S Foundation in relation to arbitration proceedings for the Joint Venture assessee. However, the contention of the assessee in this regard is not acceptable as it is not supported by the documentary evidence. 4.5 Assessee has failed to substantiate as to why the payment of legal & professional fee for the services rendered has not been made directly to the professionals concerned. The assessee has not furnished any details of the nature of legal & professional services rendered by FCC to the assessee. Hence, the submission of a....
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....uineness of the ex-gratia payment of Rs. 27,50,000/- made to Mr. Mohinder Verma, which was responded to. However, the AO was not satisfied with the said explanation of the assessee; therefore, he disallowed the same as under: "5.4 the reply of the assessee has been duly considered and not found acceptable as; (i) Sh. Mohinder Verma is not an employee of the assessee. He is a member of board of the JV constituted by representatives of both members. (ii) The JV agreement clearly provides that, "5.10 the members of board will not receive any remuneration but there out of pocket expenses of travel and lodging in India to attend board meetings will be charged to and reimburse by the joint venture." Hence, it is clearly established that the members of boards are not entitled for any remuneration or inventive or ex gratia payment by whatever name called. (iii) The project of the assessee had been completed in 2005 and any payment after the completion of the project cannot be justified in whatever name called by the assessee. (iv) The submission of the assessee that Sh. Mohinder Verma has already paid tax on such remuneration i....
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....n of Rs. 5,42,362/- on plant & machineries on the reasoning that the assessee had not done any business activity during the year as the assessee JV completed its project in Feb., 2005. Further, the AO also taxed the receipt of interest of Rs. 4,50,750/- on income tax refund of the assessee. 3.5 Aggrieved with the assessment order, the assessee filed appeal before the CIT(A) challenging all issues except the issue of taxability of interest of Rs. 4,50,750/- on income tax refund. The assessee got relief only on the issue of disallowance of depreciation of Rs. 5,42,362/-. Hence it filed this appeal agitating the above-mentioned disallowances in para 3.1, 3.2 and 3.3 of this order. A. Legal & Professional Fee paid to its member FCC: 4. The 1st issue is in respect of the Legal & Professional Fee paid to the FCC, a member of the assessee JV. 5. The Ld. Counsel submitted that the FCC was well armed with legal experts and professionals having expertise in handling the legal matters including arbitration of the business of large Projects. Therefore, their services were utilized on payment of legal & professional charges by the assessee JV to settle its dispute with the NJPC. The....
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....f Act was in parimateria to the old provision of the section 40(b) of the Act applicable to the partnership firms before 31st March 1989. The issue before the courts arisen from time to time while considering the old provision of section 40(b) of the Act applicable to the partnership firm was that whether the remuneration paid to a partner for rendering specific and special services would also be covered by the provision of section 40(b) of the Act and would be disallowed while computing the income of partnership firm. The courts had consistently held that the provisions of section 40(b) of the Act were intended to prevent the siphoning of the firm's income to partners to reduce the tax liability in the hands of the partnership firm by way of salary, bonus, interest, commission and other remuneration. But wherever a partner is under no legal obligation to provide any particular service or involve himself in any particular activity, the payments made to him for such services would not fall under the provision of section 40(b)) of the Act, argued the Ld. Counsel. In the case in hand also, the legal and professional fee paid to FCC was for the specific services which were entruste....
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....ssessee in its books of accounts. In view of the page 108-112 of the PB, the issue of legal and professional fee paid to FCC during the relevant period needs further ascertainment of facts; (i) time period during which services by three persons as mentioned above rendered, (ii) whether the invoice dated 31.12.2010 referring 12 months consists of 9 months of the relevant year and 3 months of preceding year, (iii) prior period of expense, if any, under the head legal and professional fee, etc. 10. Further, the Ld. Counsel did not bring any material before us to contradict the finding of the AO that there is no corroboratory evidence along with the nature of services rendered by the FCC in relation to the arbitration proceedings of the assessee JV vis-à-vis the cost incurred in this regard by the FCC which was reimbersed by the assessee JV as mentioned in para 4.4 to 4.8 of the assessment order. Before us, no correspondence with the Arbitrator was filed. In view of the above and considering facts of the case in entirety and in the interest of justice, we deem it fit to set aside the finding of the Ld. CIT(A) in this regard and remit this issue; the legal and professional fee....
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....business expenditure of the assessee JV and therefore, the same had to be allowed under section 37 of the Act. 13. On the other hand, the Ld. Sr. DR, emphasizing on orders the Authorities below, contended that the ex-gratia payment to Mr. Mohinder Verma and the tax payment of Mr. Harjeet Dhillon were not at all the business expenditure of the assessee but these were the sums paid to the FCC through the ex-gratia payment to Mr. Mohinder Verma and the tax payment of Mr. Harjeet Dhillon. Further, it was contended that the tax liability of Mr. Harjeet Dhillon was his personal tax pertaining to earlier years and it had nothing to do with the business of the assessee for the relevant year. Further, it was submitted that the admitted ex-gratia payment to Mr. Mohinder Verma and the tax liability of Mr. Harjeet Dhillon could have been done out of the profit as an appropriation of income and not as a charge to income as the same was not paid to meet any obligation in the normal course of business of the assessee. He drew our attention to the fact that the assessee JV had never paid any such sum in the past in lieu of their works done as an individual person and not as Board Members of the....
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.... दिलà¥à¤²à¥€ CONTINENTAL FOUNDATION JOINT VENTURE"- being deductor Re: Sub Application for Non Deduction of Tax at Source u/s 195(2)/197 of the Act for the year 2010-11 - Foundation Company of Canada Ltd. Dear Sir, This is to inform you that we M/s Continental Foundation Joint Venture ('The Company') PAN: AAAAC0084D and having its office at Continental House, 28, Nehru Place, New Delhi 110017. The Company is a joint venture between M/s Foundation Company of Canada Ltd (FCC) and Continental Construction Ltd (CCL) and is assessed as an Association of Persons (AOP) since previous year relevant to AY 1993-94. The assessee was engaged in the business of civil construction of dam at Nathpa Jhakri, Distt Kinnaur, Hinachal Pradesh, awarded by Nathpa Jhakri Power Corporation (NJPC) which is interalia financed by the World Bank. For the purpose, assessee was awarded two contracts namely Contract no 1.00 and Contract no. 2.01 with an aggregate estimated initial contract price of RS 1150 crores for the execution of the same project of construction of dam at Nathpa Jhakri. The profit sharing ratio between the two company is FCC 45% and CCL 55%. The Comp....
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....al Foundation Joint Venture Continental House, 28 Nehri Place: New Delhi - 110017 Name & Address of the Non-Resident with whom contract was made : Foundation Company of Canada Ltd 20 Carlson Court, Suit 800, Toronto, Ontario, M9W7K6, Canada Date of invoice Invoice no. FCC-2010-11 dated 31/ 12/2010 Gross Amount of Contract CAD 5,00,000 on. account of reimbursement of expenses for defending JV before Arbitrators. Nature of Contract Joint venture agreement between Foundation Company of Canada Ltd and Continental Construction Ltd for civil construction of dam at Nathpa Jhakri, Distt Kinnaur, Hinachal Pradesh, awarded by Nathpa Jhakri Power Corporation (NJPC) which is interalia financed by the World Ban Name & Address of the Non-Resident with whom contract was made : Foundation Company of Canada Ltd 20 Carlson Court, Suit 800, Toronto, Ontario, M9W7K6, Canada We confirm that the FCC does not have any other business interest of any kind or fixed place in India, other than its obligations under the joint venture agreement for execution of the Nathpa Jhakri Project. In view of the above, we request that a certificate may kindly be issued for NIL deduction of....