TaxTMI 
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2026 (1) TMI 130
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....C, Delhi 22.06.2021 143(3) rws 144C 2017-18 Assessee 3. 1518/Mum/2025 ITBA/APL/S/250/2024-25/1071989638(1) 08.01.2025 ACIT LTU, Circle 1, Mumbai 03.11.2021 143(3) rws 144C 2018-19 Assessee 4. 2243/Mum/2025 ITBA/APL/S/250/2024-25/1071989638(1) 08.01.2025 ACIT LTU Circle 1, Mumbai 03.11.2021 143(3) r.w.s.144C 2018-19 Department 5. 2244/Mum/2025 ITBA/APL/S/250/2024-25/1071982367(1) 08/01/2025 NFAC, Delhi 22.06.2021 143(3) r.w.s.144C 2017-18 Department 6. 2245/Mum/2025 ITBA/APL/S/250/2024-25/1071981574(1) 08/01/2025 ACIT LTU CIRCLE 1, Mumbai 19.02.2020 143(3)r.w.s144C 2016-17 Department 2. Grounds taken by the assessee are reproduced as under: ITA No. 1516/MUM/2025 1. Tax Credit u/s, 90 in respect of Dividend received from subsidiary in Singapore On facts and circumstances of the case and in law the Ld. AO erred in disallowing the Appellant's claim for tax credit of Rs 9,96,61,577 being the 'Singapore tax paid as defined under Article 25 (3) of the of the Double Tax Avoidance Agreement between India and Singapore. Grounds relat....
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....ppellant and its AEs The Id. CIT(A) erred in law and on facts, in disregarding the contractual terms of the legally binding agreement's between the Appellant and the AE(s). 3.3 Rejection of the functional and economic analysis carried out by the Appellant The ld. CIT(A) erred in law and on facts, in rejecting the functional and economic analysis carried out by the Appellant and in considering the AEs as the least complex entity. 3.4 Disregarding the benchmarking analysis The Id. CIT (A) erred in law and on facts, in disregarding benchmarking analysis undertaken by the Appellant in Transfer Pricing Documentation report. 15 Selection of the comparable companies Without prejudice to the above, even if the Als are to be treated as the tested party and gross profit sales is selected as the appropriate PLI, the id. CIT(A) end in rejecting functionally similar companies. 4 Provision of guarantees to AFs 4.1 The Id. CIT(A) erred in law and on facts, in holding that the provision of various guarantees by the Appellant to third parties on behalf of its AEs were international transactions. 4.2 The Id....
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....the Appellant was to evade tax and shift profits outside of India which is a condition precedent for making the Transfer Pricing Adjustment 2.1.3 On facts and circumstances of the case and in law, the Id. CIT (A) erred in not holding the proceedings initiated by the Id. TPO as void ab initio since the Id. AO erred in making the reference to the Id. TPO without proper application of mind to the facts on records, without recording reasons for any necessity or expediency and without a legal and valid approval of the Id. CIT and hence the same being not in accordance with the provisions of Section 92CA(1) of the Act. 2.1.4 The transfer pricing adjustments are contrary to the principles laid down by the Hon'ble Mumbai Tribunal in the Appellant's own case for the A.Y. 2005-06 (DCIT vs. Tata Consultancy Services Limited) and therefore are required to be quashed and deleted. 2.1.5 The Id. CIT(A) erred in law and on facts in not adjudicating the ground on rejection of the Transfer Pricing Documentation Report maintained by the appellant in good faith and with due diligence. 3 Provision of software & consultancy services 3.1 Re-characteriz....
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....Appellant submits that each ground of appeal is without prejudice to one another. 4. The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. ITA No.1518/MUM/2025 1. Tax Credit u/s. 90 in respect of Dividend received from subsidiary in Singapore On facts and circumstances of the case and in law the Ed. AD erred in disallowing the appellant's claim for tax credit of its 6.91,76,192 being the Singapore Tax paid as defined under Article 2501 of the of the Double Tax Avoidance Agreement between India and Singapore. Grounds related to Transfer Pricing: 2. Transfer pricing adjustments/additions/variations, 2.1 The Id. CTT (A) erred in law, on facts and in circumstances of the case in not deleting the transfer pricing adjustments/additions/variations made by the ld. AO as being bad in law, illegal and unsustainable on the basis of the following grounds, taken singly or cumulatively: 2.1.1 a) The Id. DCIT has failed to comply with the mandatory conditions stipulated in section 920(3) of the Act and ....
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....lysis The Id. CIT (A) erred in law and on facts, in disregarding benchmarking analysis undertaken by the Appellant in Transfer Pricing Documentation report. 3.5 Selection of the comparable companies Without prejudice to the above, even if the AEs are to be treated as the tested party and gross profit /sales is selected as the appropriate PL.1, the Id. CIT(A) erred in rejecting functionally similar companies. 4. Provision of guarantees to AFs 4.1 The Id. CIT(A) erred in law and on facts, in holding that the provision of various guarantees by the Appellant to third parties on behalf of its Als were international transactions. 4.2 The Id. CIT(A) erred in law and on facts, in not appreciating the fact that provision of guarantee is a shareholder activity and no income is expected to be generated from the same. 4.3 Without prejudice to the above, the id. CIT(A) has erred in law and on facts in disregarding the Appellant's contention that the guarantee fee should be charged based on the effective rate of insurance premium paid by the Appellant as a percentage of group revenue. 4.4 Without prejudice to the above, ....
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.... AE though it was held by CIT(A) himself in para 19.5 of the order for A.Y 2009-10 that AEs are engaged in marketing and distribution liable to be compensated for limited function? 1.6 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in holding that since OP/OC has been considered as PLI for the comparables, the same should considered for the tested party AEs, Ignoring the fact that there is no back-to-back sub-contract payment in the cases of comparables? 1.7 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in allowing the objection on erroneous application of TNMM in favor of the assessee? 1.8 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in in rejecting the FAR and economic analysis carried out by the appellant by partly allowing it in favor of appellant? 1.9 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right about the objection on disregarding the benchmarking analysis carried out in favor of the appellant? 1.10 Whether on the facts and circumstances of the case and in law, the Ld CIT....
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....ated to the IT business division which is very clear from Clause 1(K)() of page 4 of the said Scheme approved by Hon'ble High Court, thereby the assessee is the legal owner of all trademarks without any limitation and thus, Tata Sons Ltd. claiming any legal ownership on the trademarks is violative of the Court Order and that the CIT(A) relying on the Agreements entered into and Certificates Issued much later to this Court Sanction is patently wrong. (ii) After the above Court Order, If at all there could be any claim by Tata Sons Ltd. on trademark, it could only be construed for "TATA" appearing in "TATA CONSULTANCY SERVICES" and that has been duly remunerated by the assessee to Tata Sons Ltd. @ 0.25% of the Annual Net Income of each subsidiary. (iii) The BEPS Action Plan 8 to 10 emphasizes substance over form, economic reality over legal form and conduct of parties over contracts for evaluating a transaction from transfer pricing angle which has been ignored by CIT(A) which is more so when the Agreements and the Certificates issued relied on by the CIT(A) belong to the period much later to the Court Sanction Order. (iv) Even if it is assumed without ....
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....Sons L and not towards "TCS" and "TATA CONSULTANCY SERVICES". (ii) "TCS" and "TATA CONSULTANCY SERVICES" if at all appearing in any Agreements between the assessee and Tata Sons Ltd, entered into after the date of the Court Order (09.05.2003) needs to be ignored giving credence to substance over form, economic reality over legal form and conduct of parties over contracts for evaluating the transaction from transfer pricing angle. (iii) The brand royalty charged Rs. 2500.75 crores is for the exclusive use and exploitation of the brand 'TCS' and 'TATA CONSULTANCY SERVICES' (for which assessee is undoubtedly the economic owner) by the AEs of the assessee for augmenting their business revenues and for the brand "TATA" of which the Tata Sons Ltd is the legal owner for which it has been separately remunerated @ 0.25% by each of the AEs of the assessee. (iv) Economic ownership and the value creation on brand as admitted by the assessee itself in its Annual Report has been completely ignored by the CIT(A) 3.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in completely ignoring and not adjudicatin....
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....red in holding that the commission paid to non-resident agents operating outside India was not liable to tax in India and hence assessee was not liable to deduct tax under section 195 of the Act, despite it being clearly held by the Assessing Officer that the commissions are in connection with soles/revenue of the Indian Company and are thus chargeable under sections 5 & 9 of the income-tax Act, 1961, thus establishing that the liability to deduct tax ot source under section 195 arose which the assessee failed to discharge?" 11. "Whether on facts and in circumstances of the case and in law, the Ld. CIT(A) erred in allowing the deduction, holding that the year-end provision represents a known liability for services already availed and not an ad-hoc or contingent provision whereas The AO maintains that the year-end provision is not an allowable deduction under Section 37, as the liability was not crystallized within the relevant financial year." 12. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting relief u/s 90/91 for foreign taxes paid on income which is not taxable in India u/s 10AA of the Income-tax Act, 196....
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....the Ld CIT(A) is right in holding that OP/OC is the appropriate PLI and not OP/VAE, ignoring the fact that the AEs did not perform any function or own any asset or bear any risk pertaining to the software development for which the subcontract payment has been made to the assessee and therefore, the same should be excluded as pass-through cost from the PLI computation? 1.5 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in giving direction to work out margin (OP/OC) of AEs including cost incurred on (offshore) transaction assigned to TCS as against the decision of TPO of adding margin only on cost incurred by the AE though it was held by CIT(A) himself in para 19.5 of the order for AY 2009-10 that AEs are engaged in marketing and distribution liable to be compensated for limited function? 1.6 Whether on the facts and circumstances of the case and in law, the Ld CITA) is right that since OP/OC has been considered as PU for the comparables, the same should be considered for the tested party AFs, Ignoring the fact that there is no back-to-back payment in the cases of comparables? 1.7 Whether on the facts and circumstances....
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....ntee fee from 1.5% to 1.39% by relying on the decisions of his predecessors, as the facts and circumstances differ from year to year? 3.3 Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in arbitrarily determining the rate of lease guarantee at 1.39%? On the issue of Financial Guarantee: 4.1 Whether on the facts and circumstances of the case and in low, the Ld CIT(A) is right in relying on the decision of CIT(A) in assessee's own case for A.Y 2009-10 in giving direction to charge guarantee commission @ 0.77% on financial guarantee in place of 1.50% charged by TPO? 4.2 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in reducing the rate of financial guarantee fee from 1.5% to 0.77% by relying on the decisions of his predecessors, as the facts and circumstances differ from year to year? 4.3 Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in arbitrarily determining the rate of financial guarantee at 0.77%7 On the issue of Receipt of Brand Royalty: 5.1 Whether on the facts and circumstances of t....
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.... more so when the Agreements and the Certificates issued relied on by the CIT(A) belong to the period much Court Sanction Order. (iv) Even if it is assumed without admitting that there is some lack of clarity on the legal ownership of the trademarks, the CITIA) completely the ignored the economic ownership of the brand "TCS" and "TATA CONSULTANCY SERVICES" when the assessee itself claimed in its annual report of the very same FY 2013-14 that "TCS brand value up by USS 3.04 billion in 2014; Overall brand value in 2014 USS 8.2 billion, A 3X increase in the growth of our brand value; Consolidated our "Big &' position in the IT services category; 50% growth In brand value; "TCS" the Fastest Growing IT services brand in 2013 worldwide, Strangest brand rating in industry. Brand strength rated at AA+", strongly proving that the assessee is the economic owner of the brand and the 'value creation' for the said intangible asset of brand has been carried out only by the assessee and not by Toto Sons Ltd, leaving absolutely no lota of doubt or ambiguity on the economic ownership of the brand and so, Toto Sons Ltd. having been remunerated @ 0.25% by the assessee for "TATA",....
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....tances of the case and in law, the Ld. CIT(A) is correct in completely ignoring and not adjudicating on the detailed analysis and facts mentioned by the TPO in para 7.1 to 7.10 in page Nos.36 to 88 of TPO's order and instead tangentially relied on some Agreements entered into and Certificates issued thot too after the legal transfer of al assets and liabilities as per Court Order dated 09.05.2003? 6. "Whether, on the facts and in the circumstances of the case and in law, Ld. CITTA) erred in allowing deduction of Rs. 26,48,96,494/-being "State Taxes" paid overseas on the ground that since state taxes paid in USA is not eligible for relief under section 90/91, deduction under section 40(a)(ii) is permissible, when the said provision in fact pertains to amounts not deductible?" 7. "Whether, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in allowing expenses incurred on import of Software packages amounting to Rs. 16,61,59,534 which were disallowed by the assessing officer under section 40(a)(i), on account of non-deduction of tax /s. 195 of the Act?" 8. "Whether, on the facts and in the circumstances of the case and in law....
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.... AD maintains that the your end provision is not an allowable deduction under Section 37, as the liability was not crystalized with the relevant financial year." 15. "Whether, on the facts and in the circumstances of the case and in low, the L. CITIA) erred in granting relief u/s 90/91 for foreign taxes paid on income which is not taxable in India u/s 1044 of the Income-tax Act, 19617 16. "Whether, on facts and in circumstances of the case and in low, the Ld CITIA) erred in deleting the disallowance of expenses incurred on payment of subscription fees u/s 400(LA) Rs. 3,31,08,006/ 17. "Whether on facts and in circumstances of the case and in low, the Ld. CIT(A) erred in deleting the disallowance of claim of deduction under section 10AA in respect of interest income which was claimed during the course of assessment proceedings, without filing revised return of income?" 18. "Whether on facts and in circumstances of the case and in low, the (d. CIT(A) erred in allowing deduction under Section 80G for CSR expenditure and the same needs to be set aside, and the disallowance made by the Assessing Officer during the course of assessment proceedings be up....
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.... adding margin only on cost incurred by the Al though it was held by CIT(A) himself in para 19.5 of the order for A.Y 2009-10 that Als are engaged in marketing and distribution liable to be compensated for limited function? 1.7 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in holding that since OP/OC has been considered as PLI for the comparables, the same should be considered for the tested party AEs, ignoring the fact that there is no back-to-back subcontract payment in the cases of comparables? 1.8 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in rejecting the comparable AVNET INC as the company has been accepted as a comparable in previous AYs? 1.9 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in in rejecting the FAR and economic analysis carried out by the appellant by partly allowing it in favor of appellant? 1.10 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right about the objection on disregarding the benchmarking analysis carried out in favor of the appellant? On the issue of ....
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....fee from 1.5% to 0.77% by relying on the decisions of his predecessors, as the facts and circumstances differ from year to year? 4.3 Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in arbitrarily determining the rate of financial guarantee at 0.77%7 On the issue of Receipt of Brand Royalty: 5.1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing the AO/TPO to delete the adjustment of Rs. 1779,23,55,479/- made on account of Receipt of Brand Royalty from its AEs for use of the Brand "Tete Consultancy Services & TCS"? 5.2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in solely relying upon the Agreements between the assessee and the Tata Sons Ltd dated 19.04.2004 and 24.12.2009 and the three Trademark Certificates issued on 25.03.2005, 16.08.2005 and 19.01.2006 for arriving at his decision that Tata Sons Ltd. is the legal owner of the brand "TCS" and "TATA CONSULTANCY SERVICES" and that if at all the brand royalty is assessable, it is to be considered in the hands of Tata Sons Ltd. and not in the hands of the ass....
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....ating in industry. Brand strength rated at AA+", strongly proving that the assessee is the economic owner of the brand and the 'value creation' for the said intangible asset of brand has been carried out only by the assessee and not by Tata Sons Ltd, leaving absolutely no iota of doubt or ambiguity on the economic ownership of the brand and so, Tata Sons Ltd. having been remunerated @ 0.25% by the assessee for "TATA", it is the assessee that should be remunerated for the economic ownership and value creation towards the brand "TCS" and "TATA CONSULTANCY SERVICES". (v) No prudent businessman would let his intangible asset being brand valued at $ 9.047 billion (as admitted by the assessee itself in its Annual Report) be used by others without compensation and as such value creation for the brand happened in the hands of the assessee, which deserves ALP compensation in terms of section 92F(ii). 5.3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct on relying upon the draft red herring prospectus and more so it is only a draft and that Tata Sons Ltd cannot be the legal owner after the Court Order dated 09.05.2003 and that....
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....e?" 7. "Whether, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in allowing expenses incurred on import of Software packages amounting to Rs. 57,53,56,445/- which were disallowed by the assessing officer under section 40(a)(1), on account of non-deduction of tax u/s 195 of the Act?" 8. "Whether, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not treating the expenses incurred on import of Software packages amounting to Rs. 57,53,56,445/- as "royalty' within the meaning of section 9(1)(vi) of the Act.?" 9. "Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the disallowance of Rs. 93,20,819/-made under section 14A of the Act, despite the fact that the Assessing Officer had explicitly recorded dissatisfaction regarding the correctness of the assessee's claim before invoking Rule 80, following the provisions of Section 144 of the Act." 10. "Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in treating expenditure of Rs. 185,44,31,079/- Incurred for brand building as revenue expenditure dis....
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....s correctly taxed in AY 2015-16, and allowing its deduction in AY 2016-17 results in an undue benefit to the assessee. The department should also emphasize that tax assessments should be aligned with the principle of accrual accounting to ensure consistency and prevent manipulation of taxable income." 3. Summary of grounds of appeal raised by both, assessee and Revenue is tabulated below to highlight the issues to be dealt vide the respective grounds and how they are common in the three years which are to be adjudicated in the present appeals. We will take up appeal of the Revenue for Assessment Year 2016-17 in ITA No.2245/Mum/2025 and assessee's appeal in the same Assessment Year in ITA No.1516/Mum/2025 as lead cases, to draw the facts and deal with the issues raised by both the parties. Our observations and findings in these two appeals for Assessment Year 2016-17 shall apply mutatis mutandis to the appeals of the other two years by both the parties. It may be noted that numbering of respective grounds of appeal may be different in the two other years which is taken care of while tabulating the issues arising out of the grounds of appeal below. We take up grounds of appeal ser....
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....d hardware system, management of data processing and information systems and data communication systems. It carries out its overseas operations through a web of foreign subsidiaries which act as its marketing and sales support companies. These subsidiaries serve as a hub for realization of international projects. Client service is carried out by its division in India. Also, TCS was earlier held by Tata Sons Ltd. which is the principal investment holding company of Tata group. On 09.08.2004, the TCS division of Tata Sons Ltd. was converted into a separate company pursuant to order of Hon'ble High Court of Bombay approving a scheme of amalgamation. Under this scheme, the TCS division was demerged w.e.f. 01.04.2004. 4. We take up appeals for AY 2016-17 for which assessee filed its return of income on 18.11.2016, reporting total income at Rs. 16364,82,10,680/- with book profit u/s. 115JB at Rs. 29099,98,07,210/-. Assessee claimed deduction of Rs. 13298,22,42,113/- as exempt income u/s. 10AA and dividend income of Rs. 56,48,80,329/-. During the year under consideration, assessee reported, among others, the following international transactions with its Associated Enterprises (AEs)....
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.... for the comparable. According to him, reliability of data is not an issue, considering that the finances are available and there is no specific reason considering them as non-comparable. In this respect, functions performed and risk assumed by the AEs is tabulated below for ready reference.: Particulars Important information/documents Functions performed by employees of AE Key selling and marketing functions performed by AEs Profile of AE Key Employees -Postgraduates in Business Administration, Bachelors and Masters in various technical fields Significant decision of AE business AEs board of directors undertaking significant decisions for AE's business High level selling function Incentive policy of AE employees (corroborates the high-level selling functions) Contractual relation with customer AEs enter into contract with customers Principal to principal relation Assessee and AEs have principal to principal relation Market Risk Some of AEs making losses signifies that they are subject to market risk Credit Risk Provision for bad and doubtful debts signifies AEs are subject to risk associated with deferment of payment by client....
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....ten note, we are of the view that the decision of learned Commissioner (Appeals) on the aforesaid issues are unassailable. As regards the issue of appropriate PLI, we are of the view that considering the nature of activity performed by the assessee as well as the AEs, it cannot be said that the A.Es are not bearing any risk. Rather the facts on record reveal that the AEs performed the role of risk bearing distributors. It is well brought out by learned Commissioner (Appeals) in his order that the AEs are bearing credit risk and risk of default by client. In fact, the assessee through proper evidences has demonstrated instances where the credit risk with reference to part cancellation of contract has been borne by the AES without compensation from the assessee. The documentary evidences in this regard furnished by the assessee were thoroughly examined not only by learned Commissioner (Appeals) but they were also produced before us. Thus, from the aforesaid facts, it becomes clear that significant marketing functions are being performed and distribution and marketing risk are being taken by the AEs. On examination of the financials of the subsidiaries it is revealed that some subsidi....
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....partmental Representative. On the contrary, on a thorough and careful reading of the impugned order of learned Commissioner (Appeals), we are of the view that learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No Convincing argument or evidence has been brought on record by the ed Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed." 6.2. From the above extraction, it is also noted that Coordinate Bench observed the pains taken by ld. CIT(A) to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted final comparables to be considered for comparability analysis. He did not find any merit in the grounds raised by the Revenue on the said issue. The Coordinate Bench observed about the examination who afte....
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....te Bench drew its conclusion in para-20 which has already been extracted above dismissing the grounds raised by the Revenue. Having held the grounds raised by the Revenue against it, it also held that the appeal filed by the assessee was rendered academic and therefore no separate adjudication was done. As already noted, this is a recurring issue, with history of past several Assessment Years and there being no change in the fact pattern in respect of functions of the assessee performed by it when compared with the earlier years, which ld. TPO himself has accepted and acknowledged in his order more particularly in para 5.3 and 5.6.3, the findings of the Coordinate Bench in the order for Assessment Year 2009-10, in assessee's own case (supra) squarely applies in the appeals before us for Assessment Year 2016-17, both by the Revenue as well as the assessee. Respectfully, following the same, grounds raised by the Revenue are dismissed. Also, the grounds raised by the assessee in view of the outcome of grounds raised by the Revenue becomes academic, hence do not require adjudication. II. Performance Guarantee, III. Lease Guarantee, and IV. Financial Guarantee....
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.... 1" April 2002, provision of guarantee to AEs has to be considered as an international transaction. Different Benches of the Tribunal have also expressed similar view on the issue. Therefore, we hold that the provision of guarantee to the AEs is an international transaction. In fact, the aforesaid view has been expressed by the Co-ordinate Bench in WNS Global Services Pvt. Ltd. (supra). Therefore, following the aforesaid decision of the Co-ordinate Bench and the decision of the Hon'ble Jurisdictional High Court in Everest Canto Cylinders Ltd. (supra), we direct the Assessing Officer to charge guarantee commission @ 0.5% per annum both on performance / lease guarantee as well as financial guarantee." 9. Respectfully following the above decision, facts remaining same, grounds raised by the Revenue in respect of performance, lease and financial guarantee vide ground nos. 2, 3 and 4 are dismissed. 10. In view of our above stated decision on the grounds raised by the Revenue on this issue, no separate adjudication for ground no.4 in the appeal by the assessee is required. V. Brand Royalty 11. Ground no.5 is on the issue relating to receipt of brand royalty of Rs. 1779,23....
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.... Tata Sons apart from violating the provisions of the Trademarks Act, 1999 and will attract all the penal consequences as prescribed by the Trademarks Act, 1999 vii. Further, it will be both legally and commercially inappropriate for any affiliates of the assessee to pay brand subscription fees to it for use of "TCS/Tata Consultancy Services" marks when these marks are owned by Tata Sons. Affiliates of assessee also pay subscription fees for their use, directly to Tata Sons viii. TPO has no power to change the legal ownership of an asset that has existed for more than 150 years 11.1. It was further submitted that this issue is squarely covered by the decision of Coordinate Bench in assessee's own case in Assessment Year 2014-15 in ITA No.5199/Mum/2019, dated 15.09.2023. In this decision, the Coordinate Bench referred to another decision in assessee's own case for AY 2012-13 to hold that nature of payment made by the assessee is identical to the one made in the earlier year and thus, following the decision of the Coordinate Bench, it did not interfere with the decision of the ld. CIT(A) and thus, dismissed the ground raised by the Revenue. The factual position n....
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.... and distinct from the brand of "TATA". Brand value "Tata Consultancy Service" is largely self-generated which can be attributed to the name "TATA" to a small extent only. For this limited extent, assessee pays Rs. 75 crores annually to Tata Sons Ltd. He further, submitted that assessee had commissioned a concern "Brand Finance" to value its brand, i.e., Tata Consultancy Services, for which copy of brand valuation report as on 01.01.2016 issued by Brand Finance was submitted during the course of hearing. It was pointed out that brand of "Tata Consultancy Services" is the fourth most valuation brand within the IT services sector worldwide and is amongst top 10 companies in the world in the IT services sector. According to this report, the brand "TCS" was valued at USD 9047 million as on 01.01.2016. By referring to this valuation report, contention of the ld. CIT DR is that there is more to the brand value of the "Tata Consultancy Services" within the name "TATA" which has been generated by the assessee on account of its domain competence in the IT services sector, its continued growth, excellence in service and delivery, customer satisfaction, etc. He further pointed out that brand ....
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....ns Ltd. is a proprietor of trademark and service mark "TATA". 14.2. On the aforesaid issue, we have considered the submissions made by both the parties and perused the material on record. We have also gone through the order of the Coordinate Bench for the preceding years dealing with the same issue. Ld. CIT DR in his submission pointed to certain facts to distinguish the applicability of the judicial precedents in assessee's own case. We note that there is no change in the factual position which the Coordinate Benches have dealt in the preceding years in assessee's own case, on this issue. The facts dealt in the earlier years and the facts narrated in this year are identical. Also, the Brand Valuation Report issued by Brand Finance relied upon by ld. CIT DR for distinguishing the preceding years decisions, categorically mentions Tata Sons as the owner of the trade mark. There being no change in the factual position vis-à-vis brand ownership, we hold that the judicial precedents of the preceding years in assessee's own case squarely applies in this year also. 14.3. For the above, relevant findings of the Coordinate Bench in appeal for Assessment Year 2014-15 (supra) rea....
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.... the CIT(A). This ground of the revenue is dismissed." 24. Similarly, in A.Y. 2013-2014 in ITA No.1769/Mum/2018 and for A.Y. 2012-2013 in ITA No.797/Mum/2018, this issue has been decided as under:- "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. 1943 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 this expenditure as it is a recurring payment by the assessee The Id. DR vehemently relied on the order of the Id. AO. 9.2. We find that this Tribunal in assessee's group concern's case of Tata Auto....
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....sessee 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 Le. 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. All these three companies have been using the name TATA since long As regards assessee's submission that the similar claim had been-allowed in past, it may be noted that this particular issue was never examined in past. Further. perpetuity of a mistake....
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....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 of the overall objectives of the TATA Brand Equity & Business Promotion Scheme and interacting closely with the participating TATA Companies in a certainly coordinated manner, engage and set up a team of senior personnel and/or advisors/consultants and/or specialists firms as well as provid....
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....nd 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 did 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 Id. 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 said agreement towards TATA brand equity and business promotion scheme was disallowed by the A.O. The Id. CIT(A), however, allowed the same and the Tribunal vide its order dtd. 30-8-2011 passed in ITA No. 5701/Mum/2008 for ITA No.1769/Mum/2018 and other appeals M/s. Tata Consultancy Services Ltd., 28 ....
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.... 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. I of assessee's appeal. 9.3. Respectfully following the same, we find no infirmity in the order of the Id. 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." 14.4. As we mulled on the concept of 'brand', we learnt that a valuable brand isn't built overnight and it isn't built by visuals alone. It's shaped by every promise made and every experience delivered. At its core, brand value comes from trust, relevance and consistency. For a brand to stand apart, it is characterised by certain differentiating attributes with predominantly value based architecture. There is purpose which is built in the DNA of the organisation which the brand represents. It carries unmatched trust capital to enjoy credibility across diverse sectors of socio-economic setup. There is coherence in corporate governance delivered through moral leadership. It can be linked to national pride, progress and seen as a ....
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.... a deductible expense in the return of income. Ld. Assessing Officer has, relying on various decisions including decision of Hon'ble Bombay High Court in the case of S Inder Singh Gill, 471 ITR 284, Hon'ble Karnataka High Court in the case of Kirloskar Electric Co Ltd. 228 ITR 676, Hon'ble Madras High Court in case of CIT vs Indian Overseas Bank 50 ITR 725 and Hon'ble Calcutta High Court in case of Jeevan Ltd vs CIT 48 ITR 170 and ITAT decision in assessee's own case for Assessment Year 2005-06 held that the said amount is not liable to be allowed as deduction either u/s 37(1) or section 40(a)(ii). 16. We have examined the detailed submission made by the assessee and gone through the documents placed on record. It is observed that the issue is squarely covered in favour of the assessee in its own case by the Coordinate Bench for Assessment Years 2007-08 to 2015-16. Relevant portion of the order of Coordinate Bench, dated 18.12.2023 for Assessment Year 2015-16 in ΙΤA No.2413/Mum/2021 is reproduced below: 29. The assessee filed the appeal before the Id. CIT(A). The Id. CIT(A) has allowed the appeal of the assessee after following the decision ....
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.... has held that the State taxes paid overseas cannot be allowed as deduction in view of the provisions of section 40(a)(ii) of the Act. However, the aforesaid legal position has substantially changed after the decision of the Hon'ble Jurisdictional High Court in 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 ....
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....alty and since no TDS had been done by assessee u/s 195, the consideration so paid is disallowed u/s40(a)(i) of the Act. 19. We have examined the detailed submission made by assessee and gone through the documents placed on record. Assessee has made an elaborate submission with respect to non-deductibility of TDS on the amount referred to above from which we find that the matter has been adjudicated in preceding Assessment Years in a manner that imported software for internal use is capitalized and depreciation is allowed after capitalization and those for trading purposes to be subjected to TDS on account of royalty. 19.1. This issue has been decided by the Coordinate Bench of ITAT, Mumbai in assessee's own case in ITA/7513/Mumbai/2010, dated 23.03.2017 for Assessment Year 2005-06 in favour of assessee. Subsequently, following the said order, the Coordinate Bench decided the issue in favour of assessee for Assessment Year 2007-08 to Assessment Year 2015-16. While deciding on this issue, reliance is placed on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd., vs. CIT reported in 432 ITR 471. The same finding applie....
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.... 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 Id. 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 fox at source in respect of transactions effected in earlier years. This argument has to be dismissed as the year under consideration is A.Y.2012-13 where amendment has been brought. 7.3. The Id. AR further argued that even under the applicable DTAA the payment for purchase of software cannot be regarded as royalty since the definition of royalty under DTAA is narrower than ....
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....at "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 reproduction of the work. Thus, the right to reproduce a computer programme and exploit the reproduction by way of safe, transfer, licence, etc., is at the heart of the exclusive right. Section 14(b)(ii) of the 1957 Act was amended twice, first in 1994 and then again....
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.... 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 section 90(2) of the Act read with Explanation 4 there-to... and article 3(2) of the DTAA Further, the expression copyright" has to be understood in the context of the statute which deals with it, it being acc4Tted that municipal laws which apply in the contracting States must b....
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.... relevant portion of order of the Coordinate Bench for A.Y.2015-16 is reproduced below: "37. Heard both the sides and perused the material on record. We have perused the decision of ITAT in the case of the assessee itself for assessment year 2014-15 vide ITA No. 5904/Mum/2019. The relevant part of the decision is reproduced as under: 50. For the year under consideration, we notice that the assessee has made a very detailed submission before the Assessing Officer with regard to the suo motu disallowance (refer para 6.2 on pages 41 to 44 of assessment order). The Assessing Officer, in his finding, has simply stated that he is not satisfied with the correctness of the claim of expenditure since the amount disallowed by the assessee is very meagre. It is the settled position that the Assessing Officer cannot invoke the provisions of disallowance under section 14A read with rule 8D without recording any cogent reasons as to why he is not satisfied with the correctness of the claim of the assessee. Mere recording that the amounts being meagre compared to the exempt income earned, cannot be construed as recording of satisfaction. Therefore, respectfully following the rat....
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....nt year 2011-12 vide ITA No. 1650/Mum/2016. The relevant operating part of the decision is reproduced as under: "34. We have considered the rival submissions and perused the material available on record. As it is evident from the details of expenditure mentioned in the aforesaid paragraphs, the expenditures were incurred by the assessee for the purpose of advertisement in newspaper, magazine, events, seminar, conferences, exhibition, advertisement at Airport, etc. We find that on identical issue, the Co-ordinate Bench of the Tribunal vide order dated 30.10.2019, passed in assessee's own case in Tata Consultancy Services Ltd. v/s ACIT, ITA no.5713/Mum/2016, for the assessment year 2009-10, vide Para-23 at Page- 22, observed as under- 23. We have considered rival submissions and perused the material on record. We have also carefully examined the case laws cited before us. On a detailed analysis of facts on record, we have noted that the reasoning of the Assessing Officer that the expenditure was incurred for brand building is without any basis. It is to be noted, before the Departmental Authorities the assessee had demonstrated that in no way it is connected wit....
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....ure of Rs. 5.28 crore. The decision of learned Commissioner (Appeals) on this issue is modified to this extent only. 35. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the decision of the Co-ordinate Bench rendered in assessee's own case cited supra, ground no.5, raised in assessee's appeal is allowed with similar directions. This ground is allowed for statistical purpose." Respectfully following the decision of the coordinate bench of the ITAT Mumbai in the case of the assessee itself on similar issue and identical facts as referred above we don't find any merit in the appeal of the revenue, therefore, the same stand dismissed." 25. Respectfully, following the decision of the Coordinate Bench, with similar fact pattern before us, ground raised by Revenue in this respect is dismissed. X. Brand Equity subscription to Tata Sons 26. During the year, assessee paid Rs 75,00,00,000/- to Tata Sons towards subscription fee and claimed the same as revenue expenditure. Ld. Assessing Officer treated this expenditure ....
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....ench also noted that department has accepted the decision in Rallis India Ltd. (supra) and no appeal has been filed by the department against the same. Further, in the present case, nothing has been brought on record to suggest that the subscription fee paid by the assessee to Tata Sons Limited under the Tata Brand Equity and Business Promotion Agreement' is different in nature from the one considered in aforesaid decisions. Thus, respectfully following the judicial precedence in case of sister concerns, we direct the Assessing Officer to delete the disallowance on account of subscription fees paid by the assessee to Tata Sons Limited. Accordingly, ground no. 6 raised in assessee's appeal is allowed." Respectfully following the decision of ITAT on similar issue and identical facts in the case of the assessee itself as referred supra we don't find any merit in the ground of appeal of the Revenue therefore, this ground of appeal of the revenue is dismissed." 28. Therefore, respectfully following the above decision of the Coordinate Bench with similar fact pattern before us, ground raised by Revenue in this respect is dismissed. XI. Non-TDS on commission to ....
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....services rendered by them in those countries in relation to obtaining export contracts for the assessee. No material has been brought on record by the Assessing Officer to demonstrate that the non-resident agents either have any business connection in India or have PE in India so as to bring the commission payment within the tax net. The factual finding recorded by learned Commissioner (Appeals) that the non-resident agents have rendered the services in their respective countries and do not have either any business connection in India or any PE in India has not been controverted by the Revenue. Further, the nature of payment viz. commission has also not been disputed by the Revenue. That being the case, since the commission paid to the non-resident agents is not chargeable to tax in India at their hands, there is no necessity for the assessee to withhold tax under section 195(1) of the Act on such payment. Accordingly, we uphold the decision of learned Commissioner (Appeals) on this issue. Respectfully following the decision of the ITAT on the similar issue and identical facts as referred above we do not find any merit in the appeal of the Revenue. Therefore, this ground o....
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....t should be provided for taxes paid in overseas jurisdiction in respect of Sec. 10A(10AA) eligible income in India, as per the tax credit provisions of respective DTAA. He also submitted that even under MAT computation the assessee should be allowed full credit for tax paid overseas in respect of 10A/10AA income. 19. Heard both the sides and perused the material on record. We have perused the decision of ITAT for the assessment year 2009-10 vide ITA No. 5823/Mum/2016. The relevant operating part of the decision is reproduced as under. 31. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. As could be seen, while the Assessing Officer has disallowed assessee's claim of foreign tax credit in respect of income exempt under section 10A/10AA of the Act on the reasoning that only such income which is subjected to tax in both the countries would qualify for tax credit, learned Commissioner (Appeals) has restricted the relief of foreign tax credit only in respect of tax paid in USA even in respect of income which is exempt under section 10A/10AA of the Act. The learned Commissioner (Appeals) has ....
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....ndo-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 not provide for such benefit unless the income is subjected to tax in both the countries. Therefore, the foreign tax credit would be available to the assessee in all cases except the foreign tax paid in Finland and Canada. The Assessing Officer is directed to grant credit accordingly. Similar finding upheld by ITAT in AY 2007-08, 2008-09 and 2010-11 to 2013-14 also." 33.1. We have considered findings arrived at by ld. Assessing Officer and assessee's submission. In our view, double taxation relief can be given in the cases where income was taxed in India and also in a foreign country. Considering the above, ld. Assessing Officer is directed to allow foreign tax credit only with respect to DTAA countries where the income was subjected to tax both, in India and foreign jurisdiction. It is also directed that the assessee would be entitled to ....
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.... "For the purpose of sub-section (1), the profits derived from the export of articles of things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking. being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the undertaking." 35.2. Therefore, profits and gains derived from export of articles is different from the income derived from the profits of the business of the undertaking. The profits of the business of the undertaking includes the profits and gains from export of the articles as well as all other incidental incomes derived from the business of the undertaking. Assessee submitted that wherever there is an intention to exclude the other income, the same is explicitly provided in the statute. While computing the deduction under section 80HHC /80HHE etc. there is specific provision to exclude from the "Profit of the Business", the other income such as commission, brokerage, interest, rent etc. However, there is no specific exclusion while computing deduction under section 10A/10AA/10B of th....
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....ally be applicable to deduction claimed under section 10AA. Accordingly, respectfully following the above decision of the jurisdictional High Court and also the Full Bench of the Hon' Karnataka High Court, we hold that interest income is also to be considered for the purpose of arriving at the profits eligible for deduction under section 10AA. The Assessing Officer is directed to re-compute the deduction under section 10AA accordingly. The ground no 4 of the appeal is thus allowed." Following the decision of ITAT as referred supra we allow this ground of appeal of the assessee on the reason mentioned in the above order of the ITAT, therefore, this ground of appeal of the assessee is allowed." 36.1. Respectfully following the above stated decision of the Coordinate Bench in assessee's own case and facts being similar, ground raised by the Revenue in this respect is dismissed. XV. Subscription fees u/s. 40(a)(ia) 37. During the year under assessment, assessee made payments towards subscription services amounting to Rs. 9,47,14,367/- to various non-residents without deducting withholding taxes. These payment towards subscription services were mainly for the follo....
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....ed business income, falling within Article 7 of the tax treaty. x. The assessee is not allowed to exploit the database commercially under the agreement. xi. The principle, i.e., the provisions of DTAA if beneficial to the assessee, should prevail over the Act, is very well recognized and established principle and this principle has been upheld by the Supreme Court in Azadi Bachao Andolan's case wherein the Court emphatically held thus: "No provision of the DTAA can possibly fasten a tax liability where the liability is not imposed by the Act. If a tax liability is imposed by the Act, the Agreement may be resorted to for negating or reducing it; and, in case of difference between the provisions of the Act and the Agreement, the provisions of the Agreement would prevail over the provisions of the Act and can be enforced by the appellate authorities and the Court." 37.2. Ld. Assessing Officer did not accept the claim of assessee, treating the same as covered under the definition of "royalty" under section 9(1)(iv) and 9(1)(vi) of the Act as well as Article 13(2)/(3) of the treaty. Therefore, TDS was required to be done on these payments which was not ....
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....,28,86,506/- to the income of CMC Ltd. Further, ld. Assessing Officer in the said order mentioned that since CMC Ltd got merged with the assessee w.e.f. 01.04.2015, the warranty period income of CMC Ltd disallowed in Assessment Year 2015-16 may be allowed to the assessee in Assessment Year 2016-17. Assessee mentioned that since the department has considered the entire income in the first year itself, income considered by CMC Ltd in the subsequent year should be allowed as a deduction. However, ld. Assessing Officer did not allow the same. 40. We have examined the submission made by the assessee. It is seen from the assessment order of CMC Ltd for AY 2015-16 that ld. Assessing Officer had added the warranty period revenue of Rs. 3,28,86,506/- to the income of CMC Ltd in that year itself. Admittedly, ld. Assessing Officer did mention in the said order that since CMC Ltd has merged with Tata Consultancy Services Ltd w.e.f. 01.04.2015, the warranty period income of CMC Ltd disallowed in Assessment Year 2015-16 may be allowed to the assessee in AY 2016-17. It is seen that there is further mentioning about the amount disallowed in the case of CMC Ltd in Assessment Year 2014-15 of Rs. ....
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.... books of accounts of the company are audited by the independent auditors in terms of requirement of the Act and the Companies Act, 2013. The criteria for recognising provision in ICDS X is in sync with Ind AS 37. Accordingly, the year-end provision made by assessee as per prevalent accounting standard are similar as required by ICDS X. In present case, the provision required as per accounting standard and ICDS are conformity except for provision of Rs. 42,92,63,354/- which is disclosed by the assessee in Form 3CD and effect to this regard has also been given in its return of income. Accordingly, assessee made true and fair disclosure in Form 3CD with corresponding effect in total income reported by it in its return filed. Thus, based on the accounting principles discussed above, ld. CIT(A) observed that it is an ascertained liability and the same is eligible for deduction while computing total income. Accordingly, ld. CIT(A) directed ld. Assessing Officer to delete the disallowance of provision for expenses. 41.2. The same issue was dealt by the Coordinate Bench in assessee's own case for Assessment Year 2013-14 in ITA No.797/Mum/2018, dated 11.04.2022, allowing the ground rais....
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....cted and this included provision 17. The matter is examined. The primary requirement to effect disallowance under section 40(a)(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 XVII-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 aris....
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....the accounts of the company are closed within short period after the end of the year, before which the data or invoice from the concerned 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....
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.... amount within the agreed period of time. The obligation, to deduct tax at source from the account of a specific party arose only at the time the bill was passed not before that. Citing the example of audit fees the AR submitted that obligation to pay the fees to the statutory auditors arises only after they complete the statutory audit He relied upon the decisions of GE India Technology Centre Private Lid (327 ITR 456) and Industrial Development Bank of India(107 ITD45) in this regard. DR submitted that work was already carried out for the assessee, that appellant should have deducted tax source. He further submitted that once the amount was debited to profit and loss account provisions of section 40(a)(ia) were applicable 19.3. We find that the AO has not examined the issue about year-end payments. There is a difference between the payments that are made during the year and the payments made at the fag-end of the year In our humble opinion in 2nd category of payments tax has been detected in the subsequent year when Bills are booked In this regard we have also considered the amendment made to Sec. 40(a)(ia) by the finance act.2008, with retrospective effect from 1.4.2005....
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....cha Bharat Kosh and Clean Ganga Fund where CSR expenditure is not allowable as deduction under section 80G. Additionally, Memorandum to the Finance Act (No.2), 2014 also clearly indicates that CSR expenses disallowed under section 37(1) of the Act can be allowed as deduction under any other provisions of the Act, subject to satisfaction of relevant conditions as mentioned under respective sections. Also, Ministry of Corporate Affairs (MCA) issued Frequently Asked Questions ('FAQ') through General circular no. 01/2016, dated 12.01.2016 with specific FAQ No. 6. This clarification issued by one arm of the Government supports the view that deduction under section 80G is allowable on such contributions. Even various Hon'ble High Courts and Coordinate Benches of ITAT have also held that except two donations mentioned in section 80G(2)(a)(iiihk) and (iiihl), all eligible donations will be allowed as deduction u/s 80G of the Act. Considering the above facts, ld. CIT(A) allowed the claim of deduction under section 80G in respect of CSR expenses incurred. 43.2. Reference is made to the decision of Coordinate Bench of ITAT, Mumbai in the case of Inter Gold India Pvt. Ltd. in IT....
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....800(2)(a)(iihk) and (iiihl), i.e., contributions towards 'Swacha Bharat Kosh' and 'Clean Ganga Fund', where donation in the nature of CSR Expenditure is not allowable as deduction under section 80G of the Act. Therefore, the disallowances for deduction under section 80G vis-à-vis CSR can be restricted to contributions made to these Funds mentioned in Section 800(2)(a)(iiihk) and (iiihl) only. It is an undisputed fact that the assessee has not claimed any deduction against the aforesaid clauses of 80G (2)(a) of the Act and as such entire donation claimed by the assessee is allowable u/s 80G. The Ministry of Corporate Affairs ("MCA") has issued "FAQs" through General circular no. 01/2016 dated January 12, 2016 (FAQ No. 6) and has clarified on the issue as follows: "Question No. 6: What tax benefits can be availed under CSR? Answer: No specific tax exemptions have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemptions have been extended to expenditure incurred on CSR, spending on several activities like Prime Minister'....
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....on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), and iii. any change in the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset) 45.2. Accordingly, assessee debited Rs 233.87 crores in Profit & Loss account above the line and Rs 200.41 crores in Other Comprehensive Income (OCI) in its books of accounts. In Assessment Year 2016-17, assessee claimed the entire expenses debited to P&L Account in its return of income. The same was allowed by the Department. In AY 2017-18, the assessee claimed the amount of Rs 233.87 crores debited to Profit & Loss Account but inadvertently missed to claim in its return, the expense of Rs 200.41 crores debited to OCI. Accordingly, this was claimed as a deduction during the course of assessment proceedings. However, ld. Assessing Officer neither considered the said claim of deduction while determining assessed total income nor commented on the same. Assessee contended that this claim of provision for employee benefits is already present in its return of income and hence, what it requested is modification to claim already existed....
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....ised by the assessee, it has claimed benefit of "Tax Sparing Credit" towards dividend income received by it from its 100% owned subsidiary named Tata Consultancy Services Asia Specific Pte Limited (TAPL), under India-Singapore DTAA. The amount of tax credit claimed is Rs. 9,96,61,577/- being "Singapore tax paid" as defined under Article 25(3) of the India-Singapore DTAA which has been denied by the ld. AO. 47.1. TAPL had received approval under the Economic Expansion Incentives (EEI) and was subjected to concessional rate of tax. During the year, assessee received dividend of USD 45 million equivalent to Rs. 297.18 Cr. from TAPL, which the assessee offered to tax u/s. 115BBD of the Act. TAPL was subjected to concessional rate of tax u/s. 43D of Domestic Income Tax Law of Singapore since October, 2003. According to the assessee, it is entitled to relief by way of tax sparing credit under para (3) of Article 25 of India-Singapore DTAA in respect of tax that would have been otherwise payable in the absence of tax concession granted by Singapore authority u/s. 43D of the Singapore Income Tax Act. Since TAPL was subjected to concessional rate of tax on certain portion of income in ac....
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....ividend income received by it during the year. 47.4. Also, provisions contained u/s. 90 of the Act are taken into account, whereby as per provisions of Section 90(1)(a)(ii), Central Government may enter into an agreement with any country outside India for granting relief in respect of income tax chargeable under the Act and under the corresponding law in force in that country, as the case may be, to promote mutual economic relations, trade and investment. Further, provisions of Section 90(1)(b) refer to Central Government signing tax treaty for avoidance of double taxation of income under the Act. This covers exemption method which exempts from tax, in India any income taxed in the other treaty country whereby assessee gets taxed only in one treaty jurisdiction. 48. In the course of assessment proceedings, assessee furnished approval under Economic Expansion Incentives along with working of underlying tax sparing credit as well as returns of TAPL filed in Singapore. Based on these submissions, ld. AO observed that assessee has considered entire Profit After Tax (PAT) for calculation of tax sparing credit. In this respect, assessee submitted that entire PAT has gone to reserve....
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....9 1,32,23,883 2,38,85,428 1,32,23,883 1,01,03,592 28,50,000 72,53,592 17% 5,07,751 1.44 3,52,214 FY 2009-10 80,92,391 3,19,77,819 80,92,391 98,14,298 28,50,000 69,64,298 17% 4,87,501 1.42 3,42,611 FY 2010-11 83,51,523 4,03,29,343 83,51,523 1,16,37,341 28,50,000 87,87,341 17% 6,15,114 1.33 4,63,258 FY 2011-12 98,21,594 5,01,50,937 46,70,657 28,55,450 28,50,000 5,450 17% 181 1.25 145 Total ... 4,50,00,000 Total .. 15,06,144 USD to INR 66.17 INR 9,96,61,577 Tata Consultancy Services Limited 1516/M/2025 A.Y. 2016-17 Sparring Tax Cr....
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....it, it is noted that the disallowance is based on rejecting the methodology adopted by the assessee for calculating the same. Per se, there is no denial of the tax sparing credit to the assessee, considering the provisions of India-Singapore DTAA and the Act, as narrated above. The dispute relates only to the method of calculation which should be either based on FIFO method or LIFO method. While adopting FIFO method by the assessee, it has considered dividend distribution from the accumulated profits of TAPL which form part of its reserves. However, ld. AO by observing that there is no rational to assume that entire reserves of TAPL were lying ideal and no investments have been made out of the said reserves except for making dividend payments, has not considered the FIFO method. For want of further details about the utilisation of reserves of TAPL to ascertain if any investment activities were made from the said reserves, the claim of tax sparing credit was disallowed. 49.2. Based on the above, we find that dispute in the present case relates only to the method of calculation and eligibility of assessee to claim tax sparing credit under article 25(2) and (3) is not in dispute. A....