TaxTMI 
TaxTMI 
2026 (4) TMI 1903
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....cts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) 15, Mumbai ("the CIT(A)") erred in confirming the action of the Addl. Commissioner of Income-tax, Range 8(2), Mumbai ("the AO") in disallowing professional fees of Rs. 10 lakhs on the alleged ground that the said expenditure were capital in nature and complete details were not furnished by the Appellant. b. The Appellant prays that the disallowance of professional fees of Rs. 10 lakhs be deleted. Ground II: a. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing trade incentive expenses of Rs. 6.67 crores on the alleged ground that the said expenditure were in the nature of "brand promotion" giving the Appellant Company an enduring benefit and therefore, could not be allowed as revenue expenditure. ii. The Appellant prays that the disallowance of trade incentives of Rs. 6.67 crores be deleted. Ground III: a. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in bringing to tax an amount of Rs. 5.01 crores as rent for the....
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.... facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in disallowing Rs. 10.19 crores consisting of repairs & maintenance of building, service charges and depreciation on building, on the alleged ground that these expenditures have been incurred in relation to the let-out portion of the building ii. He further erred in confirming the action of the AO of adopting the proportion of the "Space Rented Out" as basis for disallowing the expenditures without rejecting the method of apportionment of expenditure in the ratio of "Net Outside Sales" ("NOS") as agreed between the Appellant and PGHH and adopted by the Appellant. iii. He failed to appreciate and ought to have held that: a. Nature of expenditure ought to be examined before treating the same as incurred in relation to the let-out portion of the building; b. The expenditure claimed by the Appellant were in the nature of business expenditure of the Appellant; and c. The expenditure incurred by the Appellant were in relation to its own use of the building. iv. The Appellant prays that the disallowance of Rs. 10.19 crores be deleted. ....
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.... comparables considered by the TPO for comparability analysis. 2. In Appeal for AY 2008-09in ITA No. 2876/Mum/2015, the assessee has raised following grounds of appeal; - Ground I: i. On the facts and circumstances of the case, and in law, the Learned Commissioner of Income Tax (Appeals)-57. Mumbai ['CIT(A)'] erred in upholding / confirming the action of the Learned Assessing Officer (AO)/ Transfer Pricing Officer (TPO) in holding that the Appellant's international transaction pertaining to rendering of support services to the associated enterprises('AEs) is not at arm's length and thereby confirming the addition of Rs. 98,08,785/-. ii. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding /confirming the action of the AO/TPO in: a. rejecting the Transfer Pricing study which was maintained in good faith and with due diligence; b. rejecting the search process followed by the Appellant; c. rejecting multiple year data; d. including certain comparables, which were not comparable; e. not including certain comparables selected by the Appellant in i....
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....thout rejecting the method of apportionment of expenditure in the ratio of "Net Outside Sales" ("NOS") as agreed between the Appellant and PGHH. GIL and adopted by the Appellant. iii. The Appellant prays that the disallowance of above expenditure be deleted. Ground No. VI i. If the alleged rental income from PGHH, GIL and rental income from Nortel Network Private Limited and DSP Merril Lynch is taxed under the head "Income from House Property", in such case, only the expenditure related to building ought to be considered for disallowance and not the shared expenses which were not related to building at all. ii. The Appellant prays that for the purpose of disallowance; the AO be directed to consider only building related expenses. 3. At the time of hearing, the learned authorised representative (AR) of the assessee submits that he is not pressing grounds of appeal related with transfer pricing issues in both the years. Hence, the corresponding grounds of appeal related with transfer pricing issues in both the years are dismissed. 4. Brief facts of the case qua remaining grounds in AY 2007-08 are that the assessee company is engaged in the bu....
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....y assessee and also sharing certain common expenses with regard to such building. In support of such arrangement, the assessee furnished agreement dated 29.08.2003 which is effective from 01.04.2001. On going through various clause of agreement, the AO recorded his observation in para 9.1 of assessment order. The AO noted that for use and occupation, the part of office building and for availing certain services, the assessee received compensation/reimbursement as has been listed in Annexure-I to the agreement. As per Annexure-I of the agreement, the condition for usage charges is @ Rs. 90 per square feet for the built-up area. There is reference of non-refundable security deposit equivalent to six months' compensation by associate company. The assessee is also entitled for various other expenses like furniture, power and firefighting, water, electricity, generator charges, administrative expenses and various other items mentioned in Annexure-I. The AO was of the view that such agreement is in the form of rent agreement. The AO asked as to why such usage charges should not be treated as income from house profit, as has been held in earlier years assessment order. The assessee wa....
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.... in AY 2004-05 in ITA No. 1286/Mum/2009 and order of CIT(A) in AY 2005-06 is filed. 9. On the other hand, the Ld. Sr. DR for the revenue submits that the decision in AY 2004-05 by Tribunal is not applicable as the facts of the year under consideration was different. 10. We have considered the rival submission of both the parties and gone through the orders or lower authorities carefully. We find that assessee has claimed total professional expenses of Rs. 85,58,205/- on account of various professional fees. The AO disallowed Rs. 10 Lakh on ad hocbasis. The Ld. CIT(A) confirmed. We find that on similar ground of appeal, the coordinate bench of Tribunal in assesses own case in AY 2004-05 deleted the similar disallowances. We find that in AY 2005-06, the AO disallowed the similar expenses. The CIT(A) allowed relief to the assessee in AY 2005-06 by following order of AY 2004-05. Thus, this issue is covered in favour of the assessee. Otherwise, we find that the AO while making ad hoc disallowance has not specified as to which item of professional fees is not wholly and exclusively for the purpose of business. Thus, considering the decision of Tribunal in AY 2004-05 (supra), we do ....
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....incentive/trade incentive scheme. The expenses during the year were substantially increased comparative to the earlier year. The AO, thus, reasonably disallowed 20% of such expenses. 14. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by parties. We find that during the year under consideration, the assessee debited Rs. 42.69 Crore on account of trade incentive and brand promotion expenses. The AO disallowed 20% of such expenditure and by taking view that such expenses were exclusively indicated for promotion of brand of various products which is enduring benefit and take it a capital expenditure and disallowed to the extent of 20% and worked out on disallowance of Rs. 6.66 Crore. The Ld. CIT(A) confirm the action of the AO by taking the view that observation of AO have not been rebutted by assessee it its submission and thus, he has no reason to deviate from the finding of AO. We find that assessee has incurred/allowed such trade incentive as a part of their business model. Such expenses in respect of promoting of products, is to be considered as rev....
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....resaid parties shared the office building owned by the assessee in such a manner that can enable their marketing/production planning teams to sit together for a seamless flow of work. While this arrangement was in place since 2001, the parties formalized it by way of an agreement dated August 29, 2003 (effective from April 01, 2001) for sharing of certain common facilities. Clauses 1 to 7 thereof deals with sharing of common premises and Clauses 8 to 10 deals with sharing of common costs, which are part of paper book. (iii) Clause 2 of the aforesaid agreement read with Annexure I thereof refers to compensation/ usage charges of Rs. 90 per sq. ft. "and/or" reimbursement of certain expenses as may be agreed between the parties. Accordingly, it was only the reimbursement of expenses that was implemented between the parties. In other words, the usage charges of Rs. 90/- per sq. ft. were never implemented between the assessee and its sister concern. Also, the corresponding security deposit was never implemented. (iv) Clauses 8 and 9 of the aforesaid agreement read with Annexure Il thereof refers to sharing of common expenses in the ratio of net sales of the companies. ....
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....n before Hon'ble Bombay High Court vide WP No. 2738/2017, challenging the Tribunal's order dated July 28, 2017 to the extent it had allowed Department's MA. The Hon'ble Bombay High Court vide its order dated March 10, 2018, set aside the Tribunal's order to the extent it allowed Department's MA and remanded the matter to the Hon'ble Tribunal to adjudicate the pending grounds and examine the applicability of taxing notional income under the head " other sources". (xi) Thus, the issues which survived before the Tribunal pursuant to the Hon'ble High Court order were: ● Whether any notional income could be added given the finding that the income receivable from PGHH was "income from other sources"? and ● Whether the disallowance of expenses could be justified when income is not taxable as "income from house property"? (xii) However, the Tribunal re-adjudicated the entire matter and held that the rental income is assessable under the head "house property" vide its order dated September 02, 2022, and the pending grounds relating to disallowance of expenses were remanded to the AO. (xiii) The assessee....
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....ny clause for charging compensation/usage charges of Rs. 90/- per sq. The AO and CIT(A) alleged that since the earlier agreement effective from 2001 was not expressly terminated, the said agreement was still in force and therefore, notional rent at Rs. 90/- per square feet was receivable even in AY 2007-08 and AY 2008-09 for the premises let out. Accordingly, the lower authorities taxed notional rental income at the rate of Rs. 90/- per square feet under the head income from house property and disallowed building related expenses. It was explained that under the old agreement, in accordance with Clause -2 which provided for compensation/usage charges of Rs. 90/- per squarefeet and/ or reimbursement of expenses as may be agreed between the parties the assessee and its sister concern did not implement the usage charges of Rs. 90/- per square feet for the area shared but implemented the reimbursement of expenses as envisaged under the agreement. Commercially, it was deemed fit not to implement the usage charges per square feet because it was very difficult to identify the square feet area occupied by the group companies. Therefore, even if it is assumed that the said old agreement is ....
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....me final. Thus, following the decision of Hon'ble High Court, receipt of rent payable by PGHH and GIL is held as income from other sources. So far as other small portion of area, which is let out to third parties, on same principle as per the decision of jurisdictional High Court is also to the taxed under the head other sources. 20. So far as taxing the notional rent is concerned, we find merit in the submission of ld. AR of the assessee that once the income is assessable as `OS', notional income cannot be brought to tax under this head. Consequently, the disallowance of building related expenditure such as repairs & maintenance of building, service charges and depreciation on building is not sustainable. We also find merits in the submission of ld AR of the assessee that section 57(ii)&(iii) of the Act expressly permits complete deduction of expenditure laid out wholly and exclusively for earning income chargeable under the head `OS'. Thus, the assessee is also eligible for all such deduction which are incurred wholly and exclusively for the purpose of income from other sources. So far as taxing of notional income is concerned, it cannot be taxed unless the AO brou....