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2015 (12) TMI 1806 - AT - Income TaxTDS u/s 195 - addition u/s 40(a)(i) - payments made towards professional charges, consultancy charges and amounts paid on behalf of other units in respect of services rendered only outside India - retrospectivity of act - HELD THAT:- The payments made towards professional charges, consultancy charges and amounts paid on behalf of other units in respect of services rendered only outside India and were not utilized in India, are not chargeable to tax in India in terms of s. 195(1) of the Act and hence, there is no obligation that could be cast on the assessee to deduct tax at source. Even otherwise, the payments are governed by the provisions of art. 14 of DTAA which would prevail over the other provisions of the Act, wherein the said payments are liable to be taxed only abroad and not in India. A retrospective amendment in statute does change the tax liability in respect of an income, with retrospective effect, but it cannot change the tax withholding liability with retrospective effect.- Decided in favour of assessee. Disallowance of expenses incurred towards overseas office maintenance, sales promotion, sales office expenses, aircraft maintenance expenses and others - HELD THAT:- major expenditure has been incurred in respect of cost of spare parts for maintenance of aircrafts, import of articles such as mineral water, raw meat, liquor etc., expenditure incurred for obtaining fitness certificate after every hours of flying as per international aviation rules, import of spare parts from abroad, promotion and marketing expenses abroad, charges, sales promotion expenses towards redemption of points under Oberoi Top programme, participation fee of IN ASIA MILES programme, expenses for media coverage of the programme, cost of space and stand for ITB Berlin in Germany, charges for stand and space booked for Arabia Travel Market in Dubai, charges for stand decoration for IBTM Exhibition at Geneva, cost of space and stand for WTM in London, entire expenses incurred in foreign sales offices in London, New York, Sydney, Singapore and Dammam on various dates throughout the year etc. From the details furnished, we also see that the entire foreign sales office receipts and expenses and statement of assets and liabilities were duly subjected to an independent audit by a chartered accountant in order to give comfort level to the assessee herein for adoption of those figures in the consolidated financial statements of the assessee. We find lot of force in the arguments of AR that no disallowance on this count was made in the earlier years and also in subsequent years by the Revenue. Hence, we hold that the principle of consistency should be followed by the Revenue. Reliance in this regard is placed on the decision of the Hon'ble apex Court in the case of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME COURT] . From the details furnished, we are completely satisfied that the entire expenditures are incurred wholly and exclusively for the purpose of business of the assessee and accordingly, direct the learned AO to grant deduction for the whole amount as deduction. Disallowance u/s 80HHC - export of food and beverages to out bound flights of foreign airlines, the payments for which were received in convertible foreign exchange - HELD THAT:- We hold that the assessee is entitled for deduction under s. 80HHC of the Act in respect of export of food and beverages to outbound flights of International Airlines and for the proceeds received thereon in convertible foreign exchange and hold that the assessee had complied with the provisions of s. 80HHC of the Act in this regard. Accordingly, the ground raised by the assessee is allowed. Disallowance of 50 per cent of aggregate expenditure incurred on running and maintenance of aircraft - HELD THAT:- We hold that no addition need to be made on an estimated basis towards running and maintenance of aircrafts. Accordingly, the ground raised by the assessee are allowed Disallowance of interest on borrowed capital to the extent of interest-free advances made to Associated Enterprises - HELD THAT:- Interest-free advances were made by the assessee to various parties during the course of its business and are strategic investments - that the borrowed funds were not diverted for non-business purposes as sufficient own funds were available with the assessee to make interest-free advances to its group concerns. When borrowed funds and own funds were inextricably mixed in the same bank account and if the own funds are more than the amounts advanced interest-free to sister concerns, then the presumption could be drawn in favour of the assessee that those advances were made only out of own funds of the assessee - from the aforesaid facts available on record, the assessee had advanced monies to various concerns during the course of its business to further strengthen its business interests with the said parties and as a measure of commercial expediency. In applying the test of commercial expediency whether the expenditure was excessively laid down for the purpose of business, reasonableness of the expenditure is to be judged from the point of view of a businessman and not that of the Revenue. Disallowance of depreciation on addition to fixed assets - HELD THAT:- Entire additions together with the income-tax depreciation figures were duly subjected to certification by the tax auditor in the tax audit report and the AO had indeed granted income-tax depreciation for other assets except ₹ 7,84,550 being depreciation on buildings and computers. We find that this action of the learned AO is not appreciated and it is also stated in the grounds that the assessee had submitted the bills before the learned AO. No hesitation to delete this addition made in the sum of ₹ 7,84,550 towards depreciation on buildings and computers and accordingly, the ground raised by the assessee is allowed. Disallowance of notional foreign exchange loss on foreign currency loan - HELD THAT:- As decided in assessee's own case [2015 (10) TMI 2022 - ITAT KOLKATA] addition to be deleted. Disallowance of General Charges - HELD THAT:- Assessee had submitted before the learned CIT(A) that the amounts debited in head office represents amounts paid to different associations like Hotel Association of India, World Economic Forum, membership fees and annual subscription for various Stock Exchanges. These are expenses incurred wholly and exclusively for the purpose of business of the assessee. We also find that this disallowance is not made by the learned AO for the asst. yr. 2002-03 (i.e. the earlier year) and in asst. yr. 2005-06 (in subsequent year). Moreover, there is absolutely no basis for making the disallowance at the rate of 25 per cent of total general charges by the learned AO. Accordingly, we find no infirmity in the order of the learned CIT(A) and hence, the ground No. 9 raised by the Revenue is dismissed. Disallowance of Prior Period Expenses - HELD THAT:- We are aware at this juncture that any claim could be made only by filing a valid return as has been held by the Hon'ble apex Court in the case of Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT] . But the same judgment states in the last para that the said finding is not applicable to appellate authorities more especially to Tribunals. Hence, respectfully following the judgment of the Hon'ble apex Court (supra) and in view of the fact that the said expenditure of ₹ 1,00,000 is genuinely incurred by the assessee for the purpose of its business, we hold that the action of the learned CIT(A) does not require any interference in this regard. Disallowance on account of legal expenses on ad hoc basis - HELD THAT:- It is not clear that whether the entire details of legal expenses were filed before the lower authorities for their verification. Hence, we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the learned AO to decide this issue afresh in accordance with law. The assessee is directed to submit all these details before the learned AO and such other evidences and documents as may be required in support of its contentions. Hence, the ground raised by the assessee is allowed for statistical purposes. Disallowance u/s14A towards proportionate management expenses - HELD THAT:- It is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence, disallowance is definitely warranted in terms of s. 14A which is brought in the statute book with retrospective effect from 1st April, 1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. We direct the learned AO to disallow 1 per cent of exempt income under this issue Disallowance on account of specific general charges - HELD THAT:- We direct the learned AO to restrict the disallowance as not relatable to the business of the assessee. Hence, the ground raised by the assessee is partly allowed.
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