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2019 (7) TMI 1770 - ITAT DLEHIDisallowance of expenditure u/s 14A - AO held that earning exempt income involves so many administrative expenses under several heads and it is not possible to believe that the assessee did not incur any expenditure whatsoever - HELD THAT:- As submitted by the ld. AR that for the earlier Assessment Year 2002-03, under similar set of circumstances, ld. AO disallowed 25% of the dividend income u/s 14A of the Act and it was directed to be reassessed by ld. CIT(A) by applying Rule 8D of the Rules but the Tribunal remanded the matter to the file of ld. AO for reconsideration taking into account the decision of the Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. [2011 (11) TMI 267 - DELHI HIGH COURT]. We find such an order Tribunal reached a conclusion that the matter needs to be set aside to the file of the AO for reconsideration keeping in mind the decision of the Hon’ble Delhi High Court in the case of Maxopp. Investment Ltd. (supra). While respectfully following the same, we remand the issue to the file of the ld. AO to comply with the said directions. Interest income - Income from other sources - on ICD, FD etc, interest on bill discounting to the tune and interest on employees’ loans and advances - HELD THAT:- As deposits for the purpose of obtaining the bank guarantee etc have nexus with the conduct of business by the assessee and are allowable, subject to the verification of such business nexus, as expenditure. However, we do not find any such probability or convincing reasons given by the assessee in respect of the ICD’s. We are, therefore, of the considered opinion that the treatment of interest derived from ICDs cannot be taken as business income and the learned Assessing Officer rightly treated it as income from other sources. In respect of the interest on FD stands on a different footing and if the assessee is able to establish the nexus between the FD and the business, the interest derived from the transaction has to be treated as business income for the purpose of deduction under section 80 HHC of the Act. We, therefore, set aside the 7 findings of the Ld. CIT(A) on this issue and remand the same to the file of learned Assessing Officer for verification of the nexus between the FD and the business and if such nexus is established, to consider the same as business income for the purpose of Section 80 HHC of the Act. Since the assessee had given the surplus funds to employees as a measure of incentive/perquisite, such an activity comprises of the business activity; that the source of such income is not activity of giving loan, but the benefit extended to 9 employees engaged in the business. The Tribunal observed that the first degree nexus of such income is the eligible business carried on by the assessee. Since facts are similar, and in the absence of any explanation as to why and how the decision under similar circumstances in assessee’s own case has no application to the facts of this year, we find it difficult to take a different view and while respectfully following the reasoning given by the Tribunal [2017 (1) TMI 266 - ITAT DELHI], we conclude that the interest derived by the assessee on the loans provided to employees is inextricably linked to the business of the assessee and constitute business income for consideration under section 80 HHC of the Act. Deduction claimed u/s 80IA in respect of captive power generating unit of the assessee situated at Gurgaon - We hold this issue in favour of the assessee and answer that the disallowance made by the ld. AO u/s 80IA of the Act in relation to the generation of power cannot be sustained. We accordingly allow this ground. Transfer Price adjustment on account of international transaction of import of components - HELD THAT:- We find that out of the total purchases of ₹ 20,46,58,682/- from the domestic market, the assessee imported from associated enterprises the components worth ₹ 22,83,666/- which does not constitute any significant portion thereof. We, therefore, having regard to the directions given by the Tribunal for earlier years and the approach adopted by the ld. AO while deleting the addition on this score, hold that the transfer pricing adjustment to the tune of ₹ 7,05,334/- made by the TPO cannot be sustained and accordingly while allowing the ground delete the same. Expenditure incurred on account of Royalty, model fee and provision for warranty in respect of the sales - HELD THAT:- As the issue has been consistently decided in favour of the assessee for more than 13 years and also upheld by the Hon’ble jurisdictional High Court, the same approach has to be adopted in this case also and, therefore, while respectfully following the consistent view taken by the Tribunal and approved by the Hon’ble High Court, we uphold the finding of the learned CIT(A). Disallowance of model fee at 25% paid during the year on the ground of it being capital in nature - as following the appellate orders for the earlier years, ld. CIT(A) deleted the same - HELD THAT:- In assessee’s own case for the AY 1996-97, the Tribunal took the view that the model fee paid by the assessee to Honda is allowable u/s 37(1) of the Act as revenue expenditure on the ground that the 16 payment was only for right to use the technology know-how and there was no ownership of the intellectual property which remains to be with the Honda. This view of the Tribunal was challenged by the revenue but the Hon’ble Delhi High Court decline to entertain the appeal and SLP against the same was also dismissed. As brought to our notice that subsequently the same view is upheld by the Tribunal and the Hon’ble High Court affirmed the same. Hon’ble Supreme Court also declined to interfere with the same. By latest order [2019 (4) TMI 1509 - ITAT DELHI] for the Asstt. Year 2009-10, the Tribunal reaffirmed the said view. For quite a long time there is consistency in the view taken by the Tribunal as upheld by the Hon’ble jurisdictional High Court and Hon’ble Apex court. Therefore, the issue is no longer res integra and is in favour of the assessee. Disallowance on account of provision for warranty made in respect of sales during the year - HELD THAT:- For the Asstt. Year 2002-03, while following the decision of the Hon’ble Apex Court in the case of Rotork Controls India Ltd. vs CIT,[2009 (5) TMI 16 - SUPREME COURT], the Tribunal deleted the addition and subsequently, similar addition was disallowed in respect of Asstt. Years 1999-2000, 1996-97, 1997-98, 2006-07, 2007-08 to 2009-10 by several orders of the Tribunal, which are to be found place in the paper book. On a reading of these orders, we are of the considered opinion that the issue is fairly settled and there is no need to reopen the same for taking fresh view. Learned CIT(A) deleted the addition by following the appellate orders and, therefore, we do not find any perversity in such finding. We uphold the order of ld. CIT(A).
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