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2019 (2) TMI 1058 - AT - Income TaxTPA - International taxation of provisions of corporate guarantee loan taken by AE’s - Held that:- We find that this issue is squarely covered by Tribunals decision in assessee own case for immediately preceding years and hence, respectfully following the Tribunals view and the decision of Hon’ble Bombay High Court in the case of Everest Kanto Cylinder Limited [2015 (5) TMI 395 - BOMBAY HIGH COURT] we direct the AO to restrict the adjustment at 0.5% of the loan amount advanced by the bank to its AE. We direct the AO accordingly. This issue of assessee’s appeal is partly allowed. Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D - Held that:- We are of the view that the assessee has interest free funds available, which are sufficient to meet its investment and at the same time, the assessee has interest bearing funds, in the absence of nexus proved by the AO, it can safely be presumed that investment were made from interest free funds in view of the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. In view of the decision of Hon’ble Bombay High Court, we are of the view that the interest expenses disallowed by AO/ TPO/ DRP is without any basis and in view of presumption held by Hon’ble Bombay High court in HDFC Bank Ltd (supra), we delete the disallowance. In view of the decision of Special Bench of ITAT Delhi in the case of Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI], we direct the AO to consider those investments only for computing the disallowance which related to exempt income during the year. We direct the AO accordingly. This issue of assessee’s appeal is set aside and allowed for statistical purposes. Disallowance in respect of difference in tour sales as per Annual Information Report (AIR) Reconciliation submitted by assessee - Held that:- The assessee before us could not filed any reconciliation qua the difference of ₹ 25,86,068/- except making verbal submissions. At last, the assessee contended that the addition should be restricted to the profit margin of sales at the rate of 11.47% on un accounted sales of ₹ 25,86,068/-. We are of the view that there are no matching unaccounted purchases which has been sold by assessee. Hence, we are of the view that the lower authorities have rightly added the non-reconciled tour sales amounting to ₹ 25,86,068/- in respect of these 21 parties. Hence, we find no infirmity in the orders of the lower authorities and this issue of assessee’s appeal is dismissed. Disallowance of Travel Book engine expense considering the same as capital work-in-progress in the books of accounts and claimed by assessee as Revenue in the return of income - assessee before us contended that this expenditure is normal revenue expenditure and eligible for deduction under section 37(1) - Held that:- The expenses incurred by assessee on account of salary on development of travel booking engine and SAP software cannot be considered as adding a new line of business for its customers, infact, upon successfully development of the same, the existing business of the assessee for providing tours and travel services can be carried out more effectively and efficiently. Thus, incurring of these expenses for travel booking engine, the assessee is expanding its existing line of business. Further, it is also a fact that the expenses incurred for travel booking engine and SAP software was only for the purpose of technology upgradation to the existing business of the assessee and by incurring the same the assessee has not created any new line of business or asset which can be given enduring benefit to the assessee. Thus, according to us, in view of the above factual and legal submission, the salary and profession expenses incurred and disallowed by AO amounting to ₹ 1,20,24,914 over the development of travelling booking engine and SAP software is to be allowed as Revenue expenses under section 37(1)
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