TMI Blog2015 (3) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... e find the factual position that the assessee-company is a member of the international organisation of Ernst and Young and its several associate concerns worldwide. Ernst and Young Global Services LLP and Ernst and Young U. K. LLP provide administrative and management support services in connection with technology updates, system and methodology and upgrades, training through webs, etc. to the assessee and to other associate concerns of the group. The assessee and its other associate concerns share the costs. A sum of ₹ 6,88,12,554 was reimbursed to Ernst and Young Global Services LLP and a sum of ₹ 23,78,781 to Ernst and Young U. K. LLP by the assessee during the current assessment year on account of its share of costs for such services. Accordingly, arrangement was arrived at for such services to be developed in a pool by the said two concerns to which the member firms would have access to it and reimbursing their respective shares of cost incurred therefor. Such reimbursement was agreed on the basis of respective turnover of the member firms. These facts are not denied by the Revenue even now before us and these are reimbursement of expenses. Once these are reimburse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) erred in granting interest under section 244A on interest and also holding that while issuing refund interest amount will take priority before principal amount. 3. We have heard rival submissions and gone through the facts and circumstances of the case. We find that the Commissioner of Income-tax (Appeals) has factually noted errors committed by the Assessing Officer while computing interest under section 244A of the Act and he brought out the factual details under the following eight aspects : (a) In treating ₹ 2,29,85,384 refunded on September 30, 2005, as refund out of tax paid even though it included ₹ 31,63,564 towards interest under section 244A of the Income-tax Act, 1961 ; (b) In granting interest on ₹ 1,49,79,822 for the period October 1, 2005 to July 31, 2006 instead of granting interest on ₹ 1,81,43,386 and consequently granting short interest ; (c) In not granting interest on ₹ 44,78,062 from July 28, 2006 to July 31, 2006, i.e., for one month as per provisions of rule 119A of the Income-tax Rules ; (d) In granting interest on ₹ 1,94,57,884 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act on reimbursement of cost for providing access to system and management audit methodology updates, etc. to EYGS LLP and Ernst and Young LLP, U. K. For this, the Revenue has raised following sole ground : 1. That the learned Commissioner of Income-tax (Appeals) erred on facts and in law in deleting the disallowance under section 40(a)(ia) of the Income-tax Act, 1961, of a total sum of ₹ 7,11,91,335 which was made by the Assessing Officer for non-deduction of tax at source as per provision of the Income-tax Act, 1961. 6. Briefly stated facts are that the assessee claimed deduction for ₹ 6,88,12,554 and ₹ 23,78,781 being amounts payable to EYGS LLP and Ernst and Young LLP, U. K. respectively towards reimbursement of costs for providing access to system and management audit methodology updates, knowledge updates through web, etc., assistance in development of common programs and policies, endeavouring to ensure that professional and to other people resources are available to assist the firm or its clients in all jurisdiction. But the Assessing Officer disallowed these am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be rigid for application of section 195 without examining the actual factual aspect of the matter that it is a result of an agreement in between the parties for sharing the data amongst the members firms in the globalisation process. This aspect, in particular, has not been controverted by the Department at any stage of the proceeding. Hence, we decide this issue in favour of the assessee and against the Revenue. Aggrieved, the Revenue came in appeal before us. 7. We have heard rival submissions and gone through facts and circumstances of the case. Before us, learned counsel for the assessee stated that the issue is squarely covered in favour of the assessee and against the Revenue. We find that the Tribunal is consistently deleting this disallowance as reproduced above one of the Tribunal's decision in the assessment year 2003-04. We find the factual position that the assessee-company is a member of the international organisation of Ernst and Young and its several associate concerns worldwide. Ernst and Young Global Services LLP and Ernst and Young U. K. LLP provide administrative and management support services in connection with technology updates, system and metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was submitted. The assessee explained that these funds were not invested out of borrowed fund but were invested out of surplus funds available with the company for short period. The Assessing Officer estimated the proportionate management expenses qua the exempted income at 10 per cent. and, therefore, computed the proportionate management expenses at ₹ 35,23,840. Aggrieved, the assessee preferred appeal before the Commissioner of Income-tax (Appeals), who invoked rule 8D of the Rules by noting that the Special Bench in the case of ITO v. Daga Capital Management Pvt. Ltd. [2009] 312 ITR (AT) 1 (Mum) [SB] has held that rule 8D read with section 14A of the Act is retrospectively applicable and, therefore, he asked the assessee to submit computation in term of rule 8D for making the disallowance. Accordingly, he restricted the disallowance at ₹ 14,75,086. Aggrieved the assessee came in appeal before us. 10. We have heard rival submissions and gone through facts and circumstances of the case. We find that the relevant assessment year involved is assessment year 2006-07 and the hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment. According to him, this amount was added back in the computation of income filed with original return of income in pursuance to section 43B(f) of the Act. He further stated that the hon'ble Calcutta High Court in the case of Exide Industries Ltd. v. Union of India [2007] 292 ITR 470 (Calcutta) stuck down the provisions of section 43B(f) of the Act as being arbitrary and ultra vires. Learned counsel for the assessee stated that the hon'ble Supreme Court has stayed the judgment of the hon'ble Calcutta High Court in the case of Exide Industries Ltd. and, therefore, he requested the Bench to set aside this issue to the file of the Assessing Officer with a direction that he will adjudicate the same as per the final judgment of the hon'ble Supreme Court in the case of Exide Industries Ltd. On this, the learned Commissioner of Income-tax-Departmental representative fairly agreed that the issue can be restored back to the file of the Assessing Officer. 13. We, after hearing both side find that the hon'ble apex court in the case of Exide Industries Ltd. in SLP (Civil) 22889 of 2008 has stayed the operation of the judgment of the hon'ble Calcutta High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as framed by the Deputy Commissioner of Income-tax, Circle-8, Kolkata, under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2008-09 vide his order dated May 24, 2010. 17. The first issue in this appeal of the Revenue is as regards to the order of the Commissioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer for non-deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act on reimbursement of cost for providing access to system and management audit methodology updates, etc. to EYGS LLP and Ernst and Young LLP, U.K.. For this, the Revenue has raised following ground No. 1 : 1. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in deleting the disallowance made by the Assessing Officer under section 40(a)(ia) amounting to a total of ₹ 24,22,61,039 paid by the assessee to Ernst and Young LLP UK and Ernst and Young Global Services LLP without deducting tax at source under section 195 of the Income-tax Act, 1961 in relation to the assessment year 2008-09. We have already dealt this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax (Appeals) confirming the disallowance of provision for leave encashment. For this, the assessee has raised following ground No. 1 : 1. The learned Commissioner of Income-tax (Appeals) has erred on facts and in law in not deleting the disallowance of a sum of ₹ 2,04,00,156 being the provision made for leave encashment in the current assessment year on the basis of actuarial valuation. 22. Since we have set aside this ground of appeal of the assessee in I. T. A. No. 792/K/2009 to the file of the Assessing Officer to adjudicate the same afresh in terms of the decision of the hon'ble apex court in the case of Exide Industries Ltd., this issue also restored to the file of the Assessing Officer to adjudicate afresh. This ground of appeal of the assessee is allowed for statistical purposes. 23. The next issue in this appeal of the assessee is against the order of the Commissioner of Income-tax (Appeals) in not adjudicating the issue of withdrawal of interest under section 234D of the Act. For this, the assessee has raised following ground No. 2 : 2. The learned Commissioner of Income-tax (Appeals) has failed to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of appeal of the Revenue, following the same analogy we also dismiss this ground of appeal of the Revenue. 27. Coming to I. T. A. No. 1000/K/2012. The sole issue in this appeal of the assessee is against the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of provision for leave encashment. For this, the assessee has raised following ground No. 1 : 1. The learned Commissioner of Income-tax (Appeals) has erred on facts and in law in not deleting the disallowance of a sum of ₹ 2,77,64,886 being the provision made for leave encashment in the current assessment year on the basis of actuarial valuation. 28. Since we have set aside this ground of appeal of the assessee in I. T. A. No. 792/K/2009 to the file of the Assessing Officer to adjudicate the same afresh in terms of the decision of the hon'ble apex court in the case of Exide Industries Ltd., this issue also restored to the file of the Assessing Officer to adjudicate afresh. This ground of appeal of the assessee is allowed for statistical purposes. 29. In the result, the Revenue's appeals are dismissed and that of the assessee is partly allowed for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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