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2015 (7) TMI 838 - ITAT MUMBAI

2015 (7) TMI 838 - ITAT MUMBAI - [2015] 41 ITR (Trib) 167 (ITAT [Mum]) - Disallowance of Club membership fee, which included entrance fees and subscriptions paid for acquiring membership in clubs - A.O. disallowed the above amount on the ground that the admission fee gives benefit of enduring nature and hence the same is capital expense in nature - Held that:- Identical issue was considered by the Co-ordinate bench in the case of Skol Breweries Ltd. vs. ACIT (claimed to be present assessee’s old .....

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2004-05 to 2006-07. Though, principle of res-judicata is not applicable in the matter of income tax, however, rule of consistency has to be followed as the facts are identical. Since there is no difference in the facts and circumstances with respect to the claim of the assessee for the Assessment Year under consideration vis-a-vis to the Assessment Years 2004-05 to 2006-07 and when the order of the Commissioner of Income Tax (Appeals) has been accepted by the revenue for the AYs 2004-05 to 2006 .....

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on to sale and purchase of the product is on principal to principal basis and to that extent the decision of Hon’ble Delhi High Court rendered in the case of Mother Diary (2012 (2) TMI 80 - DELHI HIGH COURT) is applicable. However, the Tribunal took the view that the scheme under which the impugned benefit/incentive is given needs to be examined in order to give a finding as to whether the impugned payment is commission or not. Hence, the matter was set aside to the file of the AO with a directi .....

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Vs. Intervet India Pvt Ltd (2014 (4) TMI 353 - BOMBAY HIGH COURT), wherein it was held that the sale promotion benefit availed by the dealers is not payment of Commission. In the set aside proceedings, the AO should decide the issue by considering the applicability of the above said decision of Hon’ble jurisdictional High Court. - Decided in favour of assessee for statistical purposes.

Disallowance u/s 40(a)(ia) r.w.s. 195 and 200 of the Act in respect of depreciation on payment to F .....

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t attracted on such deduction.- Decided in favour of assessee .

Disallowance made u/s 40(a)(i) of the Act of software charges - Non-deduction of tax at source - Held that:- When it was pointed out that the Explanation 4 is only a clarificatory amendment inserted by Finance Act, 2012 w.r.e.f. 1.6.1976 and hence Explanation 2 may encompass the same under its fold, the Ld A.R submitted that the assessee could not have visualized the amendment that is going to be brought in by Finance Act .....

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Skol Breweries Ltd. (supra) and restored the matter to the file of the AO to verify the contentions of the assessee that the advances were given out of own funds and not borrowed funds. Consistent with the view taken in the earlier year, we restore this issue to the file of A.O. for fresh examination by duly considering the contentions of the assessee.- Decided in favour of assessee for statistical purposes.

Transfer pricing adjustment in respect of royalty payment to Associated Ente .....

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given one more opportunity in this matter to represent its case in the current year also. Thus restore the same to his file with the direction to examine this issue afresh by making reference to the TPO and decide the same in accordance with the law. - Decided in favour of assessee for statistical purposes. - I .T.A. No. 7123/Mum/2012 - Dated:- 3-7-2015 - Shri B.R. Baskaran and Shri Amit Shukla, JJ. For the Petitioner : Shri R.R. Vora & Shri Hemen Chandariya For the Respondent : Shri G.M. D .....

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ture, hence no need of adjudication. 3. In ground No. 4, the assessee is aggrieved by the decision of Ld. DRP in confirming addition of ₹ 15,72,053/- relating to the claim of Club membership fee, which included entrance fees and subscriptions paid for acquiring membership in clubs. The A.O. disallowed the above amount on the ground that the admission fee gives benefit of enduring nature and hence the same is capital expense in nature. The A.O. has also relied on the decision of Hon ble Bom .....

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49] and the same was decided in favour of the assessee as under:- We further note that similar disallowance made by the Assessing Officer for the AYs 2004-05 to 2006-07 has been deleted by the Commissioner of Income tax (Appeals) and the revenue has accepted the order of the Commissioner Of Income Tax (Appeals. The assessing Officer has not brought out on record that there is a change in the facts and circumstances with respect to the claim of the assessee for the Assessment Year under considera .....

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e for the AYs 2004-05 to 2006-07, then the claim of the assessee cannot be disallowed for the Assessment Year under consideration. 5. We also notice that the Hon ble Delhi High Court has held in the case of CIT Vs. Samtel Color Ltd (2009)(ITA No.1152/2008 dated 20-01-2009) has held that the admission fee paid to the Clubs is also revenue in nature. Accordingly, we direct the AO to allow the claim of the assessee. 6. The fifth ground urged by the assessee relates to the disallowance made u/s 40(a .....

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ulk Discounts - Beer 7,82,01,645/- 2 Cash Discounts/COD 4,11,32,650/- 3 Sale Price Discounts 24,52,65,057/- 4 Special Discount 2,02,38,400/- 5 Commission of sales 1,42,54,598/- Total 39,90,92,351/- The AO asked the assessee as to why the Sale Price discount offered by the assessee should not be treated as commission expense falling under section 194H of the Act. After considering the explanations given by the assessee, the A.O. held that the assessee had failed to deduct tax at source from the S .....

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al in the case of Skol Breweries Ltd. (supra), as modified in M.P. No.136/Mum/2013 dated 04-10-2013 and the Tribunal, after discussing the issue in detail, has set aside this issue to the file of the A.O. to re-examine the same afresh. It is pertinent to note that the Tribunal, vide paragraph 9.4 of the order has held that the relationship between the parties, as per the agreement, in relation to sale and purchase of the product is on principal to principal basis and to that extent the decision .....

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side the order passed by AO on this issue and restore the same to his file with the direction to examine the same afresh after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law. At the time of hearing, the ld A.R placed reliance on the decision rendered by Hon ble Bombay High Court in the case of CIT Vs. Intervet India Pvt Ltd (ITA No.1616 of 2011 dated 01-01-2014), wherein it was held that the sale promotion benefit availed b .....

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sed Foster s Brand and Intellectual Property , Foster s Brewing Intellectual Property and Foster s Trademarks from Foster s Australia Ltd. for a consideration of ₹ 157,92,00,000/-. The assessee capitalized the said amount in its fixed assets schedule under the head Trade Marks/Brands and claimed depreciation thereon @ 25%. For the year under consideration, the assessee has claimed depreciation of ₹ 28,76,40,000/- in its return of income. The A.O. asked the assessee to explain as to w .....

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, he disallowed the claim of depreciation u/s 40(a)(i) r.w.s. 195 and 200 of the Act. The ld. DRP also upheld the view of the AO. 10. At the time of hearing, the ld. Counsel for the assessee submitted that the above said issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in the case of Skol Breweries Ltd. (supra) reported in (2013) 142 ITD 49 (Mumbai). We find that the Tribunal has considered an identical issue and decided the same in favour of the asses .....

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es Ltd (supra) in pars 5 & 6 as under ………….. In view of the above, we direct he A.O to delete this disallowance. 11. The next issue urged by the assessee relates to the disallowance made u/s 40(a)(i) of the Act of software charges amounting to ₹ 33,60,435/- for non-deduction of tax at source. During scrutiny assessment, the A.O. observed that the assessee has paid a sum of ₹ 33,60,435/- to SABMiller A & A (Pty) Ltd. towards the expenditure incurred .....

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ent represents a pure recovery of third party costs incurred by the overseas group entity for the benefit of the assessee. It was submitted that the payment of IT cost is not liable to income tax and thus there was no liability on the assessee to deduct any TDS while making the payment. It was also submitted that even if the payments received by it is termed as royalty under the Act, no disallowance u/s 40(a)(i) of the Act can be made as the same would fall under Explanation 4 and not under Expl .....

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e collectively payable to the owner of the rights and accordingly upheld the view taken by the A.O. 12. During the hearing before us, the ld. Representatives of both the sides agreed that an identical issue was considered in the assessee s own case reported in (2013) 142 ITD 49 (Mum) and this issue has already been decided by the Tribunal in favour of the assessee. On perusal of the order of the Tribunal, we find that the Tribunal has held that the impugned expenditure does not fall under Explan .....

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s going to be brought in by Finance Act, 2012, when the impugned payment was made in Financial year 2007-08 and hence the provisions of sec. 40(a)(i) should not be applied on the payments that were hit by prospective amendment. We agree with this contention of the assessee and accordingly direct the AO to delete this disallowance. 14. The next issue urged by the assessee relates to the disallowance of interest on advances given to group entities u/s 36(1)(iii) of the Act amounting to ₹ 36, .....

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of interest should not be disallowed. The A.O. after considering the submissions made by the assessee, disallowed the proportionate amount of interest @ 6% on the sum of ₹ 11,79,47,601/- which worked out to ₹ 36,56,856/-. The Ld DRP also agreed with the view taken by the A.O. and held that borrowed funds should have been used for the purpose of business of the assessee and not for the purpose of its associates. It was also held that the funds advanced were not on account of commerci .....

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