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M/s. Redington (India) Ltd. Versus The Addl. Commissioner of Income-Tax

2015 (8) TMI 40 - ITAT CHENNAI

Adjustment of corporate guarantee provided to Associate Enterprises - Held that:- By following the order of the Delhi bench of this Tribunal in Bharti Airtel Ltd (2014 (3) TMI 495 - ITAT DELHI) and the order of this Tribunal in the assessee's own case for assessment year 2009-10 and for the reasons stated therein, we hold that the corporate guarantee given by the assessee to its AEs does not involve any cost to the assessee, therefore, it has no bearing on the profits, income, loss or assets of .....

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that there is nothing uncommon in assessee's making payment to the use of the trademark to M/s Redington Distribution Pte. Ltd, Singapore. Referring to the judgment of the Apex Court in S.A.Builders (2006 (12) TMI 82 - SUPREME COURT), this Tribunal found that the expenditure is an allowable business expenditure. In view of the order of this Tribunal for the assessment year 2009-10, this Tribunal do not find any reason to interfere in the order of the lower authority. Accordingly, the same is con .....

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r may the nature of the building, the assessee incurred the expenditure on the temporary structure like office cabins, wooden partitions, plastering, water proofing treatment, installation charges, flooring charges etc. These expenditure are for the purpose of making the building fit for use of the business. Therefore, this Tribunal is of the considered opinion that these expenses are to be allowed as revenue expenditure. Accordingly, the orders of the lower authorities are set aside and the Ass .....

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30.9.2010 on which the DRP placed its reliance is not available on record, therefore, this Tribunal is not in a position to decide on what reasons the disallowance was made by the DRP. Accordingly, the orders of the lower authorities are set aside and the issue of disallowance u/s 40(a)(i) of the Act is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes.

Disallowance of bad debts written off - Held that:- What is required is t .....

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horities are set aside and the Assessing Officer is directed to allow the claim of the assessee.- Decided in favour of assessee.

Disallowance of expenditure for earning exempt income - Held that:- The total income is nothing but an income assessed under the Income-tax Act, 1961, for the purpose of levy of tax. Sec. 37(1) of the Act provides for allowing the expenditure laid out or expended wholly and exclusively for the purpose of business or profession in computing the income chargea .....

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e income under the Income-tax Act, 1961. Therefore, irrespective of the provisions of sec. 14A r.w. Rule 8D, the expenditure claimed by the assessee for earning the exempted income cannot be allowed as deduction for the purpose of computing taxable income. - Decided against assessee. - ITA No. 1743/Mds/2011 - Dated:- 26-6-2015 - N R S Ganesan, JM And Mohan Alankamony, AM,JJ. For the Appellant : Shri R Vijayaraghavan, Adv For the Respondent : Shri Joe Sebastin, CIT ORDER Per N R S Ganesan, Judici .....

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. Counsel submitted that the very same issue came up before this Tribunal in the assessee's own case for assessment year 2009-10. This Tribunal by an order dated 7.7.2014 by placing reliance on the decision of the Delhi Bench of this Tribunal in Bharti Airtel Ltd vs Addl. CIT, 43 Taxmann.com 150, found that the corporate and bank guarantee given by the assessee do not involve any cost to the assessee therefore, it is not an international transaction. This Tribunal has also observed that guar .....

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submissions on either side and also perused the material available on record. The assessee provided corporate guarantee to its overseas subsidiaries. The TPO benchmarked the corporate guarantee at 1.5% by relying on the materials available on record. The DRP has also found that justification of the transaction on the ground of close relationship is self defeating the concept of Arm's Length Price(ALP). Accordingly, the DRP confirmed the view taken by the TPO. 5. We have considered the rival .....

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39;s Length Price adjustment can be made. The DRP has also placed its reliance on Explanation to sec 92B of the Act. The decision of the Delhi bench of this Tribunal in Bharti Airtel Ltd. (supra) was followed by the Chennai bench of this Tribunal in the assessee's own case for assessment year 2009-10. 6. In view of the above, by following the order of the Delhi bench of this Tribunal in Bharti Airtel Ltd (supra) and the order of this Tribunal in the assessee's own case for assessment yea .....

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arises for consideration is disallowance of trade mark licence fee. 8. The ld. Counsel for the assessee submitted that the Assessing Officer disallowed a sum of ₹ 1,80,98,708/-. The ld. Counsel further submitted that the very same issue came before this Tribunal in the assessment year 2009-10 in assessee's own case and this Tribunal found that the assessee was exploiting the trade mark 'REDINGTON' for the purpose of carrying on its business. This Tribunal further found that it .....

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material available on record. For the assessment year 2009-10, an identical issue came up before this Tribunal with regard to adjustment of ALP towards payment of trademark licencee fee. This Tribunal found that there is nothing uncommon in assessee's making payment to the use of the trademark to M/s Redington Distribution Pte. Ltd, Singapore. Referring to the judgment of the Apex Court in S.A.Builders (supra), this Tribunal found that the expenditure is an allowable business expenditure. I .....

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proofing treatment, installation charges, flooring charges etc. However, the DRP found that these expenditure are in the nature of enduring benefit, therefore, it cannot be allowed as revenue expenditure. The ld. Counsel submitted that the expenditure incurred by the assessee are only for the purpose of making the building suitable for business, therefore, it has to be allowed as revenue expenditure. On a query from the bench whether the expenditure was incurred on the building owned by the ass .....

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hat the expenditure was incurred in the building taken on rent, no material is available on record to suggest that the abovesaid expenditure was incurred on the building taken on lease/rent. Whatever may the nature of the building, the assessee incurred the expenditure on the temporary structure like office cabins, wooden partitions, plastering, water proofing treatment, installation charges, flooring charges etc. These expenditure are for the purpose of making the building fit for use of the bu .....

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disallowed a sum of ₹ 40,60,298/- on the ground that the assessee failed to deduct tax. Accordingly, the amount paid to M/s Microsoft Corporation is net of the credit given by the seller for rebate and purchases return. Therefore, the assessee has not deducted tax in respect of the return made by the assessee. According to the ld. Counsel, the assessee is liable to deduct tax only in respect of the profit arose to the recipient company. In respect of the amount which was not given credit a .....

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ar from the order of the lower authority that tax was deducted. It is also not clear the returns made by the assessee to M/s Microsoft Corporation. The DRP has simply placed its reliance on their earlier order dated 30.9.2010. Therefore, this Tribunal is of the considered opinion that in the absence of any details with regard to the credit given by the assessee and the so called returns made by the assessee to M/s Microsoft Corporation, the liability of the assessee to deduct tax cannot be decid .....

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credit and the so called return made by the assessee to M/s Microsoft Corporation and thereafter decide the issue in accordance with law after giving reasonable opportunity of hearing to the assessee. 19. The next issue arises for consideration is disallowance of bad debts written off. 20. Shri R. Vijayaraghavan, ld. Counsel for the assessee submitted that the assessee has written off a sum of 2,06,03,544/- as bad debt in the books of account. However, the TPO and DRP found that the assessee has .....

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onsidered the rival submissions on either side and also perused the material available on record. We have also gone through the provisions of sec.36(1)(vii) of the Act which reads as follows: "subject to the provisions of sub-section(2), the amount of [any bad debt or part thereof which is written-off as irrecoverable in the accounts of the assessee for the previous year]: 23. Sec.36(1)(vii) was amended by Direct Tax Laws (Amendment) Act, 1987, with effect from 1.4.1989. In fact, the Parlia .....

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In the case before us, the lower authorities found that the assessee has not established that the debt has become bad. Since the Parliament has made a change in the enactment with effect from 1.4.1989, this Tribunal is of the considered opinion that it is not necessary for the assessee to establish that the debt has become bad. What is required is that the debt has to be written off in the books of account of the assessee for the previous year as irrecoverable and subject to fulfilling the condi .....

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disallowance of expenditure for earning exempt income. 25. Shri R. Vijayaraghavan, ld. Counsel for the assessee submitted that the Assessing Officer disallowed the claim of the assessee u/s 14A to the extent of ₹ 1,88,245/-. Referring to the order of the DRP, the ld. Counsel submitted that the assessee has not earned any income from the investment, therefore, no part of the expenditure could be disallowed. 26. On the contrary, the ld. DR submitted that the assessee made investment for the .....

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