TMI Blog2015 (10) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 10% of expenses of ₹ 12,17,518/- (i.e. ₹ 1,21,752/-) when the assessee has already disallowed and capitalized in investment a sum of ₹ 3,08,710/-.) - In view of the above discussion the disallowance, we find that the Ld. CIT(A) has rightly restricted to when no director's remuneration has been claimed by the Ld. CIT(A). Therefore, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the impugned order - Decided against revenue. - ITA No. 538/Del/2013 - - - Dated:- 19-8-2015 - N. K. Saini, AM And H. S. Sidhu, JM For the Petitioner : Ms Y Kakkar, Sr. DR For the Respondent : Dr Rakesh Gupta, Adv. Shri Tarun Kumar, Adv ORDER Per H S Sidhu Revenue has filed the present Appeal against the impugned Order dated 26.11.2012 passed by the Ld. CIT(A)-V, New Delhi for the asstt. year 2009-10, on the following grounds:- 1(a).Whether the Ld. CIT(A) has erred on facts and in law in deleting addition of ₹ 20,41,412/- made by the AO on account of difference in arms length price. 2. Whether the Ld. CIT(A) has erred on facts and in law in restricting disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly; that the services of the assessee are exclusively meant for holding company i.e. AvH NV, Belgium only; that the agreed consideration for consultancy services has been decided as per the service agreement to be direct/ indirect cost attributable to said work plus 10% mark up. Therefore, the addition made by the Assessing Officer is correct and accordingly, she requested that this ground of appeal may be allowed 5.1 As regards the another addition of ₹ 37,12,429/- made u/s. 14A r.w. rule 8D of the I.T. Rules is concerned, Ld. DR submitted that the main objective of the company is to establish JVs in cement, mining, building material, renewable energy and other infrastructure sectors. The manner of deployment of funds also reveal that they are utilized for making investments or kept in bank. The contention of the assessee that the expenses debited in P L account have no nexus with earning exempt income is not borne out from the facts of the case. She further stated that it is the utilization of the due diligence study carried out by consultants that has led to the decision of deployment of funds in the form of investments in Equity Shares of Sagar Cements Ltd. and dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,412/- on account of difference on a/c of arms length price and ₹ 37,12,429/- u/s. 14A vide assessment order dated 02.2.2012 passed u/s. 143(3) of the I.T. Act, 1961. Aggrieved with the assessment order dated 02.2.2012 passed by the AO, assessee filed an appeal before the Ld. First Appellate Authority, who vide impugned order dated 26.11.2012 partly allowed the appeal filed by the assessee. 7.1 Apropos ground no. 1 relating to deletion of addition of ₹ 20,41,412/- made by the AO on account of difference in arms length price is concerned, we find that the basic issues involved are (a) whether the appellant is a company doing services to the parent company only ; or it is in addition to the services being carried for the parent company that it is doing some other business activity also and (b) whether mark up percentage should be applied on the entire expenditure debited to P L etc or it should be applied only on the expenditure attributable to the services done for the parent company. We note on going through the assessment order that AO has referred to the service agreement dated 30.4.2008 only with the principel company. He has not accepted the version of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all types of mining machines, tools and implements, smelters crushing machines, furnaces and other equipments . 7.3 From the above, we find that the assessee is carrying out the activity other than that mentioned in the service agreement stands also confirmed from an agreement dated 11.08.2010 with M/s Alps Industries Ltd., which shows the assessee to be in the business process of hydro power generation etc. Besides this, it has made investment in shares of M/s Sagar Cement Ltd. as appearing in the Balance sheet. The Profit and Loss a/c shows sales of ₹ 35,96,309/- which is nothing but payments received on account of the services rendered to the parent company as per the service agreement. The books of accounts are duly audited and the auditor has reported in notes to accounts that transaction with related parties are amounting to ₹ 35,96,309/- and further that earning in foreign currency(accrual basis)-the service income at ₹ 35,96,309/-. 7.4 Apart from the aforesaid the expenditure has been shown at ₹ 51,59,565/- in the P L etc the breakup of which has been produced in the submissions made by the appellant noted above, this includes expenditure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -6 of the order that; In the said decision, it has been held that even for the pre- Rule 8D period, whenever the issue of Section 14A arises before an AO, he has, first of all, to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income under the Act. Even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income, the AO will have to verify the correctness of such claim. In case the AO is satisfied with the claim of the correctness of such claim. In case the AO is satisfied with the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, the AO is to ascertain the claim of the assessee in so far as the quantum of disallowance under Section 14A is concerned. In such eventuality, the AO cannot embark upon a determination of the mount of expenditure for the purposes of Section 14A(1). In case, the AO is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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