TMI Blog2016 (8) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds inter alia that assessee has failed to furnish the expenses to substantiate its claim of royalty payment; that the nature of payment is that the assessee has failed to explain if payment is capital or revenue in nature; that the genuineness of the actual payment has not been proved; that it is not proved that tax at source has been deducted or not, but CIT (A) has not preferred to call the remand report qua the said documents nor entertained the said documents on the basis of some request for additional evidence. However, it is admitted fact that the royalty payment made by the assessee company qua the AY 2008-09 and AY 2010-11 has already been allowed as revenue expenditure by the revenue authorities. In these circumstances, we find it expedient to restore the matter to the AO to decide afresh. AO to allow the royalty payment to the tune of ₹ 70,18,413/- after due verifications of the documents relied upon by the assessee. So, the ground no.2 is determined in favour of the revenue. Addition u/s 14A - Held that:- Assessee’s own case in its favour by restoring the matter back to the file of the AO for de novo consideration in the light of observations made therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting and packaging Inks and it was called upon to explain to justify the claim of ₹ 6,21,95,582/- debited in the profit loss account on account of management consultancy expenses and as to why the same should not be disallowed on the basis of reasoning recorded in the assessment order of Assessment Year 2008-09. Assessee filed reply dated 21.10.2011. AO, on the basis of findings recorded qua the claim of ₹ 6,21,95,582/- for AY 2008-09, disallowed the said amount and added back the same to the total income of the assessee. 3. Assessee also claimed a royalty of ₹ 70,18,413/- in the profit loss account reflected under the head related party disclosures of books of account. AO noticed that royalty given for the previous year was ₹ 15,12,580/-. Assessee reported to have not furnished the details of documents to substantiate this royalty payment and also failed to explain if the payment is capital in nature or revenue in nature and as to whether TDS was made on such payment or not and consequently, the AO disallowed the amount of ₹ 70,18,413/- and added back the same to the total income of the assessee. 4. Assessee, during the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely by following the assessment order of AY 2008-09 and affirmed by the ld. CIT (A). However, when the matter was challenged before the ITAT, the order of CIT (A) qua the AY 2008-09 was set aside and restored the matter to the file of AO for de novo examination in the light of the observation made by the Tribunal. 10. It is also not in dispute that the AO passed fresh assessment order dated 31.01.2014 and decided the issue, as to the claim of ₹ 6,21,95,582/- debited in profit loss account on management consultancy expenses, in favour of the assessee. 11. Ld. CIT (A) overturned the findings made by the AO by making following observations :- Before me the appellant has submitted all the documents to show that payments were made to the following group companies for work done by them for the appellant. 1) M/s Siegwerk Benelux N.V. for providing technical services, 2) M/s Siegwerk (Asia Pacific) Pvt Ltd for providing technical services also which differed from the services provided by MIs Siegwerk Benelux N.V., 3) M/s Siegwerk Druckfarben provided management in support services. It is apparent from the above, that the appellant has incurred expenditure in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). The word 'profits' occurring in section 2(22) means profits in the commercial sense, that is to say the profits made by the company in the real and true sense of the term - P.K. Badiani v CIT (1976) 105 ITR 642 (SC) From a plain reading of Section 2(22)(e) it is seen that the payments made by the appellant to the three group concerns does not fall within the definition of dividend. One of the basic conditions of Sec. 2(22)(e) is that the payment by a company should be by way of advance of loan. The payments made by the appellant to M/s Siegwerk Benelux N.V., M/s Siegwerk (Asia Pacific) Pvt Ltd M/s Siegwerk Druckfarben is payment for work done. It is not in the nature of loan or advance. It is not a case where the monies advanced would be returned back. In view therefore it is clear that the amount of ₹ 6,21,95,582/- is not an advance or loan and therefore Sec. 2(22)(e) cannot be invoked in the matter. The addition of ₹ 6,21,95,582/- is therefore deleted. The ground of appeal is ruled in favour of the appellant. 12. Bare perusal of the findings returned by the AO goes to prove that he has merely followed the assessment order of the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the matter to the AO to decide afresh. AO to allow the royalty payment to the tune of ₹ 70,18,413/- after due verifications of the documents relied upon by the assessee. So, the ground no.2 is determined in favour of the revenue. GROUND NO.3 16. This ground is hereby determined against the revenue having not been pressed during the course of arguments. GROUND NO.4 17. Assessee has shown dividend income of ₹ 1,94,17,695/- of the profit loss account. AO by invoking the provisions contained u/s 14A of the Act read with Rule 8D of the Rules computed the disallowance to the tune of ₹ 8,67,240/-, disallowed the same and added back to the income of the assessee. However, on the other hand, the ld. CIT (A) ordered the deletion of ₹ 8,67,240/- by returning the following findings :- Thus whenever the issue of 14A arises the AO should ascertain the correctness of the claim of the appellant in respect of expenditure incurred or not incurred in relation to income which does not form part of the total income under the Act. In case the AO is satisfied with the claim of the appellant, the AO should accept the claim of the appellant so far as the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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