TMI Blog2016 (10) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... owance under Section 14A - Held that:- We remit the issue back to the file of the Assessing Officer to verify and exclude the investments made in subsidiary companies for the purpose of calculation of disallowance under Rule 8D(2) of the Income-tax Rules, 1962 and also verify interest expenditure whether directly attributable to the exempt income. - ITA No. 1155, 1145/Mds/2016 - - - Dated:- 18-10-2016 - Shri Chandra Poojari, Accountant Member And Shri G. Pavan Kumar, Judicial Member Assessee by : Sh. R. Vijayaraghavan, Advocate Revenue by : Sh. Jayaram Raipura, CIT ORDER Per G. Pavan Kumar, Judicial Member The assessee has filed the appeal against the order of the Assessing Officer passed under Section 143(3) of the Income-tax Act, 1961 (in short 'the Act') r.w.s. 92CA r.w.s. 144C(1) of the Act in pursuance of directions of Dispute Resolution Panel dated 22.12.2015. The Revenue has also filed an appeal against the very same order of Dispute Resolution Panel. Let's first take the assessee's appeal in I.T.A. No.1155/Mds/2016. 2. The assessee has raised three major grounds. The first ground is with regard to guarantee commission. At the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee argued that the assessee has paid an amount of ₹ 1,81,51,501/- as trademark fees to M/s Redington Distribution Pte Ltd. The facts are that the Ld. Transfer Pricing Officer was not satisfied with the submissions since no documentary evidence was produced in respect of legal owner of trademark. Whereas, the assessee-company has entered into an agreement with its wholly owned subsidiary company for payment of trademark licence fees of USD 4,00,000 per annum for a period of ten years with effect from 1st April, 2006 and whereas, the amount of ₹ 1.81 Crores was paid during the financial year 2010-11. It was explained that the assessee-company is using the logo Redington from the date of commencement of its operations. This trademark was held by Redington Pte Ltd., Singapore. As per the agreement, these trademarks were transferred from Redington Pte. Ltd., Singapore to Redington Distribution Pte Ltd. As the claim of its parent company for use of such trademark and logo, the assessee-company has paid trademark fees in order to fulfillment of its objectives. The Ld. TPO considered the submissions and is of the view that the trademark is not registered in Singapore and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk to M/s Redington Distribution Pte. Ltd., Singapore. It is not necessary for the TPO to go beyond this plausible explanation, since it is a widely accepted business practice around the world. This is not an unique case for the assessee company alone. Further, it is for the assessee to decide the dynamics of its business. The assessee is the best judge to decide on such issues. The Hon'ble Supreme Court in the case of S.A. Builders vs. CIT (288 ITR 01) has held that any expenditure incurred by the assessee, if justified by commercial expediency, is an expenditure allowable for the purpose of taxation and what is commercial expediency is a matter to be decided by the assessee. In the facts and circumstances of the case, the said addition is deleted. Following the earlier decision of the Tribunal in the assessee's own case, we direct the Assessing Officer to allow the expenditure of trademark licence fees. 7. Coming to the last ground, the Assessing Officer made disallowance of ₹ 5,95,44,737/- under Section 14A of the Act, in the assessment proceeding. The Assessing Officer found from the balance sheet that the assessee has made investment of ₹ 231.03 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR relied on the decisions of Delhi Bench of this Tribunal in ACIT v. Sun Investment Pvt. Ltd. [8 ITR (Trib.) 33] and Punjab Haryana High Court in CIT v. Hero Cycles Ltd. (323 ITR 518) where it was held that the Assessing Officer has to establish that specific expenditure was incurred for earning the exempt income, then only disallowance can be made. Similarly, to substantiate net worth the assessee- company has reserves and surplus in their balance sheet and these investments are made out of such accumulated profits and also submitted that interest-free funds were available and relied on the judgments of Bombay High Court in CIT v. HDFC Bank Ltd. (366 ITR 505) and CIT v. Reliance Utilities Power (313 ITR 340). With these submissions, the Ld. AR prayed that the disallowance made under Section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 be deleted. 9. Contra, the Ld. Departmental Representative relied on the orders of the lower authorities. 10. We heard the rival submissions, perused the material available on record and judicial decisions cited. The Ld. AR submitted that the assessee-company was having adequate liquid funds and the investments were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as per law and merits and in the light of the decisions cited herein above. While doing so, we also direct the Ld. Assessing Officer to consider the decision of the Tribunal in the case M/s Agile Electric Sub Assembly Pvt. Ltd. cited supra wherein it was held as follows:- 7.2 In regard to applicability of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associated Hotels Ltd v. DCIT reported in 2013 (9) TMI 604 in ITA No.1503, 1624/Mds/2012 dated 17th July, 2013, it has been held by the Chennai Bench of the Tribunal as follows:- Disallowance U/s. 14A rw Rule 8D - CIT upheld disallowance - Held that - investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is invested in wholly owned subsidiary. This fact supports the case of the assessee that the assessee is not into the business of investment and the investm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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