TMI Blog2018 (6) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a single project joint venture it cannot be said that the assessee was not carrying on business in some intervening years but in business in earlier and later years - earning of income during the year is not a prerequisite for coming to the conclusion that business is in fact carried on during the year - thus assessee is very much carrying on business in the years - ground raised by department is dismissed. Exclusion of deemed export business benefits - accrual receipts - Held that:- There is no infirmity in the order of CIT(A) for excluding the deemed export benefits which have already been taxed in the A.Y.2003-04 and Tribunal have also confirmed the action of the AO. Accordingly, there is no infirmity in the order of CIT(A) for excluding deemed export business benefits. Disallowance of 20% on travelling expenses - Held that:- All the expenses are primarily incurred in connection with the arbitration proceedings and other pending litigations. Keeping no infirmity in the order for restricting disallowance to 20% of expenses. - ITA No.8536/Mum/2011, ITA No. 8537/Mum/2011, ITA No.7311/Mum/2013, ITA No.3249/Mum/2014, ITA No.1273/Mum/2015 And ITA No.8527/Mum/2011 And 8528/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed by the Tribunal in subsequent years, wherein issue has been decided in favour of the assessee. 8. We had carefully gone through the orders of the Tribunal for the A.Y.2003-04 and found that disallowance of reimbursement of bank guarantee commission paid to non-residents was deleted by the Tribunal after having a detailed finding and the same order has been followed by the Tribunal in the subsequent years. Copies of the orders are placed at page 1-34 of the paper book. Precise observation of the Tribunal was as under:- As the reimbursement of expenses is not taxable in the hands of payee, there is no point in compelling the assessee to still go ahead with the deduction of tax at source. Ex consequenti the impugned order on this issue is set aside. This ground is allowed. 9. This issue of non-deduction of tax at source from similar payments made to nonresidents has been decided in favor of the assessee right from AY 2003-04. 10. In the order for AY 2006-07 in ITA 6187/M/2011 the Tribunal has dismissed the Revenue's appeal in Para 3, 4 5 which are reproduced below: Before us, Ld Counsel for the assessee submitted that identical issues were the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venture is necessary in order for meeting the obligations to the client under the agreement. The joint venture is also involved in arbitration proceedings with the client certain contractual matters were also pending before the Honorable Delhi High Court. In this scenario, the idle funds available with the joint venture which are out of erstwhile contract receipts are invested in Fixed Deposits and interest is earned thereon. We found that this interest mainly arose on account of fixed deposits kept with banks. These funds were so invested pending final resolution of contractual disputes and completion of the contract. Since the funds were found to be surplus pending final resolution of disputes the AO had rightly assessed interest income under the head Income from Other sources. This ground of the Department is therefore allowed in all the years under consideration. 13. Next grievance of Revenue relates to allowing certain expenditure as revenue expenses incurred by the assessee during the course of business. We have considered rival contentions and found that in A.Y.2005-06 on substantially identical facts AO decided the matter being sent back by ITAT following the order for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et its subsisting obligations under the contract arising in the above context. Various issues relating to the contract, its execution, claims and counter claims were at the time lying before the Board of Arbitrators for adjudication and were being actively pursued by the assessee. The issues and disputes in question are of substantiate nature and have a direct co-relation with the execution of the project. Thus taking into account the totality of the facts of the case, the assessee was very much carrying on business during the years under consideration. During these years expenditure was incurred mainly in respect of the bank guarantee charges professional charges, traveling and conveyance for professionals. From the record we find that in AY 2004-05, AY 2005-06 and AY 2006-07 the Tribunal has restored this issue to the file of the Assessing Officer for fresh adjudication, in AY 2005-06 the AO by his order dated 16.12.2016 passed u/s 143(3) r/w 254 has held that the assessee was in fact carrying on business and has allowed the entire business expenditure incurred by the assessee. The AO has thus relied on the maintenance certificate issued by SJVN on 18.3.2011 and the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which till then was being carried forward as Work in Progress. The AO brought the said sum to tax in AY 2003-04. This addition was confirmed both by the CIT (A) and by the Tribunal (ITA No. 35/Mum/2007). The CIT(A) has elaborately dealt with the issue and decided the issue in favor of the assessee the operating part of his order being as under: It is undisputed that the entire amount of ₹ 12.83 Crores has already been brought to tax in the assessment for AY 2003-04 which has also been confirmed by the IT AT, although the assessee has preferred appeal in the High Court which is still pending. This issues has therefore to be decided on the basis of decision prevailing as on date, which is that the entire amount of claim of ₹ 12.83 Crores has been subjected to tax in A Y 2003-04 and has also been paid up by the assessee. Taxing the same again in AY 2011-12 would certainty not be lawful. Out of the total claim of ₹ 12,83,51,428/-, a sum of ₹ 54,97,774/- has already been claimed as a deduction and allowed in AY 2010-11. The remaining amount of ₹ 12,28,53,654/- is claimed in AY 2011-12, comprising of three components, as per table above. The facts and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d USA. 18. We have heard the rival contentions. From the record we found that in the A.Y.2007-08, assessee has made payment to following two parties. * J.R. Knowles, USA * S.A. Healy Co., USA 19. These entities had rendered services in connection with the arbitration proceedings with the client. M/s JR Knowles had been employed for the purpose of providing independent testimony. These services rendered do not 'make available' any technical knowledge, experience, skill, know-how or process nor does it consist of the development of and transfer of a technical design or plan in favour of the assessee joint venture. The assessee joint venture had also obtained CA Certificates at the time making the remittance without deduction of tax Similar facts apply to the remittance made to SA Healy, USA. 20. We observe that services of both the parties were availed by the assessee in the context of the arbitration proceedings between the assessee and SJVN. Both the payees are residents of USA. Accordingly payments to them are governed by the India USA DTAA. Article 12 of the said DTAA defines 'fees for included services' as those which 'make available technica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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