9911796707
TMI Blog2018 (8) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... was completed u/s 143(3) of the Act on 22-12-2010 determining the total income at Ras.23,85,36,030 by making additions towards disallowance of expenditure incurred in relation to exempt income u/s 14A for Rs. 14,22,463, disallowance of certain expenses u/s 40(a)(ia) for failure to deduct TDS u/s 194C and 194J of the Income-tax Act, 1961 for Rs. 1,56,83,873, disallowance of sponsorship expenses paid to non residents u/s 40(a)(i) for failure to deduct tax at source u/s 195 of the Income-tax Act for Rs. 5,20,67,912, disallowance of site services and project commission u/s 40(a)(i) for failure to deduct TDS u/s 195 of the Income-tax Act, 1961 for Rs. 6,82,813 and income estimated on advances received of Rs. 10,84,97,194. 3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has challenged additions made by the AO in respect of disallowance of expenditure incurred in relation to exempt income u/s 14A, disallowance of expenditure u/s 40(a)(ia) and 40(a)(i) for failure to deduct tax under respective sections and determination of income accrued on advances received from project consultancy. The Ld.CIT(A), after considering relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred in relation to exempt income towards interest expenses and other expenses by invoking Rule 8D(2)(ii) & 8D(2)(iii) of I.T. Rules, 1962. It is the contention of the assessee that it has not incurred any expenditure towards earning exempt income, therefore, invoking Rule 8D(2) to disallow such expenditure without arriving at a satisfaction as to how the claim of the assessee with regard to non incurring of expenses is incorrect. The assessee further contended that it has accepted suo moto disallowance of Rs. 50,000 before the Ld.CIT(A), however, the Ld.CIT(A) has ignored the claim of the assessee and allowed partial relief towards interest disallowance u/r 8D(2)(ii); but, confirmed addition made by the AO towards disallowance of other expenses. 5. We have heard both the parties and perused the material available on record. The AO has applied provisions of Rule 8D(2)(ii) & 8D(2)(iii) to determine disallowance contemplated u/s 14A of I.T. Act, 1961 in respect of interest expenditure and other administrative expenditure. The assessee has accepted adhoc disallowance of Rs. 50,000 considering the nature of investments which yield exempt income without furnishing any working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding any reason as to how such payment made outside India coming within the ambit of provisions of section 195 of the Income-tax Act, 1961. The AO has made addition towards liaisoning and other site charges paid to a service provider, a foreign company in Saudi Arabia for rendering services to the assessee's project located outside India for the reason that entire services are sourced from India and as such, the expenditure is incurred in India. The assessee has not brought anything on record to establish that the income component embedded and accrued to the parties in the transaction with Indian parties is not taxable in India under the I.T. Act, 1961. 8. Having heard both sides, we do not find any merit in the findings of the AO for the reason that on perusal of details filed by the assessee, we find that all payments related to liaisoning and related services has been paid to a non resident company having no PE in India providing local assistance and local liaisoning services to the assessee for its project in Saudi Arabia. All these payments have been paid outside India for rendering such services to the project located outside India. No part of services has been either rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n resident having no PE in India for services rendered outside India, provisions of section 195 has no application. Consequently, no disallowance could be made u/s 40(a)(ia). We do not find any error in the findings of Ld.CIT(A); hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue. 9. The next issue that came up for our consideration is estimation of income on advance receipts received from project at Rs. 10,84,97,194. The facts with regard to the impugned dispute are that during the year under consideration, the assessee has received advances of Rs. 51.66 crores from the project. The assessee has recognized revenue on the basis of percentage completion method by taking into account total advances received from the project. The AO made addition towards income accrued from advances received from the project on the ground that the assessee has not followed percentage completion method to recognize revenue from the project. According to the AO, the assessee company has not complied with the principle laid down in AS-11 to recognize revenue, but followed a method which suits to its convenience to postpone the revenue from the project. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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