TMI Blog2018 (12) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... ss expenses - Held that:- As the assessee submitted that in Assessment Year 1999- 2000, the Tribunal had held that the same should be done pro-rata as that of Sec. 14A of the Act. Upon careful consideration, we follow the same and order accordingly. Interest u/s 234D - whether CIT(A) has erred in holding that interest u/s 234D should not be charged where refund has been received before 01.06.2003? - Held that:- As find merits in the Appellant submission that Sec. 234D has been inserted by the Finance Act 2003 w.e.f. June 1st 2003. Accordingly, all the ingredients for its applicability must take place after its coming into force. The AO is, therefore, directed not to charge interest u/s. 234D where refund has been received by the assessee before the date of insertion of Sec. 234D. In the result the appeal is allowed. - ITA NOS. 2108/MUM/2006, 4403 And 687/MUM/2011 - - - Dated:- 19-11-2018 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Assessee : Shri Nitesh Joshi/Shri Parth Tambday For The Revenue : Shri Himanshu Sharma ORDER PER SHAMIM YAHYA, AM : These are three appeals by the assessee and one cross ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of expenditure under section 14A of the Act on reasonable basis, instead of deleting the same as no expenditure is incurred to earn tax free income. Assessee s appeal (A.Y 2006-07) : 1. The learned CIT(A) erred in not directing the Assessing Officer to allow the expense of ₹ 3,83,10,783 being the professional fees paid to Preroy AG ('PAG') as claimed by the Appellant. 2. The learned CIT(A) erred in not directing the Assessing Officer to allow the foreign air travel expenses amounting to ₹ 15,81,141 in respect of the foreign travel undertaken by the wife of the director, incurred by the Appellant. 3. The learned CIT(A) erred in not directing the Assessing Officer to allow one third of the total telephone expenses incurred at the director's residence, amounting to ₹ 46,082. 4. The learned CIT (A) failed to appreciate that in the case of a Company, no disallowance of expenses on account of personal use can be made. 5. The learned CIT(A) erred in directing the Assessing Officer to compute the disallowance of expenditure under section 14A of the Act on a reasonable basis, instead of directing the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that the services were rendered to STPL but not by PAG but by Mr. Sushil Premchand in the capacity of a Director. Without prejudice to conclusion of the ITAT that services were rendered by Mr. Sushil K. Premchand (SKP) to STPL, the said services cannot be rendered without any consideration. There needs to be some consideration for which the Appellant should be allowed to claim a deduction. 6. Upon careful consideration and hearing both the counsel, we note that this issue has been consistently decided by the Tribunal against the assessee. In this regard, we may gainfully refer to the order of ITAT in assessee s own case dated 05.04.2016 in ITA Nos. 2802, 2803 2088/Mum/2003 for Assessment Years 1995-96 to 1997-98 wherein the Tribunal had adjudicated the issue as under:- 8. We find that, as evident from the assessment orders of the PAG- which were placed before us in the paper-book, one hundred percent of the share in the PAG were owned by Shri Sunil K Premchand (SKP, in short) who is also a director, and majority shareholder, in the assessee before us. We have also noted that whatever evidence the assessee has lead, so far as the rendition of service by the PAG i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of rendition of services, whether during the assessment year 1995-96 or eve in respect of subsequent assessment years, includes fax message by SKP, travel schedules of SKP, boarding passes of SKP and fax message by Preroy AG to a business house informing the time of Sushil s arrival at Amsterdam on July 1, 1994 and suggesting a meeting at the KLM lounge at Amsterdam . The work done by Preroy AG did not have any independent existence beyond work done by SKP or, as the documentation frequently refers to him as, Sushil. As a matter of fact almost entire work, for which the Preroy AG is paid, is the work done by SKP. There is no evidence for any independent work done by Preroy AG. A lot of emphasis is placed on the work done in connection with OKS India and the fact that the assessee had substantial stakes in this entity. Learned counsel has taken pains to emphasize the fact that the assessee is in the business of investments and the work done to protect his investments in these companies is also for the purposes of his business of making investments. The occasion to deal with this aspect of the matter will, however, arises only when there is a finding that bonafide expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by SKP s boarding passes at Zurich and Munich ad report on Inchem visit on 18th August 1994. In the details of travelling expenses, however, SKP has justified his Germany trip, probably with a stopover at Zurich, on the ground that he represented STPL at business meetings with joint venture partners in Germany . When SKP was representing the assessee in the meeting with the joint venture partners, there cannot be any question for the payment of the same presence, of the same person, to Preroy AG as well. The description of services rendered in the invoices does not, therefore, meet our approval. 11. We have also noted that the description of services, in the agreement dated 2nd January 1995 entered into by the assessee with the Preroy AG- a copy of which has been placed before us in the paper-book, is vague. Clause A2 defines the services as any or all the services envisaged to be provided by PAG under this agreement . Cause C1 and C2 further describes deals with the services as follows: C1. PAG shall render any or all the services under this agreement at any place outside the territory of the Republic of India, depending on the requirements of STPL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our opinion, it is wholly irrelevant whether the services, for which billing is done by Preroy AG, are for the purposes of business of the assessee. As regards learned counsel s contention that the income in question, in the hands of Preroy AG, has been brought to tax in India, and, therefore, it cannot be said that no services are rendered, we are of the view that merely because an income has been taxed in the hands of recipient of an income, does not mean that it s a deductible expenditure in the hands of the person making the payment. The deduction is required to be examined and adjudicated upon in accordance with the law, and, when we do so, we donot find legally sustainable merits in the claim of the assessee. 13. As regards the observations made by the CIT(A), which have been challenged in this appeal, we are not inclined to deal with the same individually. What matters is that the disallowance in question, for the detailed reasons set out in this order, is confirmed and even if the CIT(A) made some extraneous observations, that does not affect the outcome of this appeal. All the specific issues have been dealt with in this order anyway. 14. Ground no. 1 is thus dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 1998-99 in ITA Nos. 4493 4737/Mum/2003 vide order dated 11.07.2018 has adjudicated this issue as under :- As regards the disallowance u/s 14A is concerned, we agree with the ld. Counsel of the assessee that the disallowance should be restricted to in respect of those investments which had yielded a dividend income during the year under consideration. This proposition follows the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs CIT [2015] 378 ITR 33 (Del.) followed by the Hon'ble jurisdictional High Court decision in the case of Principal CIT vs Ballarpur Industries Ltd. in ITA No. 51 of 2016. Furthermore, with regard to the disallowance u/s 14A, the assessee s contention that the ratio from Special Bench decision in the case of ACIT vs Vireet Investments [2017] 82 taxmann.com 415 should be followed and for the disallowance, only those investments are to be considered for computing the average value of investment which yielded exempt income during the year should be considered, we are in agreement with the same and direct accordingly. 11. Following the above precedent, we direct that the disallowance u/s 14A should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where refund has been received before 01.06.2003. On this issue, we note that learned CIT(A) has held as under :- 6.1 The ld. Counsel of the appellant has submitted that Sec. 234D was introduced in the Act vide Finance Act, 2003 w.e.f. 1st June, 2003. Sub section of (1) of Section provides that subject to the other provisions of this Act, where any refund is granted to the assessee under Sub section (1) of Sec. 143 and no refund is due on regular assessment or the amount refunded under sub section (1) of Sec. 143 exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest @ 1 percent (2/3 percent upto Sept. 2003) on the whole or excess amount so refunded for every month or part of the month comprise in the period from the date of grant of refund to the date of such regular assessment. It is submitted that Section has been introduced w.e.f. June 1, 2003 therefore, it would be attracted only in case of refunds issued after June, 1, 2003. Accordingly, as in case of Appellant, the refund was granted during Feb., 2003 no interest would be levied u/s 234D. 7. I find merits in the Appellant submission that Sec. 234D has been inse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
