TMI Blog2019 (9) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... pay them only once its claims are settled with ONGCL. The record also shows that the confirmations have not been filed before the Revenue authorities whereas it was vehemently argued by the ld. AR that the confirmations were made available before the Revenue authorities. Hence the matter is remanded back to the file of the Assessing Officer for the limited purpose of examining the settlement by the OEC and ONGCL by taking the confirmations filed on record and take a view in accordance with the provisions of law. Disallowance on account of Festival expenditure - HELD THAT:- Revenue authorities disallowed is the increase in expenses without any iota of evidence or cogent reason. Keeping in view, the judgments of Hon ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs CIT [ 1954 (10) TMI 12 - SUPREME COURT] , Sayaji Iron Engg. Co. Vs CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] and DCIT Vs Haryana Oxygen Ltd. [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] , we hereby hold that the disallowance made by the Assessing Officer cannot be legally sustained. TDS u/s 194J - Disallowance on account of legal and professional expenses - HELD THAT:- The dispute will be decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 4673/Del/2016 And ITA No. 2081/Del/2016 - - - Dated:- 23-7-2019 - Sh. H. S. Sidhu, Judicial Member Dr. B. R. R. Kumar, Accountant Member For The Assessee : Sh. Somil Agarwal, CA For The Revenue : Sh. Amit Katoch, Sr. DR ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal is directed against the order passed by the ld. CIT (A)-16, New Delhi in the case of the order passed u/s 143(3) of the Income tax Act, 1961 by the Assessing Officer dated 30.09.2014 determining total income at ₹ 6,84,66,740/- as against returned income of ₹ 6,06,00,520/-. 2. The ground no. 1 2 taken by the assessee pertains to addition u/s 41(1) of the Act of ₹ 508,583/- during the assessment proceedings the Assessing Officer noted that there are static creditors which have neither been written off nor the amount have been paid in the subsequent period. The alleged creditors are as under:- Party Name A.Y.2010-2011 (Rs.) A.Y.2011-2012 (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below. He argued that the assessment order and the order of ld. CIT (A) categorically denied the filing of confirmations from the creditors. 4. We have gone through the arguments, judgments quoted and the facts on record. We find that during the assessment proceedings, the assessee has submitted a list of sundry creditors more than three years consisting of 15 parties, out of which 11 parties have been paid in the financial year 2013-14 and amount pertaining to one party namely, ICRA has been written off as not payable. Regarding the four parties disputed before us, the assessee has transferred these amounts to OSV claim payable as on 31.03.2014 which means that the company has filed its claim statement for the OSV Contract which is reflected in claim receivable. The matter is still under settlement by the OEC appointed by Company and ONGCL. The creditors represent amount payable to be paid only against the amount recoverable from ONGCL on settlement. These creditors are for various material/services rendered by them during the contract which is also a matter of dispute raised by ONGCL, and hence the company will pay them only once its claims are settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of legal and professional expenses. The Revenue disallowed the payment of ₹ 64,000/- made to R.N. Kalra and ₹ 75,000/- to M.C. Panda as no TDS has been deductible on these expenses. It was argued by the ld. AR that Mr. R.N. Kalra Mr. M.C. Panda were the arbitrators for the case between ONGCL and assessee company. They were not rendering any service to the assessee company. They were appointed by ONGCL to mediate between both. Since there services were in the nature of court procedure for out of court settlement, TDS was not deducted on the payment made to them. As per Sec 194J of the Income Tax Act Professional services means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section . Thus, arbitration is not covered u/s 194J and hence TDS is not required to be deducted on such payments, therefore, provision of 40(a)(ia) not applicable on the same. The ld. DR, Sh. Amit Katoch argued that the arbitration act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( V) Fugro Seastar AS/ Fugro Statelllte Positioning AS ₹ 3,21,840/ - ( VI) Fugro Seastar AS/Fugro Statellite Positioning AS ₹ 16,82,856/- 10. Before us, it was argued that the amount paid to Ahm Marine LLC of ₹ 77,295/- is on account of visa charges and hence no TDS is deductible. We accept the arguments of the ld. AR on this issue that no TDS is deductible on this amount. Regarding the DPS Offshore and Fugro Seastar AS, it was submitted that the assessee has hired trans receiver which is a part of acoustic tracking system, global positioning system installed on the vessel. It was argued placed on the judgment on ONGC Vs CIT 376 ITR 036 that these are ancillary works related to prospecting, extraction, production of mineral oils and payment made by the assessee by the nonresident company are assessed under Section 44BB of the Act and hence the profits are deemed to be 10% of the aggregate amount specified. He further relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in or out of India) to the assessee or to any person on his behalf on account of the provision of services, and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and ( b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services facilities connection with, or supply of plant and machinery on hire Used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. Expanation,-For the purposes of this section- ( i) plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said Business; ( ii) mineral oil includes petroleum and natural gas. Section 40(a)(ia) reads as under: Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of each case taking into account the nature of remittances, income component therein or any other fact relevant to determine such appropriate proportion. 4. As disallowance of amount under section 40(a)(i) of the Act in case of a deductor is interlinked with the sum chargeable under the Act as mentioned in section 195 of the Act for the purposes of tax deduction at source, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Act, hereby clarifies that for the purpose of making disallowance of other sum chargeable' under section 40(a)(i) of the Act, he appropriate portion of the sum which is chargeable to tax under the Act shall form the basis of such disallowance and shall be the same as determined by the Assessing Officer having jurisdiction for the purpose of sub-section (1) of section 195 of the Act as per Instruction No. 2/2014 dated 26.02.2014 of CBDT. Further, where determination of 'other sum chargeable has been made under sub-sections (2), (3) or (7) of section 195 of the Act, such a determination will form the basis for disallowance, if any, under section 40(a)(i) of the Act. 14. A co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for calculating the depreciation shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956). 17. According to the first proviso to section 115JB(2), the accounting policies, the accounting standards adopted for preparing such accounts, the method and rates of depreciation which have been adopted for preparation of the profit and loss account laid before the annual general meeting, should be followed while preparing profit and loss account for the purpose of computing book profit under section 115JB. 18. Based on the direct provisions of the Income Tax Act and judgments in the case of Malayala Manorama Co. Ltd. vs. CIT 300 ITR 0251, (SC) and CIT vs. Prakash Industries Ltd. 324 ITR 0391(P H), the addition made by the Assessing Officer on account of adjustment in computation u/s 115JB is hereby deleted. 19. In the result, the appeal of the assessee is partly allowed and appeal of the Revenue is dismissed. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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