TMI Blog2015 (11) TMI 1792X X X X Extracts X X X X X X X X Extracts X X X X ..... Visa towards services rendered by them - HELD THAT:- As relying on own case order has restored this issue to the file of the AO. Facts being the same, we have no other alternative but to following the said decision of the precedent laid down by the Tribunal. Accordingly, we restore this ground to the file of the AO for verification of the facts and fresh decision. Ground No.3 of assessee s appeals is allowed for statistical purposes. Payment to the Great Eastern Shipping Company Limited (GESC) - claim regarding depreciation rejected - HELD THAT:- We are of the considered opinion the expenditure incurred by the assessee for vacating the premises given to the tenant is a business expenditure and allowable as revenue expenditure. Therefore, we allow Ground No.4 in part. Disallowing the loss in respect of replacement of shares of Zee Telefilms to a foreign Institutional Investors (FII) - HELD THAT:- No further transactions could be continued with respect of these shares. Thereafter Chase Manhattan Bank, who acted as the Global Custodians for EMGF raised a claim against the bank on the ground that the FII and the Global Custodians were not duly notified of the notices/objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, the ld.DR could not bring any material contrary to the findings of the Tribunal. Therefore, we have no other alternative but to dismiss the Ground No.8 taken by the revenue. Loss made on the outstanding forward contracts - HELD THAT:- We find that the issue raised by the assessee stands covered by the decision of Hon ble Supreme Court in the case of Woodward Governor India P. Ltd [ 2009 (4) TMI 4 - SUPREME COURT] as held the loss suffered by assessee on account of fluctuations of foreign exchange as on the date of Balance Sheet is an item of expenditure under section 37(1), allowed the mark to market loss in the case of equity index/stock future as an allowable loss - I.T.A. No.2519 and 2520/Mum/2004, I.T.A. No.2679 and 2680/Mum/2004, I.T.A. No.4424/Mum/2005, Cross Object ion No.84/Mum/2006, I.T.A. No.4670/Mum/2005 - - - Dated:- 20-11-2015 - Shri B. R. Baskaran, AM And Pawan Singh, JM For the Petitioner : Shri. Jasbir Chouhan For the Respondent : Shri A V Sonde ORDER Per Pawan Singh, JM These are six appeals filed by the revenue and cross-appeals thereto by the assessee. The assessee also filed Cross-objection bearing CO NO.84/Mum/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that the broken period interest is permissible as a deduction. The ld. AR further submitted that following the decision of Bombay High Court in the case of American Express International Banking Corporation (supra), vide order dated 9.10.2002 allowed the claim of the assessee for the assessment years 1980-81 and 1981-82. He further submitted that this decision was not available before the ld.CIT(A) while deciding the issue before him for earlier years. Now the issue raised herein stands covered by the decision of the Jurisdictional High Court in the assessee s own case. 7. After considering the submissions of the ld.AR as well as the decision rendered by the Jurisdictional High Court in the case of American Express International Banking Corporation (supra) decided this issue in favour of the assessee. Aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us. 8. The ld.DR submitted the facts of the case and relied on the order of AO. 9. At the time of hearing the ld.AR submitted that the issue raised by the revenue in this appeal is now stands covered in favour of the assessee and against the revenue by various decisions and orders of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the assessee paid taxes of ₹ 4,23,65,902/- on the salary paid to ex-patriate officers employed in India was paid in India. The assessee submitted that the services of these officials were taken in India and accordingly they were paid in India. Therefore, they were eligible for deduction while computing taxable income. The explanation tendered by the assessee did not find favour of the AO. According, the assessing officer disallowed the claim of the assessee with a liberty to claim benefit of section 44C of the Act. Aggrieved by the decision of the AO, the assessee preferred an appeal before the first appellate authority. 13. Before the FFA/ ld.CIT(A), the ld.AR contended that an identical issue had come up before the ld. CIT(A) in assessee s own case for the assessment years 1996-97 and 1997-98 and the ld.CIT(A) granted relief to the assessee. 14. The ld. CIT(A) by following the decision of his predecessor for the earlier years directed the AO to delete the addition made by him. Aggrieved by the decision of ld.CIT(A), the Revenue has filed this appeal before the Tribunal. 15. Before us the ld.DR submitted the facts as submitted before the lower authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- (in fact the total of the alleged amount is ₹ 10,72,000/-) incurred on library subsidy, contributions to staff cultural committee and recreation club. 22. The AO observed that the assessee has incurred following amounts: a) Library subsidy ₹ 22,000 b) Staff cultural committees and recreation club ₹ 20,000 c) Holiday Home ₹ 10,30,000 Total ₹ 10,72,000 23. The AO called for the explanation from the assessee as to why these expenses should not be disallowed and added back to the total income of the assessee. In reply, the assessee contended that these expenses have been incurred for administrative convenience and therefore, the same cannot be considered as disallowance u/s 40A(9) of the Act. The AO was of the view that these payments are said to be made to staff associations, these are in the nature of contribution referred in section 40A(9) of the Act. Accordingly, the AO disallowed the claim of the assessee. Aggrieved, assessee preferred the appeal before the ld.CIT(A). 24. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , training advertising, salts promotion, local travel and other expenses ₹ 68,00,000 ₹ 1,47,32,997 He further observed that assessee has not made any disallowance on account of above mentioned expenses on the ground that section 37(2) has been deleted by the Finance Act, 1997. The AO under the provisions of section 37(1) of the Act disallowed all the expenses and added back to the total income of the assessee. Aggrieved by this, assessee has filed appeal before the ld.CIT(A). 31. In the first appellate proceedings, the ld.CIT(A) observed that the provisions of section 37(2A) had been deleted w.e.f.1.4.1998 and hence he was of the opinion that the expenditure on entertainment could not be disallowed. He further observed that mere claiming of deduction is not sufficient; the assessee has to prove its case. The assessee failed to justify it and hence AO was right in his decision. He further observed that the AO while applying the provisions of Act should take reasonable view. Accordingly, the ld. CIT(A) directed the AO to restrict the disallowance to ₹ 1 lac on estimated basis and delete the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid finding is reproduced below: In the assessment order the AO. has not established any nexus between the borrowings and the investment in the tax free bonds. Incidentally the investment in the tax free bonds were made in the past years. The AO. has disallowed an amount of interest on the basis of proportion........ In my view, as the nexus between the borrowings and the investments have not been established, it cannot be said that there was any expenditure laid out for earning the tax free income. Therefore the provisions of section 14A of the Income-tax introduced w.e.f. 1/4/1962 would be of no benefit to the revenue The AO. is therefore directed to allow a relief of Rs............ from the total income of the appellant. 11.2 In the year under consideration, the appellant has contended that if the appellant's net worth i.e. capital, profit reserve and surplus and current deposits is higher than the investment in tax free securities, then the investment in tax free securities should be regarded to be made from its own funds. The newly inserted section 14A of the Income-tax Act, 1961 with retrospective effect, clearly and specifically provides that in computing the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts cited by the appellant were rendered by the courts prior to the insertion of section 14A of the I.T. Act. The appellant gets relief accordingly. Appellant's appeal on this ground is partly allowed. 37. Aggrieved by this the revenue is in appeal before us. 38. The ld. DR submitted the facts of the case and relied on the order of AO. 39. Before us, the ld.AR argued that, the ld. CIT(A) has thoroughly discussed the factual and legal aspects of the case and he also relied On identical issue decided by his predecessor in the earlier Ayr.98-99 vide order dtd.04/06/2001. The Ld. DR could not differentiate how the issue raised again in this year is different from the previous year, nor been able to show any contrary law to us. 40. After considering the rival contentions and on perusal of the record, we find that the issue raised by the revenue in this appeal stands covered in favour of assessee by the decisions relied upon by the assessee. Therefore, we do not find any infirmity in the order of ld. CIT(A) accordingly, we confirm his order. Ground No.6 taken by the revenue stands dismissed. 41. Now we shall take up the appeal bearing ITA No.2520/Mum/2004 by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1999-2000 and we, after through discussion dismissed the ground taken by the Revenue. Respectfully following the same, here also we take similar view and dismiss Ground No.6 of Revenue s appeal. 54. Now we shall deal with the assessee s appeal for the assessment year 1999-2000 being ITA No.2679/M/2004. 55. The first grounds relates to the confirmation of interest accrued but not due on securities as income of the assessee. 56. The interest accrues on securities for which due date of payment rises after the day which fall due for payment. The assessee did not added this interest income in the total income. The AO was of the view that since the interest in respect of securities for which the due date of payment arises after the end of the previous year i.e. 31.3.1999 is the income of the assessee. Therefore, he added the same to the total income of the assessee. In the appellate proceedings, the ld.CIT(A) by following the decisions in assessee s own cases for the earlier assessment years 1995-96 to 1999-2000 confirmed the action of the AO. 57. Before us also, the ld.AR could not brought on record any material to reverse the view taken by the first appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999- 2000, and even today the revenue could not bring any material contrary to constrain to take a different view. Therefore, respectfully following the order of the Tribunal in assessee s own case, we allow Ground No.2 taken by the assessee. 63. The third issue pertains to disallowance of fees paid to Master card and Visa towards services rendered by them. 64. Before us both the parties conceded that an identical issue had come up before the Tribunal in assessee s own case in Hongkong and Shanghai Banking Corporation Ltd V/s JCIT in ITA Nos. 709,2604,2605,4709/Mum/99 (AYs-1992-93 to 1994-95 1996-97 and 1997-98 order dated 15.2.2007 para 53 to 55 of the order has restored this issue to the file of the AO. Facts being the same, we have no other alternative but to following the said decision of the precedent laid down by the Tribunal. Accordingly, we restore this ground to the file of the AO for verification of the facts and fresh decision. Ground No.3 of assessee s appeals is allowed for statistical purposes. 65. The last ground pertains to the confirmation of disallowance made by the AO regarding the payment to the Great Eastern Shipping Company Limited (GESC), and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the following decisions: a) CIT Vs Versus Mohanlal Brother - 1982 133 ITR 642(Bom); b) CIT v Nav Bharat Nirman (P) Ltd [1983] 141 ITR 723 (Delhi). c) CIT v. Auto Distributors: 210 ITR 222 (Cal) The ld. AR further submitted that the Hon ble Bombay High Court in the case of Mohanlal Brother (supra) held that the amount paid for obtaining the possession of premises is business expenditure u/s 37(1) of the Act. In the case of Nav Bharat Nirmal (P) Ltd (supra), it has also been held by the Hon ble Delhi High Court that liability for non-eviction of tenant and liability to pay brokerage accrued to assessee in relevant accounting year is expenditure, section 28(i) r.w.s.145 of the Act. The facts of the case in CIT V/s Auto Distributors Ltd (supra) are similar to the facts of present case in the said case the Calcutta High Court allowed the claim of the assessee treating it as business expenditure u/s 37(1) of the Act. 68. The ld. DR relied on the orders of authorities below. 69. After hearing the contentions of both the parties and on perusal of records including the decisions relied upon by the assessee, we are of the considered opinion the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght by restoring to Arbitration proceedings through the Stock Exchange did not yield any positive result in view of the lapse of time. Chase Manhattan Bank, who acted as the Global Custodians for EMGF raised a claim against the bank on the ground that the FII and the Global Custodians were not duly notified of the notices/objections as required under the Custody Agreement. In these transactions, Chase and EMGF suffered loss of 3.5 crores. Since these clients are very important to the bank and to safeguard their interest the assessee spent ₹ 3.5 crores and hence assessee claimed business loss in the computation of income. The AO did not accept the claim of assessee and disallowed the same. Aggrieved the assessing filed appeal before the ld. CIT(A). The ld.CIT(A) held that the assessee was not responsible for theft of shares as well as the matter being sub-judice before Hon ble High Court. The ld. CIT(A) confirmed the action of the AO. 75. Before us the ld.AR contended that the assessee is acting as mediatory to holds securities, collect dividends, obtains deliveries, ensures transfer in the name of the clients and delivers the securities when the same are sold by the client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, Appeal by Reveue. 81. The first issue urged by the revenue is in respect of broken period interest of ₹ 1,08,09,47,760/-. 82. We find that we have decided an identical issue in the revenue s appeal for the assessment year 1999-2000 vide para 2 to 10 of this order. Therefore, by following the principle of consistency, we dismiss Ground No.1 taken by the revenue. 83. The second issue raised by the revenue is in respect of directing the AO to delete bonus point on credit cards amounting to ₹ 5,97,56,963/-. 84. Facts of the issue are the assessee bank give credit and bonus point to the customers on purchasing goods on credit cards. These credits points are converted into cash and credited to the account of the customers. Aggregating such bonus points on credits cards amounting to ₹ 5,97,56,963/- claimed by the assessee-bank as an expenditure and deducted the same from the total income of the assessee. The AO disallowed the same on the ground no provision has been made in the Income Tax Act. The ld. CIT(A) allowed the claim of the assessee holding that the bonus points accruing to the customers is a liability against the commission income earned from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground no.3 of revenue s appeal. 90. The ground No.4 taken by the revenue pertains to deletion of disallowance of ₹ 14,99,000/- incurred on library subsidy, contributions to staff cultural committee and recreation club. 91. We have already discussed similar ground of revenue s appeal and vide paragraphs 21 to 28 of this order for the assessment year 1999-2000, we have dismissed ground taken by revenue therein. Therefore, following the above view, here also we dismiss Ground No.4 taken by Revenue. 92. The next issue raised by the revenue in this appeal pertains to deletion of disallowance of ₹ 2,37,21,174/- in respect of entertainment expenses. 93. This ground being identical and no change in facts to that of Ground No.5 for the assessment year 1999-2000, we take similar view as taken therein vide para No.30 to 35 of this order. Accordingly, we dismiss Ground No.5 taken by Revenue. 94. The Sixth ground of this appeal pertain to deletion of addition of exemption of interest of ₹ 26,48,23,923/- earned on tax free bonds. 95. Similar issue has come up before the Tribunal in Revenue s appeal for the assessment year 1999-2000 and we, after thorough dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the repayment covers more than on previous year. Therefore the entirety of the commission accrues at a time. The assessee-bank on the other hand, submits that the service having a spread of years the accrual should be year by year. The Revenue's contention that the accrual of the entire commission is a point of time accrual is not tenable. The contesting submissions boil down to one question whether accrual is co-eval with the pay ability, the same may be payable but may not be apportionable until the happening of an event; in the present case the expiry of the period, for, the guarantee beyond the expiry date of the previous year the right to receive for unexpired period, for, the guarantee beyond the expiry date of the previous year remains in a suspense. It may or may not fructify into an actual right to receive for the subsequent period of the term of the guarantee as the sooner determination of the guarantee is a contingency not ruled out by the agreement. It is only upon certain conditions being fulfilled, viz., the guarantee running the full course or period of the debt guaranteed, that the right to the entirety of the commission can be said to have accrued .. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary) to a non-resident considers that whole of such sum would not be chargeable in the case of the recipient. It would thus follow that for invoking Section 195(2), it is a sine qua non that sum being paid to the non-resident is 'chargeable under the provisions of this Act', i.e., IT Act, 1961 whether fully or partly, i.e., the entire sum or the income hidden or embedded therein. When an income is not eligible to tax in India, by the virtue of the provisions of the applicable DTAA, the deduction of tax under Section 195 of the Act does not come to play at all. It leads us to the conclusion that the expression 'chargeable under the provisions of this Act' cannot include an income, which in terms of the specific provisions of the applicable DTTA is not eligible to tax in India. Accordingly, the ld CIT(A) allowed the claim of the assessee made u/s 40(a)(i) of the Act and directed the AO to delete the addition made on account of TDS not deducted. 104. Before us, the ld. DR reiterated the same submissions as made before the ld. CIT(A). He relied on the order of AO. 105. The ld.AR relied on the order of the ld. CIT(A) and in addition thereof the ld. AR also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,2605,4709/Mum/99 (AYs-1992-93 to 1994-95 1996-97 and 1997-98 order dated 15.2.2007 para 53 to 55 of the order has restored this issue to the file of the AO. Facts being the same, we have no other alternative but to follow the said decision of the Tribunal. Accordingly, we set aside the order of ld.CIT(A) and restore this ground to the file of the AO for verification of the facts and fresh decision. Ground No.3 of assessee s appeals is allowed for statistical purposes. 114. The fourth ground pertains to the confirmation of disallowance made by the AO regarding the payment to the Great Eastern Shipping Company Limited (GESC), and also the claim of ₹ 20 crores regarding depreciation rejected by the ld. CIT.(A). 115. This ground is similar to that of Ground No.4 of ITA No.2679/Mum/2004 filed by the assessee and vide para 65 to 69 of this order, we have allowed the same. Therefore, following our observations above, we allow Ground No.4 of this appeal. 116. The last ground of this appeal Loss made on the outstanding forward contracts of ₹ 15.16.14,000/- 117. During the year under consideration, the assessee booked a net loss of ₹ 15,16,14,000/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to delete the addition. Ground No.5 taken by the assessee is allowed. 121. Now we shall take Cross Objection No.84/Mum/2006 filed by the assessee in respect of AY-2001-02. 122 The first issue raised by the assessee in cross-objection is regarding income assessable for the assessment year 2001-02 for the interest in respect of securities for which the due date of payment (coupon date) had not risen in the accounting year ended 31st Mach, 2001. Since, we have dismissed Ground No.1 of revenue s appeal bearing No. I.T.A. No.4424/Mum/2005 on the same issue. The cross objection on this Ground does not survive, therefore, rejected. 123. The second ground of cross-objection is regarding net loss of ₹ 15,16,14,000/- on account of outstanding foreign contracts. 124. We have decided this ground in favour of the assessee vide paragraph 116 to 121 of this order. Therefore, this ground becomes infructuous. Therefore, dismissed as infructuous. 125. In the result, ITA Nos.2519 and 2520/Mum/2004 by revenue stand dismissed, ITA No.2679/M/2004 by assessee stands partly allowed for statistical purposes, ITA No.2680/M/2004 is allowed, ITA No.4424/M/2005 by revenue stands dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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