TMI Blog2017 (9) TMI 1929X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the issue in favour of the assessee In the present case, the commission payments have been made to an entity tax resident in United Kingdom. The benefit of Indo UK Double Taxation Avoidance Agreement is thus clearly admissible to the recipient. Coming to the treaty provisions, it is not even the case of the Assessing Officer that the UK based entity had a permanent establishment in India, and the commission paid to this entity, therefore, cannot be taxed as business profits. It is only elementary that, in the absence of a PE, Article 7 of the applicable DTAA does not allow taxation of business profits in the source country. As for the taxability under the fees for technical services clause, it is important to bear in mind the fact that the Indo UK DTAA has a make available clause in its article dealing with fees for technical services. As for the connotations of make available clause in the treaty, there are at least two non-jurisdictional High Court decisions, namely Honble Delhi High Court in the case of DIT v. Guy Carpenter Co Ltd. [ 2012 (5) TMI 31 - DELHI HIGH COURT] and in the case of CIT v. De Beers India Minerals (P.) Ltd. [ 2012 (5) TMI 191 - KARNATAKA HIGH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to the double disadvantage in the sense that neither the amount is deductible in the year in which expenditure is incurred nor the deduction is permitted in the year in which the tax is deducted, though wrongly, in respect of such payments. We are, therefore, urged to direct the Assessing Officer to allow the payment of purchase commission and guarantee commission for the year 2003-04 which was not claimed in that year on the ground that taxes were not deducted from the same and has been claimed in the present year on the basis that now taxes has been deducted and paid. Learned Departmental Representative very fairly does not oppose the contention so advanced by the assessee. Thus bearing in mind entirety of the case, we see merits in the stand of the assessee and direct the Assessing Officer to allow the claim, upon verification about the factual elements embedded in the submissions of the learned Counsel, in accordance with law. This issue is thus remitted to the file of the Assessing Officer for necessary factual verification. The additional ground is thus allowed for statistical purposes. Addition made on account of refund of value added tax receivable by the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the total income. 2.2 The learned CIT (Appeals) has grossly erred in law on facts of the case in confirming the action of the AO in making the impugned addition without appreciating the fact that the AO had misinterpreted Rule 8D and that the impugned addition was made without carrying out any preliminary exercise of verifying if the expenditure suo moto disallowed by the appellant is correct or not as per Sub Rule 1 of Rule 8D. Further, the appellant has not claimed that it has not incurred any expenditure to earn income which is not includible in total income. Hence, the disallowance made by the AO and confirmed by the CIT (A) is not in accordance with Sub Rule 1 of Rule 8D of the I.T. Rules, 1962. 2.3 The learned CIT (Appeals) has grossly erred in law on facts of the case in confirming the action of the AO in making the impugned addition by invoking the provisions of Rule 8D of the I.T. Rules, 1962 in utter disregard to the fact that the said Rule, which was introduced with effect from 24th March, 2008 shall apply only with effect from A.Y. 2008-09 and is not applicable to A.Y. 2007-08 as held by the Hon'ble High Court in the case of Godrej Boyce Manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in law and on facts in deleting the addition of ₹ 2,40,95,000/- made on account of disallowance u/s 40(a)(i) r.w.s. 195 of the Act, for failure to comply with the provisions of Chapter XVII-B from the commission paid to BG Energy Holding Ltd., a non-resident company. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 8. So far as this issue is concerned, it would be appropriate to take note of some of the undisputed facts. The assessee before us is a public company engaged in the business of distribution and transmission of natural gas. During the relevant previous year, the assessee made expenditure aggregating to ₹ 2,40,95,000/- on account of payment of commission on purchase of gas, to BG Energy Holdings Ltd, a UK based company. The Assessing Officer was of the view that the payments so made by the assessee to BG Energy were taxable in the hands of the recipient and the assessee was, therefore, required to deduct tax at source from these payments. It was his contention that since assessee has not so deducted tax at source, the payments made to BG Energy Holding Ltd were to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to BGEH as it provided a corporate guarantee to Cairn Energy Ltd on behalf of the appellant, BGEH was the primary obligor to the selling parry for the gas purchase contract. The facts regarding the quantum of payment are not disputed as it is evidence by the agreements and the A.O. has also not disputed the same. As per Explanation 2 below clause (vii) of Sub-Section (1) of Section 9 of the I.T. Act 'fees technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial technical or consultancy services (including the provision of services of technical or personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration or which would be income of the recipient chargeable under the head 'salaries'. Now it would also be useful to examine the meaning of word commission . The term commission has not been defined in the income tax act in section? of the Income Tax Act. However, Explanation below Section 194H of the Income Tax Act has defined commission as under: Commission or brokerage includes any payment rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utinizing the effectiveness of the policies that are adopted and (d) initiating steps to change policies when they are judged to be less effective than they ought to be. Management thus pervades all organizations. Further reliance is also placed on the orders of Angelique International (55 SOT 226 (Del)), Adidas Sourcing Ltd. (21 ITR (Trib.) 697 (Del.)) and Sukani Enterprise ITA No. 1330/M/2011, wherein also, the proposition laid down is that services provided by the foreign selling commission agent cannot be categorized as managerial services so as to invoke provisions of S.9(1)(vii) of the Act. Therefore, in my considered opinion and in view of the preceding discussion the services rendered should be categorized as 'commission'. Accordingly the payment is beyond the scope and meaning of section under section 195 was not there. The payment has directly has been remitted abroad and therefore, it also cannot be said that it has been received by some agent in India. The honourable Supreme Court of India in the case of Toshoku (supra) has held that commission earned by the non-resident for acting as the selling agent for the Indian exporter, wherein such non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, Explanation: For the purpose of this clause [i.e. 9(1)(i)], (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; (b) (c) (d)** ** ** (vii) income by way of fees for technical services payable by- (a) ** ** ** (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c)** ** ** Explanation 1- .* Explanation 2.- For the purposes of this clause, fees for technical services means any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive the commission arises in India only when exhibitor participates in the India International Food Wine Show (to be held in India), and makes full and final payment to the applicant in India and that the commission income would, therefore, be taxable under section 5(2)(b) read with section 9(1)(i) of the Act . The Authority for Advance Ruling also held that the fact that the agent renders services abroad in the form of pursuing and soliciting participants and that the commission is remitted to him abroad are wholly irrelevant for the purpose of determining situs of his income . We do not consider this approach to be correct. When no operations of the business of commission agent is carried on in India, the Explanation 1 to Section 9(1)(i) takes the entire commission income from outside the ambit of deeming fiction under section 9(1)(i), and, in effect, outside the ambit of income 'deemed to accrue or arise in India' for the purpose of Section 5(2)(b). The point of time when commission agent's right to receive the commission fructifies is irrelevant to decide the scope of Explanation 1 to Section 9(1 )(i), which is what is material in the context of the situation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendering of any managerial, technical and consultancy services . As we do so, it is useful to bear in mind the fact that even going by the stand of the Assessing Officer, at best services rendered by the non-resident to the agent included technical services but it is for this reason that the amounts paid to these agents, on account of commission on exports, should be treated as fees for technical services. Even proceeding on the assumption that these non-resident agents did render the technical services, which, as we will see a little later, an incorrect assumption anyway, what is important to appreciate is that the amounts paid by the assessee to these agents constituted consideration for the orders secured by the agents and not the services alleged rendered by the agents. The event triggering crystallization of liability of the assessee, under the commission agency agreement, is the event of securing orders and not the rendition of alleged technical services. In a situation in which the agent does not render any of the services but secures the business anyway, the agent is entitled to his commission which is computed in terms of a percentage of the value of the order. In a rever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either. The question then arises whether in a situation in which, in the course of carrying on such business, the assessee has to necessarily render certain services, which are of such a nature as covered by Explanation 2 to Section 9(1)(vii), and even though the assessee is not paid any fees for such services per se, any part of the business profits of the assessee can be treated as 'fees for technical services' and taxed as such under section 9(1)(vii). This question does not pose much difficulty either. In the light of the discussions in the foregoing paragraph, unless there is a specific and identifiable consideration for the rendition of technical services, taxability under section 9(1)(vii) does not get triggered. Therefore, irrespective of whether any technical services are rendered during the course of carrying on such agency commission business on behalf of Indian principal, the consideration for securing business cannot be taxed under section 9(1)(vii) at all. This profits of such a business can have taxability in India only to the extent such profits relate to the business operations in India, but then, as are the admitted facts of this case, no part of operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well ahead - as much as he can - of tender closing. 5.5 The AGENT on behalf of the PRINCIPAL, will purchase tender documents and forward the same to the PRINCIPAL well ahead - as much as he can - of tender closing. The cost of purchase of such tender documents shall be reimbursed by the PRINCIPAL to the AGENT. 5.6 To assist for claims and complaints (if say) that may arise from third parties and help to reach appropriate settlement in close co-ordination with the PRINCIPAL. 5.7 The AGENT will not enter into Agreements or Contractual Obligations . create any financial liabilities on behalf of the PRINCIPAL, without the PRINCIPAL'S prior written consent. 5.8 The AGENT hereby nominates Mr. Hossam Kawash as their contact point who will be totally responsible for the PRINCIPAL'S business for clarity of communication expeditious action. 5.9 To assist the PRINCIPAL in all possible way, as and when requested by the PRINCIPAL for the fulfillment of its obligations, in case of a contract within the TERRITORY. It includes assisting the PRINCIPAL in identifying subcontractors like logistics, shippers, cargo handling agencies for smooth execution of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent is entitled for the applicable commissions. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT WELSPUN will pay GLOBAL SYNERGY INTERNATIONAL LTD. in its capacity as agent for WELSPUN a sales commission, based on the FOB mill sales price for the GK 3 project equal to: (i) 2% of the FOB Mill value in U.S. Dollars for the ordered quantity. All sales commissions shall be paid in U.S. Dollars to the bank account to be advised by GLOBAL SYNERGY, details of which will be provided by the agent. The sales commission shall be payable by WELSPUN to GLOBAL SYNERGY INTERNATIONAL LTD. as interim payments on prorate basis after realization of the payments received by the PRINCIPAL within a reasonable time but not exceeding 30 days from receipt of payment by the PRINCIPAL. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT By the virtue of this addendum, WELSPUN agree to pay GLOBAL SYNERGY INTERNATIONAL LTD., in its capacity as agent for WELSPUN, a sales commission, based on the FOB mill sales price for the GK 3 project equal to: (i) 4.10% of the FOB Mill value in U.S. Dollar for the quantity shipped is last (18 ) Shipment. (a) GLOBAL SYNERGY INTERNAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as rendition of technical services is concerned, one of the main points in the case of the revenue, as evident from a plain reading of the impugned order under section 201, is that manufacturing of specialized pipe was a highly technical activity involving very complex technical exercise of technology and skilled labour and finest grade of raw material and that obviously, to procure the orders, the assessee company will need specialist agents who can understand the nitty gritty of the assessee's business and can demonstrate the assessee's business profile and quality of products of the assessee to the potential clients to convince them to enter into a contract with the assessee company Just because a product is highly technical does not change the character of activity of the sale agent. Whether a salesman sells a handcrafted souvenir or a top of the line laptop, he is selling nevertheless. It will be absurd to suggest that in the former case, he is selling and the latter, he will be rendering technical services. The object of the salesman is to sell and familiarity with the technical details, whatever be the worth of those technical details, is only towards the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of these services inasmuch as it is not the rendition of these services but securing business of the assessee which triggers the income accruing to the non-resident agents of the assessee and it is securing of business for the assessee which is the proximate cause of the income accruing to the assessee. This issue is also covered, in favour of the assessee, by a coordinate bench decision in the case of Dy. CIT v. Troikaa Pharmaceuticals Ltd. [IT Appeal No. 2028/Ahd/13 and CO No 13/Ahd/14] and vice versa, wherein it has been, inter alia, observed as follows: '5. As regards the references to Section 9(1)(vii), as made by the Assessing Officer and the learned Departmental Representative, we find that aspect of the matter is also covered, in favour of the assessee, by a large number of judicial precedents- including Hon'ble Madras High Court's judgment in the case of CIT v. Farida Leather Co. [(2016) 66 taxmann.com 321 (Madras)], wherein Their Lordships have, inter alia, observed as follows: 5. The main contention of the learned counsel for the assessee/respondent is that the agency commission/sales commission paid by the assessee to non-resident agents, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation: For the purposes of this sub-clause,- (A) royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9: (B) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9: (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139 thirty per cent of, such sum shall be allowed as a deduction in computing the income of the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. ** ** ** Explanation 4.- For the removal of doubts, it is hereby clarified that the expression through shall mean and include and shall be deemed to have always meant and included ''by means of , in consequence of or by reason of .' 7.1 Section 40 of the Act spells out what amounts are not deductible from the income charged to tax under the profits and gains of business or profession. 7.2 Section 40(a)(i) of the Act deals with interest and other sums payable outside India. The provisions of this sub-clause made applicable to interest have been extended to payment of royalty, technical fees and any other sum chargeable under this Act. The section provides that the sums covered by the sub-clause, which are chargeable under the Act and are payable outside India, shall not be allowed as an expenditure to the assessee, unless tax is paid thereon or is deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the assessee to deduct the tax at source does not exist. 10. Further, just because, the payer / assessee has not obtained a specified declaration from the Revenue Authorities to the effect that the recipent is not liable to be taxed in India, in respect of the income embedded in the particular payment, the Assessing Officer cannot proceed on the basis that the payer has an obligation to deduct tax at source. He still has to demonstrate and establish that the payee has a tax liability in respect of the income embedded in the impugned payment. 11. In the instant case, it is seen, admittedly that the nonresident agents were only procuring orders abroad and following up payments with buyers. No other services are rendered other than the above. Sourcing orders abroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations or other support in respect of any other technical matters. It also does not require any contribution of technical knowledge, experience, expertise, skill or technical know-how of the processes involved or consist in the development and transfer of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 9 of the Act, then there is no question of applying Explanation 4 to Section 9 of the Act. Therefore, the Revenue has no case and the Tax Case Appeal is liable to be dismissed. 6. Clearly, therefore, the payment of commission in the hands of the nonresident agent, as long as such an agent carries out its activities outside India, does not result in taxability in the hands of the agent in India.' 39. As we deal with this aspect of the matter, we may also take note of the following analysis, in the case of UPS SCS Asia Ltd. v. Asstt. DIT, (International Taxation) [2012] 50 SOT 268/18 taxmann.com 302 (Mum.), about the scope of managerial, consultancy and technical services which the services rendered must fulfil so as to lead to taxability as fees for technical services: '5. A bare perusal of the above quoted provision indicates that the fees for technical services means any consideration for rendering of any managerial, technical or consultancy services but does not include the consideration for any construction, assembly etc. The learned CIT(A) has held the services rendered by the assessee as fees for technical services' coming wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction from the other for executing particular job in a particular manner, it cannot be said that the former is managing that affair. It would mean that the directions of the latter are executed simplicity without there being any planning part involved in the execution and also the evaluation of the performance. In the absence of any specific definition of the phrase managerial services as used in section 9(1)(vii) defining the fees for technical services , it needs to be considered in a commercial sense. It cannot be interpreted in a narrow sense to mean simply executing the directions of the other for doing a specific task. For instance, if goods are to be loaded and some worker is instructed to place the goods on a carrier in a particular manner, the act of the worker in placing the goods in the prescribed manner, cannot be described as managing the goods. It is a simple direction given to the worker who has to execute it in the way prescribed. It is quite natural that some sort of application of mind is required in each and every aspect of the work done. As in the above example when the worker will lift the goods, he is expected to be vigilant in picking up the goods moving t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fees for technical services taken note of by the ld. CIT(A) is technical services . He observed that the assessee's business structure is time bound service coupled with continuous real time transmission of information by using and also making available its technology in the form of sophisticated equipments and software etc. The learned CIT(A) has held that : in order to ensure efficient and timely delivery and to provide continuous real time information, the Appellant is required to use sophisticated technology for which the Indian entity is also equally involved and to whom the appellant is committed to providing the requisite software and equipment . The learned CIT(A) has also accentuated on the clause 2 of the Agreement which reads as under: 2. Contractor shall separately execute a Technology and Software license agreement for the provision of computer equipment and software supplied by SCS. Contractor shall separately execute a Trademark license agreement for the use of any marks or brands owned by United Parcel Service of America, Inc. The fee payable by Contractor under paragraph 3.1 will not include any royalty amount relating to the use of intangible pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee'. From the above quoted part of sec. 80 O, it can be seen that the deduction at that time was available not only in respect of income as a consideration for the use of 'technical or professional services' but also any 'commercial....knowledge experience or skill'. Theses two sources are distinct from each other as can be seen from the employment of word 'or' between them. In order to qualify for deduction under this section, the income could have resulted from the rendering of 'technical or professional services' or commercial knowledge, experience or skill etc. When the tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f other words which it keeps. This rule is wider in scope than the rule of ejusdem generis. In order to discover the meaning of a word which has not been defined in the Act, the Hon'ble Supreme Court has applied the principle of noscitur a sociis in several cases including Aravinda Paramila Works v. CIT [(1999) 237 ITR 284 (SC)]. As noted above the word 'technical' has been sandwiched between the words 'managerial' and 'consultancy' in Explanation 2 to sec. 9(1)(vii) and no definition has been assigned to the 'technical' services in the relevant provision, we need to ascertain the meaning of the 'technical services' from the overall meaning of the words 'managerial' and 'consultancy' services by applying the principle of nosticur a sociis. It has been held above that the 'managerial services' and 'consultancy services' pre suppose some sort of direct human involvement. These services cannot be conceived without the direct involvement of man. These services can be rendered with or without any equipment, but the human involvement is inevitable. Moving in the light of this rule, there remains no doubt whatsoev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the technical/Managerial services rendered by the said company to the assessee. Assessee indeed entered into an agreement for propagation of its handicraft products with the non-resident company. The copies of the agreement have been placed before the authorities. The agreement clearly shows that the non-resident company was to get commission for promoting the products of the assessee company and rendering incidental services on sales such as recovery etc. for doing export sales. It is also responsibility of the non-resident company to disseminate the information and inquire about various importers in various countries so that assessee exports can be increased. The agreement clearly shows that non-resident company was to get the commission for promoting the product of assessee company after sales proceeds are received. The detailed terms of the agreement are as under: Agency Agreement In this Agreement between M/s Armayesh Global, Kamanwala Chambers, 2nd Floor, Sir P.M. Road, Fort, Mumbai 400 001, India hereinafter referred to as Principal and Indijack Limited, 99 Breck Nock Road, London N19 5 AB, U.K. - hereinafter referred to as Agent - the following is agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all observe the rules of fair competition and be responsible for any violation of the same. 2.6 The Agent is not authorized to accept payments directly in their own name but shall assist the principal in collecting outstanding payments. The Agent is also authorized to accept notification of defects by a customer, as well as the statement of a customer that he will the goods at the disposable of the principal or any similar statement by which the customer exercises his rights resulting from defective delivery. The Agent shall immediately ii principal and shall see to it that the necessary evidence in favour of the principal is obtained. 2.7 The Agent shall establish business relations only with such customers whose solvency is satisfactory to the best of the knowledge and belief of the Agent. 17. Thus as can be seen from the above, all the terms do indicate that the said company was only acting as an Agent on commission basis and has not been providing any Managerial/Technical services. Further there is no evidence on record that they are providing any technical/managerial services. The said company was responsible for arranging timely payment from the customers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . 19. As can be seen from the above section 9(1)(vii)(b), fee payable for the purposes of making or earning income from any source outside India is not included in the definition. The amount has to be considered as business income. Since the services are rendered outside India, that amount is not taxable as it does not accrue or arise in India. The same view was considered by the Hon'ble Bombay High Court in the case of CEAT International S.A. v. CIT237 ITR 859, where certain export commission was paid to a Non-Resident Company and it was held that the assessee did not impart any information concerning technical, industrial, commercial or scientific knowledge exports or skill, nor rendered any managerial technical or consultancy services. The commission attributable to the services rendered cannot be regarded as royalty or fees for technical services and it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 ITR (St) 235] is thus clearly admissible to the recipient. Coming to the treaty provisions, it is not even the case of the Assessing Officer that the UK based entity had a permanent establishment in India, and the commission paid to this entity, therefore, cannot be taxed as business profits. It is only elementary that, in the absence of a PE, Article 7 of the applicable DTAA does not allow taxation of business profits in the source country. As for the taxability under the fees for technical services clause, it is important to bear in mind the fact that the Indo UK DTAA has a make available clause in its article dealing with fees for technical services. As for the connotations of make available clause in the treaty, there are at least two non-jurisdictional High Court decisions, namely Honble Delhi High Court in the case of DIT v. Guy Carpenter Co Ltd. [2012] 346 ITR 504 and Honble Karnataka High Court in the case of CIT v. De Beers India Minerals (P.) Ltd. [2012] 346 ITR 467 in favour of the assessee, and there is no contrary decision by Honble jurisdictional High Court or by Honble Supreme Court. In De Beers India Minerals (P.) Ltd.'s case (supra), Their Lordships pose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indo UK DTAA will come to the rescue of the assessee. Whichever way one looks at it, whether in the light of the provisions of the Act or the Indo UK DTAA, the conclusions of the CIT(A) do not call for any interference. 14. The appeal of the Assessing Officer is, therefore, dismissed. ITA No. 364/Ahd/2014 : AY: 2008-09 Assessee s appeal 15. Ground no. 1 is general and it does not call for any specific adjudication. 16. In ground no. 2, the assessee-appellant has raised the following grievances:- 2. The learned CIT (Appeals) grossly erred in law and on facts of the case in confirming the action of the AO in making disallowance of ₹ 30,40,260/- by invoking the provisions of Section 14A of the I.T. Act read with Rule 8D of the I.T. Rules out of expenditure incurred wholly and exclusively for earning the income chargeable to tax. 2.1 The learned CIT (Appeals) has grossly erred in law on facts of the case in confirming the action of the AO in making the impugned addition by invoking the provisions of Section 14A of the I.T. Act and Rule 8D of the I.T. Rules ignoring the fact that the expenditure which can be attributed to the exempted income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the year in which the Rule 8D had admittedly come into force and as per assessee s claim that it had sufficient interest free funds. No disallowance is made by the Assessing Officer in respect of interest payments. The disallowance has been made on the basis of the formula set out in Rule 8D in respect of administrative expenses and we see no infirmity in the order of CIT(A) in confirming this disallowance. Ground No.2 is thus dismissed. 18. By way of an additional ground, the assessee has raised following grievance:- Both the lower authorities ought to have allowed Purchase commission and guarantee commission for AY 2003-04 which was not claimed in AY 2003-04 and disclosed by way of a note in statement of total income filed along with return of income that the same will be claimed in the year of payment. In view of this, it is submitted that the said payment has been made during the year under review and hence, the same be granted accordingly 19. So far as this grievance of the assessee is concerned, it is sufficient to take not of the fact that the assessee had incurred certain expenditure on account of purchase commission and guarantee commission in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard, which is upheld. Ground No.1 is thus dismissed. 25. In ground no. 2, the Assessing Officer has raised the following grievance:- Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 1,47,85,477/- made on account of refund of value added tax receivable by the applicant for AY 2007-08. 26. So far as this grievance is concerned, it is sufficient to take note of the fact that admittedly the assessee had never claimed deduction in respect of the amount of excess VAT paid by the assessee on gas purchase cost in the FY 2006-07. Yet, when this amount was refunded to the assessee in the present year, the Assessing Officer brought it to tax. The plea of the assessee that since it was never claimed as deduction at the time of making payment, it cannot be brought to tax now, was simply brushed aside by the Assessing Officer. Aggrieved, assessee carried the matter in appeal before the ld. CIT(A). Learned CIT(A) deleted the addition on the ground that VAT has not been routed through profit and loss account and therefore , it has not been claimed as expenditure . The Assessing Officer has not satisfied with the relief so granted by the CIT(A) and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT (A) is not in accordance with Sub Rule 1 of Rule 8D of the I.T. Rules, 1962. 31. It is pertinent to observe that the grievance raised above is similar to the grievance raised by the assessee in its appeal for Assessment Year 2008-09 vide ITA No.364/Ahd/2014. For the detailed discussion in paragraph no. 17 above, we see no infirmity in the order of CIT(A) in confirming this disallowance. Ground No.2 is thus dismissed. 32. By way of an additional ground, the assessee has raised following grievance:- Disallowance of set off of ₹ 8,80,500/- towards brought forward business loss of AY 2008-09 against business income of AY 2009-10 and levy of interest. 33. Learned counsel for the assessee fairly submits that all that is prayed for in respect of these grounds of appeal is consequential relief. Learned Departmental Representative does not oppose the prayer so made by the assessee. In view of the above position, we uphold the plea of the assessee, in principle, and remit the matter to the file of the Assessing officer for consequential relief and resultant attachment as prayed for. The additional ground raised by the assessee is allowed for statistical purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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