TMI Blog2021 (9) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... the DTAA between India and USA - HELD THAT:-.CIT(A) confirmed the view of the Assessing Officer by relying on the decision of Centrica Offshore Pvt.Ltd . [ 2014 (5) TMI 154 - DELHI HIGH COURT] - As contended by assessee that as per India US DTAA, the make available clause is not satisfied in the present case. Therefore, the reimbursement cannot be characterized as FTS. We find that this aspect has not been examined by Ld.CIT(A), therefore, the finding of Ld.CIT(A) is set aside and this issue is restored to Ld.CIT(A) to decide it afresh after having considered the submissions of the assessee regarding make available clause in terms of India US DTAA. Thus, Ground No.3 raised in the assessee s appeal is partly allowed for statistical purposes. Allowability of education cess as a deduction u/s 37(1) - HELD THAT:- Respectfully following the judgement of Hon ble Bombay High Court in the case of Sesa Goa Ltd. vs JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] we direct the Assessing Officer to delete the addition. Thus, additional grounds raised by the assessee are allowed. Allowability of working capital adjustment - HELD THAT:- Since this issue, we have decided in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions to the extent confirmed by the Learned CIT(A) deserve to be deleted. Part I - Transfer pricing grounds of appeal 2. That Learned CIT(A), even after noting that relief granted by Learned Dispute Resolution Panel for A Y 2009-10 in Appellant's own case is in accordance with law laid down by Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd. ITA No. 765 of 2016, failed to give clear directions allowing the relief sought for by way of deletion of adjustment on account of outstanding receivable from Associated Enterprise ( AE ). Part II - Corporate tax grounds of appeal 3. Disallowance of relocation expenses u/s 40(a)(i) 3.1 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of Learned AO disallowing the amount paid to AETRSCO as reimbursement of relocation expenses incurred by AETRSCO on relocation of employees (except providing relief with respect to travel cost/travelling expenses incurred towards visits of the Appellant's own employees visiting outside India), u/s 40(a)(i) of the Act. 3.1.1. On the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeals raised in the above-mentioned appeal, the Appellant craves leave of this Hon'ble Tribunal to raise the following additional ground of appeal and prays that the same may be admitted and be heard and considered as part of the Captioned Appeal while adjudicating the same. Ground 5: Deduction in respect of Education Cess That on the facts and in the circumstances of the case, the Appellant prays that education cess and secondary higher education cess on income-tax paid for the year under consideration, i.e. Assessment Year 2012-13 ought to be allowed as a deduction under section 37(1) of the Income Tax Act, 1961 while computing the total income. The Appellant craves leave to add, alter, delete or modify the above ground of appeal. 3. The Appellant humbly submits that the above-mentioned ground may kindly be admitted as it does not require any fresh examination of facts and can be adjudicated on the basis of material on record It goes to the root of the matter and is required to be adjudicated In order to determine the correct tax liability of the Appellant Reliance is also placed on the decision of the Apex Court in the case of National The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of American Express International Inc., USA and was engaged in the global business processing and support services and Travel Travel related services. During the previous year relevant to the Assessment Year, the assessee had undertaken international transaction with its Associated Enterprises ( AE ) amounting to more than ₹ 15,00,00,000/-. Therefore, in terms of section 92CA of the Act, the international transactions entered into by the assessee with AE were referred to the Transfer Pricing Officer ( TPO ) for determining the Arm's Length Price ( ALP ) with the previous approval of the CIT, Delhi-1, New Delhi. The TPO vide order dated 15.01.2016 suggested adjustment in respect of receivables of ₹ 10,73,12,034/-. It was observed by the Assessing Officer that the assessee had shown receivables from its AE in its books of accounts. It was noticed by the Assessing Officer that the assessee company was in receipt of payment for services rendered to its AEs after expiry of period specified in the respective service agreements but did not charge any interest on such delayed payments by the AE. Therefore, the TPO suggested upward adjustments of ₹ 10,73,12,034/- to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP and the judgement of Hon ble Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant, if any. 10. Further, Ld.CIT(A) agreed with the conclusion drawn by the Assessing Officer/TPO that the payment towards travel expenses constitutes fee for technical services in terms of section 9(1)(vii) of the Act and Article 12 (4) of India US DTAA. It was further held that the appellant was required to deduct TDS on the payment made to AE hence, non-deduction of tax would attract disallowance u/s 40(a)(i) of the Act. Further, the disallowance of travelling expenses made in respect of the employees who travelled aboard for training or business purposes, did not accept the finding of the Assessing Officer and held that such expenditure do not constitute FTS under either the Act or the Treaty. 11. Aggrieved against this order, both the assessee and the Revenue filed separate cross-appeals before this Tribunal. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in the case of assessee itself for Assessment Year 2010-11 in ITA No.1426/Del/2015 vide order dated 17.07.2019 has held as under:- 37. Now coming to Ground No.14, this is to the effect that the interest of credit period granted by the company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon ble Delhi High Court in ITA No.765/2016 in the case of Kusum Healthcare P. Ltd. 19. The above order was followed in Assessment Year 2011-12 by the Tribunal. We do not see any reason to deviate from the decision rendered in the earlier years. The Assessing Officer is directed accordingly. The Ground of appeal No.2 raised by the assessee is thus, allowed. 20. Now, coming to Ground of appeal No.3 raised by the assessee in respect of addition made by invoking the provision of section 40(a)(i) of the Act. It is contended by the Ld. Counsel for the assessee that the Assessing Officer disallowed a sum of ₹ 3,92,81,378/- stating that reimbu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the make available clause of India US DTAA is not satisfied in present case and reimbursement cannot be characterized as FTS. Hence, no tax is deductible in law and no disallowance could be made u/s 40(a)(i) of the Act. Reliance was placed on the decisions of Hon ble Karnataka High Court in DIT vs Abbey Business Services Pvt.Ltd. in ITA No.214 of 2014 and the judgement of Hon ble Bombay High Court in the case of DIT vs Marks Spencer Reliance India Pvt.Ltd. bearing ITA No.893 of 2014. Ld. Counsel for the assessee submitted in view of the aforesaid decisions and more particularly, when the clause make available, is not satisfied of India US DTAA. The authorities below were not justified in making the disallowance. 21. On the contrary, Ld. CIT DR supported the orders of the authorities below and submitted that there is no infirmity in the order of Ld.CIT(A). Ld.CIT DR submitted that Hon ble Delhi High Court in the case Centrica Offshore Pvt.Ltd. vs CIT (supra) has held that payment towards travel expenses constitutes fees for technical services. 22. We have heard the rival contentions and perused the material available on record and gone the orders of the authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of material on record It goes to the root of the matter and is required to be adjudicated In order to determine the correct tax liability of the Appellant Reliance is also placed on the decision of the Apex Court in the case of National Thermal Power Corporation Limited v. err (1998) 229 ITR 383 (SC). 4. In the interest of justice, it is therefore humbly requested that the said additional ground may kindly be admitted and adjudicated and the Hon'ble Tribunal may decide on merits after providing the Appellant an opportunity of hearing in the matter. 5. In view of the aforesaid and in the interests of equity and justice, it is respectfully prayed that the aforesaid additional ground of appeal, by virtue of the discretion vested with this Hon'ble Tribunal under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, be admitted and taken into consideration while adjudicating the above appeal. 24. Ld. Counsel for the assessee submitted that the additional ground for Assessment Years 2012-13 2013-14 is raised against disallowance of education cess u/s 37(1) of the Act. He submitted that the education cess is allowable expenditure u/s 37(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Revenue has raised following ground of appeal:- 1. In the facts and circumstances of the case, the Ld.CIT(A) has erred in deleting the Transfer Pricing adjustment made on account of delay in receipt of receivables and by allowing working capital adjustment to the assessee while calculating its profit margin. 30. The solitary ground in this appeal is with regard to allowing working capital adjustment of the assessee while calculating its profit margin. 31. At the outset, Ld. Counsel for the assessee submitted that Ld.CIT(A) has allowed the working capital adjustment by following the decision of Tribunal in assessee s own case in ITA No.1426/Del/2015 order dated 17.07.2019. 32. Ld.CIT DR could not controvert these facts. 33. We have heard the rival contentions and perused the material available on record. In para 18-19 of this order we have affirmed the view of the Ld. CIT(A) on allowing working capital adjustments. Therefore, for the same reasoning this ground is dismissed. 34. In the result, the appeal of the Revenue is dismissed. 35. Now, we take up ITA No.2834/Del/2018 [Assessment Year 2012- 13] wherein the Revenue has raised followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby affirmed. Thus, Ground Nos.1.1 to 1.3 raised by the Revenue are rejected. 37. Ground No.2 raised by the Revenue relates to allowance of payment of travelling expenses. Similar ground was raised by the assessee in ITA No.2714/Del/2018. 38. Since, we have affirmed the view of Ld. CIT(A) on the issue of allowability of payment of travelling expenses in respect of its own employees in ITA No.2714/Del/2018. We do not see any reason to disturb the finding of Ld. CIT(A) as payment of travelling expenses to its own employee could not fall within the ambit of FTS. Thus, Ground No.2 raised by the Revenue is rejected. 39. In the result, the appeal of the Revenue is dismissed. 40. The assessee has also filed Cross Objection No.125/Del/2018 against ITA No.2834/Del/2018 pertaining to Assessment Year 2012-13 . The assessee has raised following grounds in the cross-objection:- 1. The Learned TPO and the Learned AO have erred, in law and on facts and in circumstances of the case, by not accepting the economic analysis undertaken by the Respondent in accordance with provisions of the Act read with the Income Tax Rules ( Rules ), and undertaking a fresh economic anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has raised following ground of appeal:- Based on the facts and circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 ( the Act ) against the order dated February 28, 2018 passed by the Learned Commissioner of Income-tax (Appeals) - 44, New Delhi ( referred to as Learned CIT(A) ) against the assessment order dated February 27, 2017 passed by the Additional Commissioner of Income-tax, Special Range-1, New Delhi ( referred to as learned AO ) under section 143(3) the Act on the following grounds: 1. Based on the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the order passed by the learned- AO without appreciating the facts of the case and law relating thereto and the various additions to the extent confirmed by the Learned ClT(A) deserve to be deleted. 2. Disallowance of relocation expenses u/s 40(a)(i) 2.1 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of Learned AO disallowing the amount paid by the appellant to AETRSC0 on account of rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iest. We find that this aspect has not been examined by Ld.CIT(A), therefore, the finding of Ld.CIT(A) is set aside and this issue is restore to Ld.CIT(A) to decide it afresh after having considered the submissions of the assessee regarding make available clause in terms of India US DTAA. Thus, Ground No.3 raised in the assessee s appeal is partly allowed for statistical purposes. 46. No change into facts and circumstances have been pointed by the Ld. counsel for the assessee except stating that the facts of the of case in Centrica Offshore Pvt. Ltd. vs CIT (supra) relied by the Ld. Authorities below are distinguishable as in that case payment was made qua the provision of service. In ITA No.2714/Del/2018, we have set-aside the order of Ld. CIT(A) for decision afresh after considering the submissions of the assessee. For the same reasoning in this year as well impugned order is set-aside. Ld. CIT(A) is hereby directed to decide the issue after considering all objections of the assessee. 47. Ground No.3 raised by the assessee is against the initiation of penalty proceedings. This ground is dismissed being pre-mature. 48. In the result, the appeal of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in the case of Kusum Healthcare Pvt.Ltd.(supra) and also the decision of Tribunal in earlier years. Therefore, we do not see any infirmity in the finding of Ld.CIT(A) and the same is hereby affirmed. Thus, Ground Nos.1.1 to 1.3 raised by the Revenue are rejected. 51. Taking the consistent view, Ground Nos. 1.1 to 1.3 raised by the Revenue are rejected. 52. Ground No.2 raised by the Revenue relates to payment of relocation expenses to its own employees. Similar ground was raised vide Ground No.2 in ITA No.2834/Del/2018 relating to Assessment Year 2012-13 by observing as under:- 38. We have affirmed the view of Ld.CIT(A) in respect of allowance of payment of travelling expenses in respect of its own employees. The Assessing Officer has not pointed that the disallowance was related to AEs. In the absence of the same, we do not see any reason to interfered in the finding of Ld.CIT(A). Thus, Ground No.2 raised by the Revenue is rejected. 53. Taking the consistent view, Ground No.2 raised by the Revenue is dismissed. 54. In the result, the appeal of the Revenue is dismissed. 55. The assessee has also filed Cross Objection No.126/Del/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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