TMI Blog2021 (10) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... ot an issue that the foregoing legislative amendments have proposed employers contribution/disallowance u/s.43B as against employee s contribution u/s.36(va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 01-04-2021 only, we hold that the impugned disallowance is not sustainable in view of all these latest developments. The impugned ESI/PF disallowance is deleted therefore. - Decided in favour of assessee. Disallowance of sponsorship fees under section 37(1) - HELD THAT:- We find no merit in the assessee s instant last substantive grievance. This is for the reason that it has failed to pin point even a distinct direct nexus between its day to day business activity viz-a-viz the impugned alleged sponsorship fee paid to the eligible women for their life time achievements. This tribunal s Third Member s decision in M/s. Hyundai Motors India Ltd. Vs. DCIT, [ 2015 (9) TMI 962 - ITAT CHENNAI ] after considering the hon'ble apex court s landmark decision Sassoon J. David and Company (P) Ltd [ 1979 (5) TMI 3 - Supreme Court ] holds that any expenditure claim raised u/s.37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this effect reads as under: 67. The next issue is with regard to the Corporate Guarantee and Bank Guarantee. 68.From the Annual Report of the assessee, it was seen that the assessee had issued guarantees on behalf of its subsidiaries to the tune of ₹ 464.36 crores and on behalf of others, to the tune of ₹ 3.42 crores. The assessee was called to explain the same. The assessee stated that they had not issued any fresh guarantee during the Assessment Year 2009-10 and the guarantee is outstanding, is purely on account of the currency transition adjustment on restatement of guarantees outstanding at the closing rates prevailing on 31st March 2009 for disclosure in financial statement in compliance with the Accounting Standards. Further, the assessee stated that the outstanding guarantee issued by the assessee as on 31.03.2009 represents guarantee issued on behalf of the overseas subsidiaries in earlier years. Further, they stated that during the course of assessment proceedings in the relevant assessment years, the TPO made addition to the Corporate Guarantee issued during those years by adopting the bench mark rate based on the available internal comparable uncontro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Associated Enterprises of the assessee have not provided any security to the assessee. In the agreement / contract between the Associated Enterprises and the assessee, no condition has been imposed on the Associated Enterprises to pay the amount to the assessee and even in some agreements if it is mentioned, in the event of the Associated Enterprises financially becoming weak, the risk undertaken by the assessee becomes greater. Further, invoking a guarantee provided to an Associated Enterprise is very difficult as it depends on the financial condition of the Associated Enterprise and the law governing such transactions in that country and the assessee is bound by the provisions of FEMA and RBI guidelines. Therefore, the TPO concluded that the Bank commission charges cannot be compared for the commission charges that has been payable to the assessee by the Associated Enterprises and it is a clear financial services rendered by the assessee to their Associated Enterprise, which has to be compensated by proper commission charges. Accordingly, the TPO held 2% shall be charged as commission and proposed an upward adjustment to the income of the assessee to the tune of ₹ 817.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding rendered by the Tribunal is utterly perverse. 70.The argument of the learned Senior counsel appearing for the assessee is that prior to the amendment brought about in Section 92B by Finance Act 2012, the Tribunal had decided that furnishing of a guarantee by an assessee was not an international transaction as it did not fall within any of the limbs of Section 92B. It is submitted that to get over the judicial pronouncement, the explanation was inserted. The argument is that Clause (c) of the Explanation supports the case of the assessee inasmuch as the Explanation makes it clear that giving of a Corporate Guarantee is not a service. Without prejudice to the said contention, it is submitted that only Corporate Guarantee is given by the assessee, which are in the nature of lending are covered under clause (c) of Explanation 1 to Section 92B. Further, it is submitted that the nature of transactions covered by Clause (e) specifically include even those transactions which may not have a bearing on the profit, income, losses or assets of such enterprises at the time of transaction are covered if they have such a bearing at any future date. It is argued that the language used in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on P L account, but inherent risk cannot be ruled out in providing guarantees. Ultimately, the Tribunal upheld the adjustments made on guarantee commissions both on the guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise. 76.In the light of the above decisions, we hold that the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and restore the order passed by the DRP . 5.1. We adopt the foregoing detailed discussion Mutatis Mutandis and hold that the learned lower authorities have rightly treated the assessee s corporate guarantee(s) in all the three impugned assessment years as an international transaction falling u/s.92B of the Act. We therefore decline the assessee s multifaceted submission in light of its main as well as additional ground touching upon the impugned issue . 3. Learned counsel failed to pin point any distinction on any legal and factual aspect. We thus decline assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s The New Indian Express Group for promotion of 'Devi Uttar Pradesh Awards' to be conferred upon 10 exceptional women who have displayed dynamism and innovation in their line of work. The expenditure incurred is a contribution made by the assessee company for empowerment of women. Though, it is a noble cause, but this contribution has no relation to the business activity of the assessee company. There is no nexus between the contribution made and the income generated for the business of the assessee Company. As per provisions of section 37 of the Income Tax Act, 37(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly or exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business and profession'. In view of the above, as the expenditure incurred is not wholly and exclusively for the purpose of business of the assessee Company, the same is disallowed. 6.1 During the appellate stage, the appellant Company ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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