TMI Blog2021 (7) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... the Coordinate Bench of the Tribunal in taxpayer s own case for AY 2005-06 [ 2020 (12) TMI 723 - ITAT DELHI ] upheld the order passed by the ld. CIT (A) while deciding the issue in assessee s favour has given a finding that the payments made by the assessee as GAM charges cannot be treated as payment of salary to non-resident but were in the nature of reimbursement of expenses and there fore assessee was not required to deduct TDS on such payments. - Decided in favour of assessee. TDS on payment of lease rent charges do not fall in the category of FTS - HELD THAT:- payment of lease rent charges do not fall in the category of FTS. In the absence of any material change in the factual as for A.Y. 2005-06 [ 2020 (12) TMI 723 - ITAT DELHI ] as well as the legal aspect of the assessee, we hereby hold that the disallowance made by the AO is directed to be deleted. Capital Advance - Assessee purchased software for the purpose managing fixed assets database, cheque preparation software, MIS etc. which was returned due to operational deficiencies - HELD THAT:- The software was at first instance capitalized by the assessee in. its books of accounts and after returning the software, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Benches of ITAT and judicial pronouncements of the Hon ble High Court of Bombay and Hon ble High Court of Rajasthan, we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37 of the Income Tax Act. - ITA No. 2242, 2260/Del/2015, 5994, 3513/Del/2017, 5538, 6953/Del/2018, 17, 18, 19, 20/Del/2021 - - - Dated:- 30-7-2021 - Sh. Amit Shukla, Judicial Member Dr. B. R. R. Kumar, Accountant Member Appellant By : Sh. Deepak Chopra, Adv. Sh. Harpreet S. Ajmani, Adv. Respondent By : Ms. Meera Srivastava, Cit Dr ORDER Per Dr. B. R. R. Kumar, Accountant Member: Since, the issues involved in ITA Nos. 17 to 20/Del/2021 are identical, they were heard together. 2. In ITA No. 17/Del/2021, the following grounds have been raised by the assessee: 1. That on the facts and circumstances of the case and in law, the Assessing Officer ought to have considered that the education cess paid on the income tax was an allowable deduction for computing total income given the fact that the same was not hit by the provisions of Section 40(a)(ii) of the Act. 3. In ITA No. 2242/Del/2015, following groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of interest u/s 234B of the Act made by the AO. 4. In ITA No. 2242/Del/2015, the assessee has also raised additional ground of appeal under Rule 11 of the Income Tax (AT) Rules, 1963 which is as under: 6. That on the facts and circumstances of the case and in law, the Assessing Officer ought to have considered that the education cess (EC) and Secondary High Education Cess (SHEC) paid on the income tax was an allowable deduction for computing total income given the fact that the same was not hit by the provisions of Section 40(a)(ii) of the Act. 5. In ITA No. 2260/Del/2015, following grounds have been raised by the revenue: 1. On the facts and in the circumstances of the case, the ld. CIT (A) erred in law in deleting the addition of ₹ 25,01,93,313/- made on account of Arm s Length Price. 2. On the facts and in the circumstances of the case, the ld. CIT (A) erred in law in deleting the addition of ₹ 1,82,94,611/- made on account of no deduction of TDS in respect of payment made towards Global Account Management charges. 6. In ITA No. 5994/Del/2017, following grounds have been raised by the revenue: 1. The ld. CIT (A) erred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is engaged in the provision of global logistics services. The group is headquartered in Seattle, Washington and operates in three segments, i.e. air freight, ocean freight and ocean services (customs brokerage and import services). It has offices in 167 locations across the globe and has 13 international service centres located worldwide. 12. The Assessee is engaged in the provision of logistics services in the Indian region. The logistics services provided ranges from packing, loading/ unloading, trucking, containerization, customs clearance and other cargo handling activities besides moving the goods via air/ sea. Expeditors India s functions comprise the Indian leg of a logistics contract involving the transportation of consignments from the consignee (or Indian port/ airport) to the Indian Port/ airport (or consignee) while another Group entity typically handles similar services at the other end of the consignment in their respective region. ITA No. 2260/Del/2015 A.Y. 2009-10(Ground No. 1) ITA No. 5994/Del/2017 A.Y. 2010-11(Ground No. 1) ITA No. 3513/Del/2017 A.Y. 2011-12(Ground No. 1) ITA No. 5538/Del/2018 A.Y. 2012-13(Ground No. 1) ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the TATA group companies as an Indian example for requirement/ payment for such services. The documents filed before the US Tax Authority by the group company was also provided before the TPO which states that these services are provided to the group companies at arm s length price. The assessee has also submitted that they provided the documentary evidences like the intra net snap shots, percentage of nominated business (global business referred by the related entities to the assessee) received by the assessee which are parts of the services for which the assessee pays the consideration in the form of royalty. 16. The assessee has also stated that the cost base of the AE which provides these services need not be the only basis for allocation of the service charges to the group companies. As these services are ultimately benefitting the assessee in terms of increasing its turnover, sales of the assessee is taken as the basis for allocation. This method is consistently followed by the assessee over the years and by the group companies world over. 17. The royalty payment is based on the agreement between the assessee and its parent company. The agreement is dated 15.12.2001. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o fallacy in the findings of CIT(A) has been pointed by the Revenue. We find no reason to interfere in the order of CIT(A) and thus the grounds of Revenue are dismissed. 19. Respectfully following the decision of Co-ordinate Bench of ITAT in AY 2005-06 the AO is directed to delete the addition made on account adjustment of royalty. ITA No. 2260/Del/2015 A.Y. 2009-10(Ground No. 2) ITA No. 5994/Del/2017 A.Y. 2010-11(Ground No. 2) ITA No. 3513/Del/2017 A.Y. 2011-12(Ground No. 2) ITA No. 5538/Del/2018 A.Y. 2012-13(Ground No. 2) ITA No. 6953/Del/2018 A.Y. 2014-15(Ground No. 2) GAM expenses: 20. Global Accounting Manager (GAM) is a team of employees fully responsible to take care of a particular global customer of the Expeditors group and having operations in many countries. The Expeditor entity having the GAM team on its payroll has to incur expenses on the GAM team and their activities, viz. salary, operational expenses etc. These expenses are distributed to various countries in proportion to the revenue earned by Expeditors in that country from that particular customer account. The assessed has also reimbursed GAM charges to Expeditors Int l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments. 24. We further find that in A.Ys. 2001-02 2004-05 identical issue arose in assessee s own case and the issue was decided in assessee s favour by the Co-ordinate Bench of Tribunal. 25. Before us, no distinguishing feature in the facts of the case in the year under consideration and that of A.Y. 2001-02 2004-05 has been pointed out by the Revenue. The Revenue has also not placed any material on record to demonstrate that the order of the Tribunal in assessee s own case in earlier years has been overruled by higher judicial forum. In such a situation, we find no reason to interfere in the order of CIT(A). 26. Thus, the ground of appeal of the Revenue is dismissed. ITA No.2260/Del/2015 A.Y.2009-10 [Ground No.3 (VSAT)] ITA No.5994/Del/2017 A.Y. 2010-11[Ground No.3 (VSAT)] ITA No.3513/Del/2017 A.Y. 2011-12[Ground No.3 (VSAT)] ITA No.5538/Del/2018 A.Y. 2012-13[Ground No.3 (VSAT)] Lease Line expenses: 27. During the course of assessment proceedings, it is observed that the assessee has paid sum of Rs. XX being lease line expenses to M/s Expediters International of Washington Inc. in foreign currency but no TDS has been made. Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enduring benefit to the assessee and was also reversed in the books of account, the same is a revenue expenditure. 34. From the facts, it can be concluded that the expense went into drain by de fault and the assessee could recover 50% of the expenses paid. Since, the expenses involved pertain to the purpose of the business and not in the nature of any capital expenditure in real sense, the same can be treated as allowable revenue expenditure. The ground of the assessee is treated as allowed. ITA No. 5538/Del/2018 A.Y. 2012-13(Ground No. 3) Disal lowance u/s 40(a)(ia): 35. The contention of the assessee that the AO had erred in disallowing bank guarantee commission charges and cash management charges under section 40(a)(ia) of the act on basis of Notification No. 56 - 2012 dated 31.03.2012 and holding that TDS was deductible on such payments. 36. The Co-ordinate Bench of ITAT Mumbai Benches, Mumbai in the case of Kotak Securities Ltd in ITA No. 6657 of 2011 for AY 2004-05 dated 03.02.2012 had held that there was no principal agent relationship between a bank issuing bank guarantee and the taxpayer and hence the payment though termed as commission was not covered un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been filed be fore us. Rather it falls within the ambit of interest as de fined under section 2(28A), which provides that, interest includes any service fees or other charge in respect of all monies borrowed. Thus, there was no requirement to deduct the TDS on account of rendering of managerial services. On the other hand, Ld. DR supported the order of the AO. 5. As regards the payment of processing fee paid to Nationalized Bank, we agree with the contention of Ld. Counsel that, loan processing fee is charged by the banks for processing the application when a borrower approached the bank for a loan. Such a service fee or charge it has been included in the definition of interest , as given in section 2(28A) which reads as under: 'interest' means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized . From the above, it is quite apparent that the definition of interest will include any service fee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the income must act on behalf of the principal. Here the banker does not act on behalf of the assessee for rendering any kind of service. The contract of guarantee does not give any rise to principal - agent relationship between the assessee and the bank and, therefore, the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated under section 194H and accordingly, there was no requirement to deduct TDS on this payment. Thus, on this score also, the order of the Ld. CIT(A) is affirmed. Before us, the Ld. Counsel had also brought to our notice a CBDT Circular No. 56 of 2012 wherein it has been clarified that 'guarantee fee'paid to a nationalized bank will not be subject to withholding tax. Thus in view of the CDBT Circular also the ground raised by the revenue cannot be sustained and accordingly, the same is dismissed. Respectfully, following the above order, we decide first two grounds of appeal against the AO. 38. The material facts of the case are the same in the instant year also. In accordance with the principle of consistency, the doctrine of judicial discipline and the facts and the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. C.I.T.. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 wherein the same issue has been decided in favour of the assessee and particularly held that education cess is an allowable expenditure. 45. Further, he argued that in the case of ITC Vs ACIT in ITA No. 685/Kol/2014 dated 27.11.2018 wherein it was held that the education cess is an allowable expenditure. 46. The ld. AR has also relied in the case of Peerless General Finance Investment Co. Ltd. Vs DCIT in ITA No.937 938/Kol/2018 dated 24.03.2019 wherein it was held that education cess is not tax and is an allowable expenditure. 47. The ld. DR argued that it is not the appropriate forum to raise the issue at this juncture. Since, there is no dispute between the assessee and the Assessing Authorities, a non-dispute cannot be adjudicated. He argued that the education cess is a part of the Income Tax and is a charge on the assessee. Hence, it cannot be treated as expense eligible for deduction. 48. Heard the arguments of both the parties and perused the material available on record. 49. Regarding the claim of education cess as an allowable expenditure, we find that the CBDT vide Circular No. 91/58/66 ITJ(19) clarified as under: Interpretation of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax, if any, as levied by the Central Acts from time to time; and (v) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time. 53. Thus, wherever the legislature wanted to include this term specifically in the statue it has done so under the Act. The term 'tax' has been de fined in section 2(43) of the Act to include only Income-tax, Super Tax and Fringe Benefit Tax (FBT). Provision of the section 2(43) is as given below: tax in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe bene fit tax payable under section 115WA. 54. Surcharge on income-tax finds place in the First Schedule, but that is not the case so far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked and set apart for the purpose of services for which it is levied. 57. We also find that the proceeds from collection of Education Cess are not credited to Consolidated Fund but to a non-lapsable Fund for elementary education- Prarambh ik Shiksha Kosh . Since the proceeds from collection of Education Cess are kept separate for a specified purpose, applying the principles in the aforesaid decision of Apex Court in the case of M/s Dewan Chand Builders (supra), it can be said that the same is not in the nature of tax. Hence, it is allowable as deduction. 58. Further, Provisions of Section 37 are perused which are as under: 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 and exclusively for the purposes of the business or pro fession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . Explanation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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