TMI Blog2021 (12) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... group services provided by the assessee to its AE is deleted. TP adjustment of interest payment on loan - HELD THAT:- This Tribunal for the assessment years 2011-12 to 2014-15 [ 2018 (7) TMI 1955 - ITAT NEW DELHI] remitted this issue to the record of the TPO for undertaking benchmarking analysis in accordance with the directions of this Tribunal for the assessment year 2010-11. Disallowance of branch office expenditure and expenditure incurred due to non-producing of production sharing contracts - HELD THAT:- We fail to see any such provision in the act that if the other party in the joint-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Accordingly, these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of education cess paid before the due date of filing the return of income - AO disallowed the claim of the assessee being part of the Income-tax which is not an allowable deduction - HELD THAT:- The dispute under consideration is purely legal in nature, as the facts are not in dispute. As in the case of Chambal Fertilizers and Chemicals [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] and Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] , wherein after considering the CBDT Circular, it has been held that the assessee is eligible to claim the deduction of the 'cess' as per the provisions of Section 37 of the Income Tax Act. In the absence of any contrary decision of jurisdictional High Court or any other high Court, the decisions relied upon by the ld. Sr. counsel are binding on this Tribunal. Respectfully following the above decisions, this issue is decided in favour of the assessee and the claim of deduction on account of education cess is allowed. Short credit of TDS - HELD THAT:- Assessing Officer is directed to verify the correct TDS credit available to the assessee and then to allow the same. Interest on refund u/s. 244A - HELD THAT:- We note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble ITAT in AY 2011-12 and 2012-13 and directions of the Hon'ble DRP for AY 2009-10 and AY 2010-11 4.1. The learned TPO/AO/DRP erred in disregarding the decision of Hon'ble ITAT in AY 2011-12 and AY 2012-13 and directions issued by the Hon'ble DRP in the case of the Appellant for the prior years i.e. AY 2009-10 and AY 2010-11 (which have also been affirmed by Hon'ble ITAT) even though the facts and circumstances of its case and the business model of the Appellant continued to remain the same. Ground No. 5: Erroneously questioning of commercial expediency of the Appellant 5.1. The learned TPO/AO/DRP erred in law and on facts by questioning the commercial expediency of the Appellant in availing the intra-group services from its AE and in changing from floating interest rate to fixed interest rate on the External Commercial Borrowing ( ECB ) taken from its AE. Ground No. 6: Erroneous application of CUP for determining arm's length interest rate 6.1. The learned TPO/AO/DRP erred in making an upward adjustment of ₹ 14,71,656 to the total income of the Appellant by erroneously applying CUP Method for deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the Hon'ble ITAT in Appellant's own case for AYs 2010-11 to 2014-15. 10.3 The learned AO/DRP erred in not appreciating that this difference is on account of difference in opening WDV of assets on first day of the captioned assessment year which was accepted by the revenue authorities in earlier years. Ground No. 11: Disallowance of inventory written off 11.1 The learned AO erred in law and in facts in disallowing inventory written off of ₹ 15,71,20,459 on the basis that the Appellant submitted only internal documents which do not suffice for allowance of expenditure. 11.2 The learned AO/DRP erred in not appreciating that amount of obsolete inventory written off was debited to the Profit and Loss Account which has been audited by an independent auditor. Ground No. 12: Claim for deduction of cess 12.1 On the facts and circumstances of the case and in law, the Appellant prays that the learned AO be directed to allow deduction in respect of education cess on income-tax paid by the Appellant. Ground No. 13: Violation of principles of natural justice 13.1. The learned AO/DRP erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the latest decision for the assessment year 2013-14 and 2014-15 vide order dated 03.04.2019, the Tribunal has considered and decided this issue in para 14 to 16 asunder: 14. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. It has been submitted that the DRP in their order for the year under consideration has noted as under: It has been brought to notice by the assessee that the Hon'ble ITAT has passed the orders for AY 2011-12 and 2012-13 respectively on 18.07.2018 17.07.2018. In these orders relief has been given to the assessee on the issues of branch office expenditure cost incurred on non producing PSC, head office expenditure, inventory written off and depreciation. In case a decision is taken by the department to accept the decision of Hon'ble ITAT before the final order is passed, the order of the ITAT may be followed to avoid further litigation as the matter become final. 15. Further, it is observed that for assessment year 2011-12 (ITA No. 1478/Del/2017) and assessment year 2012-13 (ITA No. 6791/Del/2017) following the above ruling. 16. From the above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the earlier decision of this Tribunal in assessee's own case, we set aside this issue to the record of TPO/Assessing Officer with the same directions. 10. Ground No. 7 is regarding disallowance of branch office expenditure and ground No. 8 is regarding disallowance of expenditure incurred due to non-producing of production sharing contracts. 11. We have heard ld. Sr. Counsel as well as ld. DR and carefully perused the orders of the authorities below on this issue as well as the decision of this Tribunal in assessee's own case for the preceding assessment years. At the outset we note that this Tribunal in its earlier order in assessee's own cases for the assessment years 2013-14 and 2014-15 vide order dated 03.04.2019 in ITA Nos. 7476 7477/Del/2018 has considered and decided these issues in para 30 to 33 asunder: 30. The ld. Counsel at the outset submitted that fact and circumstances of the case are similar to assessment year 2010-11 and this issue stands covered by this Tribunal for assessment year 2010-11 as under: 55. From the above chart it is apparent that out of the total expenditure incurred of ₹ 931819021/- the Ld. Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenditure and partly disallowed the expenditure by using the single yardstick that if expenditure are shared by the JV same are allowable and if same is not shared by JV partners, then it is not allowable. We failed to see any such provision in the act that if the other party in the joint-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Therefore according to us the expenses incurred by the Assessee with respect to i) KG-OS- 02004/1 of ₹ 71638553/- ii) MN DWN 2002/2 of 1649/- ₹ 10524 iii) KG-DWN-98/4 of ₹ 6245 0283/ cannot be disallowed. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day business. These expenditures cannot be said to bring an enduring benefit to the business nor the same can be said as initial outlay for expansion of business. In the instant case, the expenditure so incurred by the Assessee is for furtherance of activities undertaken by it in the normal course of its business. The same are incurred on continuous basis for evaluation of business activities. In view of the decision of Bombay High Court in the case of CIT v. Essar Oil Ltd. [IT Appeal No. 921 of 2008, dated 16-10-2008], such expenditure is to be allowed as revenue expenditure. Hon'ble Calcutta High Court in the case of Kesoram Industries Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 held that where the setting up does not amount to starting of new business but expansion or extension of the business already being carried on by the Assessee, expenses in connection with such expansion or extension of the business must be held to be deductible as revenue expenses. One has to consider purpose of the expenditure and its object and effect. Accordingly, it was held that expenses pertaining to exploring feasibility of expansion or extension of business are revenue expenditure and not ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Accordingly, these grounds raised by the assessee stands allowed. 12. Following the earlier order of this Tribunal, this issue is decided in favour of the assessee and against the Revenue. 13. Ground No. 9 is regarding disallowance of head office expenses. 14. We have heard ld. Sr. Counsel as well as ld. DR and carefully perused the orders of the authorities below on this issue as well as the decision of this Tribunal in assessee's own case for the preceding assessment years. At the outset we note that this Tribunal in its earlier order in assessee's own cases for the assessment years 2013-14 and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Merely because the joint-venture partners are not sharing the cost/expenses which is been incurred by the Assessee, It does not become disallowable in the hands of the Assessee. We find no such condition existing either under section 42, or under section 37 (1) of the Income Tax Act. Therefore, we reject the contention of the revenue that unless the expenditure is not borne by all the JV partners the expenses cannot be allowed to the Assessee. In fact, if the JV partners share the expenditure, there cannot be any question of claim of such expenditure in the hands of the Assessee, once again. Further, if the expenses are not specified in the agreement u/s. 42 (1), even if the JV partners agree to share those expenditure, it is not allowable u/s. 42 (1) or section 37 (1) of the act. Now it needs to be examined, whether the Assessee has incurred expenditure for the purposes of its business or not. The Assessee has stated that it has incurred such expenditure having regard to its standard of operation and the quality of execution work, safety of its employees in the environment. These expenses are required to be incurred by the Assessee based on the commercial expediency. The Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the said expenses have not been borne by the joint venture partner, particularly when it is not disputed by the Revenue that the expenditure were made for commercial expediency. 42. The ld. CIT DR opposed to the same and submitted that the issue has been contested before the Hon'ble High Court. 43. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We fail to see any such provision in the act that if the other party in the joint-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Accordingly, this ground raised by the assessee stands allowed. 15. To maintain the rule of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o look at what kind of assets the Assessee are owned by and used by it. Assets are production database management system, SAP up gradation, budgeting and forecasting system, training programs, simulations software, asset modeling systems and email facilities. When the Assessee is participating in such a huge production sharing contract, It is too naive to think that production database management system and SAP, training programs, simulations programme and email facilities have not been used by the Assessee. Issues have also been examined at the time of determining Arm's length price of these expense. The actual cost of these assets are not doubted by the Ld. Assessing Officer. In view of this we are of the opinion that these assets are beneficially owned by the Assessee and are used for the purposes of the business of the Assessee, therefore entitles Assessee to claim the depreciation on these assets. In view of this ground No. 5 of the appeal of the Assessee is allowed. 50. As regards difference in depreciation of other assets of ₹ 2,65,85,446, the appellant submits that the aforesaid difference is on account of the fact that the appellant had capitalised certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 616. 52. In view of the above binding precedents, the AO ought to be directed to accept the opening WDV of assets as submitted by the appellant in the schedule to computation of income which is arrived from the closing WDV of fixed assets of previous year. Accordingly, the AO be directed to delete disallowance on account of difference in depletion as per the computation of income and tax audit report. Without prejudice, it is submitted that if the expenditure capitalised by the appellant in previous years is not held to be capital in nature and depreciation and depletion on capitalised portion is subsequently disallowed, the amount capitalised by the appellant should be allowed as deduction under section 37(1) of the Act in the relevant assessment year. 53. The ld. CIT DR has no objection for the above issue to be set aside to ld. AO/TPO. 54. After hearing both the sides and considering the totality of the facts of the case, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate its case. The Assessing Officer shall decide the issue as per fact and law after givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom.), affirmed by the Hon'ble Supreme Court by judgment reported in 295 ITR 451. The ld. AR for the taxpayer also contended that the taxpayer has submitted audit report of an independent auditor prepared on the basis of physical verification and maintenance of inventory during assessment proceedings and further relied upon the decision rendered by coordinate Bench of the Tribunal in Gillette India Ltd. vs. ACIT - 66 taxmann.com 221. Ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the taxpayer relied upon the orders of AO/DRP. 39. While deciding the identical issue, the Hon'ble Bombay High Court in case cited as Alfa Laval India Ltd. vs. DCIT (supra) held as under:- Held, (i) that the duly certified auditor's report placed before the Assessing Officer clearly justified valuation of obsolete items at 10 per cent. of cost. There is no dispute that the assessee is entitled to value the closing stock at market value or at cost whichever is lower. It is also not in dispute that the value of the closing stock has been taken as the value of the opening stock in the subsequent year. Moreover, it is also not disputed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee claimed deduction on account of education cess paid before the due date of filing the return of income. The Assessing Officer disallowed the claim of the assessee being part of the Income-tax which is not an allowable deduction. 23. Before us, ld. Sr. counsel for the assessee has submitted that Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT reported in 107 Tamann.com 484 has held that Education Cess is an allowable deduction while computing the income under the head profit and gains from business or profession , as it does not fall within section 40(a)(ii) of the Act. He has also relied upon the decision of Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT (2020) 117 taxmann.com 96 (Bom) on this issue. Placing reliance on the precedents, as laid down by Hon'ble Rajasthan High court and Hon'ble Bombay High Court, he has submitted that education cess paid by the assessee is an allowable deduction for computing the income from business and profession. 24. On the other hand, ld. DR has submitted that Education Cess is part and parcel of income-tax itself and therefore, is not allowable deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
