TMI Blog2021 (10) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record to show its reimbursement of expenditure towards expat salary - HELD THAT:- AO mentioned that as per provisions of section 144C(13), no further opportunity can be allowed to the assessee. The assessee has very elaborately detailed the nature of reimbursement expenses - The assessee has also furnished the details such as the reimbursement ledger along with sample invoices - The explanation of nature of reimbursements, ledger copies of reimbursement of expenses, sample invoices are also part of assessment records. Therefore, the Assessing Officer s statement that the details are not available on record, is not correct. Therefore, we restore the issue to the files of the A.O. The A.O. is directed to examine the details which are placed on record such as the reimbursement ledger, sample invoices etc. The A.O. shall also consider the submissions made before the Assessing Officer with regard to reimbursement / recovery of expenses. Disallowance of vehicle rental expenses - A.O. had disallowed vehicle lease rentals on the ground that payments were made towards purchase of vehicles - HELD THAT:- As decided in own case [ 2017 (1) TMI 1673 - ITAT BANGALORE] we allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment order dated 31.01.2014 passed u/s143(3) r.w.s. 144C of the I.T.Act. The relevant assessment year is 2009- 2010. First, we shall adjudicate the assessee s appeal. IT(TP)A No. 262/Bang/2014 (Assessee s appeal) 2. The assessee in its grounds of appeal had raised seven grounds relating to transfer pricing adjustment and six grounds relating to corporate taxation. The assessee has also raised an additional ground with regard to transfer pricing adjustment, namely, ground No.8 vide its application dated 29.11.2020. The learned AR during the course of hearing submitted that if additional ground is adjudicated, the other grounds relating to TP adjustment becomes academic. The additional ground raised reads as follow:- Ground 8 That in the facts and circumstances of the case, having regard to the similarity of functions performed, assets employed, and risks assumed by the Appellant in rendering the services to its Associated Enterprises (AEs) situated in the United Kingdom (UK) and in countries other than in the UK, the arm s length price agreed between the Competent Authorities of UK and India in the Mutual Agreement Procedure invoked under the India-UK DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Pvt.Ltd. (vi) FCS Software Solutions Pvt.Ltd. 3.2.1 It was further submitted that the arithmetical mean of the working capital margin of the above companies would fall below the assessee s NCP margin for provision of software development services. Consequently, the international transaction of provision of software development services by the assessee to its AEs for the relevant assessment year can be concluded as being at arm s length. Further, the learned AR submitted that as regards the ITE segment, many of the comparables selected by the TPO / DRP has to be excluded based on various orders of the ITAT Bangalore Bench on account of functional dissimilarity and turnover filter. It was submitted that subsequent to exclusion, only four companies would be remaining in the final list of comparables, which are as follows:- (i) Aditya Birla Minacs Worldwide Ltd (ii) Microland Ltd. (iii) Allsec Technologies Ltd. (iv) Informed Technologies Ltd. 3.2.2 It was submitted that the arithmetical mean of working capital adjustment margins of the above companies would fall below the assessee s NCP margin for provision of ITE services. Consequently, the international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other jurisdictional transaction. Similarly, in the orders passed by the Income Tax Authorities also no distinction has ever been made between UK and other jurisdictional transactions. Even before us, no distinction in facts and nature of transactions has been brought on record. This has been pending for a long time and to put quietus to the whole issue, we are of the considered view that the margin of TP adjustment settled under the UK MAP should be adopted across the board for assessee s international transaction with AEs situated in other jurisdiction (since the international transaction with assessee s AEs in UK comprises almost 83% of the total revenue). This proposition finds support in the order of the ITAT Mumbai Bench in the case of J.P.Morgan Services Pvt. Ltd. v. DCIT (supra), which has been followed by the Co-ordinate Bench of the Bangalore Tribunal in the case of CGI Information Systems Management Consultants Pvt. Ltd. v. DCIT (supra). In this regard, the relevant paragraph No.3.6 of the order in the case of J.P.Morgan Services Pvt. Ltd. v. DCIT is reproduced below:- 3.6 We have gone through the arguments made by both the sides and also the material placed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. under mistaken impression that these were expenses claimed disallowed the same on the ground of nondeduction of tax at source. Before the DRP the assessee contended that these were infact recovery of expenses and not expenses claimed. The DRP directed the Assessing Officer to verify the claim of the assessee. The Assessing Officer passed final assessment order by making disallowance on the ground that no details were available on record. 4.1 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR submitted that the A.O. has misconceived the amount received by the assessee as expenditure and disallowed the same. It was stated that since these are recoveries and not expenses claimed, the A.O. may be directed to delete the disallowance. It was further stated that the details are on record at pages 578 to 592, 774 to 775 and 806 to 812 of the paper book. Therefore, the conclusion of the A.O. that no details are available on record is factually incorrect. 4.2 We have heard rival submissions and perused the material on record. The DRP vide its order dated 12.12.2013 had directed the Assessing Officer to verify whether the claim of the assessee that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der lease for the use of its employees for business purposes. It was stated that being a lease the assessee had claimed deduction of lease rental paid. It was submitted that Circular No.2 /2001 dated 09.,02.2001 issued by the CBDT clarifies that in case of a finance lease the owner of the asset is entitled to the depreciation. Therefore, the assessee had accordingly claimed deduction of lease rentals paid as revenue expenditure. It was stated that the details and submissions are placed on record from pages 777 to 779 and 813 to 876 of the paper book submitted by the assessee. Alternatively it was submitted that the interest on lease rental is to be allowed as a revenue expenditure. It was submitted by the learned AR that the Tribunal in assessee s own case for assessment year 2008-2009 and 2010-2011 has allowed the claim of the assessee in its entirety (For A.Y. 2008-2009, the order of ITA in MP No.145/Bang/2016 dated 28.04.2017 and for A.Y. 2010-2011 in IT(TP)A No.191/Bang/2015 dated 25.01.2017). 5.4 The learned Departmental Representative supported the orders of the Income Tax Authorities. 5.5 We have heard rival submissions and perused the material on record. An identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rent-free accommodation, etc., (b) any expenditure incurred in providing any other benefit or amenity free of charge or at a concessional rate, (c) any expenditure which would have been incurred by the director but for such expenditure having been incurred by the company, (d) any expenditure incurred by the company for the purpose of any insurance on the life, etc. Therefore, it is clear that the expenditure incurred by the assesseecompany on maintenance of vehicles which were available to the directors for their personal use would fall within the meaning of remuneration as defined in the Explanation to s. 198 of the Companies Act, and once such remuneration is fixed as provided in s. 309 of the Companies Act, it is not possible to state that the assessee company incurred an expenditure for the personal use of the directors i.e., even if there was any personal use by the directors, the same was as per the terms and conditions of service and insofar as the assessee-company was concerned it was a business expenditure and not disallowable as such. 9.1. There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts. It will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals presiding over the Courts or the Tribunals and not reached objectively on the basis of the facts placed before the authorities. If a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd should charge depreciation on the same. In the case of operating lease, the Accounting Standard provides that the lessee should recognize the lease payments as an expense in the profit and loss account and the lessor should recognize the asset given on lease and charge depreciation in respect of the same. The aforesaid distinction between finance lease and operating lease is not recognized under the Act. Under the provisions of the Act, depreciation is admissible under section 32 of the Act only to the 'owner' of the asset. Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under section 37 of the Act. 5.3 The Circular No.2 of 2001 dated 09.02.2001 (247 ITR (St.) 53) issued by the Central Board of Direct Taxes (CBDT) has opined that the aforesaid accounting standard issued by ICAI creating distinction between finance lease and operating lease will have no implications under the provisions of the Act. The relevant excerpt of the said Circular are reproduced herein below:- Under the Income-tax Act, in all leasing transactions, the owner of the asset is entitled to the depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the eye of law. A scrutiny of the sale agreement cannot be the basis of raising question against the ownership of the vehicle. The clues qua ownership lie in the lease agreement itself, which clearly point in favour of the assessee 5.6 The Hon'ble Rajasthan High Court in the case of Rajshree Roadways v. Union of India [2003] 263 ITR 206/129 Taxman 663 upheld the assessee's claim of allow ability of lease rentals paid as lessee of the Trucks as a revenue expenditure under section 37(1) of the Act, even though the lease was categorized as finance lease. Thus it is clear that the Tribunal has decided this issue by following the decision of Hon'ble Supreme Court in the case of ITDS Vs. CIT reported in 350 ITR 527 as well as decision of Hon'ble Rajasthan High Court in the case of Rajshree Roadways Vs. Union of India (supra). Following the decision of Hon'ble Gujarat High Court as well as Hon'ble Supreme Court (supra), we decide this issue in favour of the assessee and accordingly allow the claim of the assessee regarding lease rentals as an allowable revenue expenditure. It covers both the grounds of the assessee as well as revenue s appeal. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The same is forming part of the assessment records. Therefore, it is not correct on the part of the A.O. to state that no details are produced. Therefore, we direct the A.O. to examine this issue afresh and also follow the dictum laid down by the judgments of the Hon ble jurisdictional High Court referred supra. It is ordered accordingly. Hence, ground No.3 is allowed for statistical purposes. Ground No.4 : Short grant of TDS : 7. It was submitted that the total tax credit available to the assessee was Rs.1,73,74,280. However, the Assessing Officer has given credit for only Rs.1,73,68,650. It was stated that the DRP has given direction to the A.O. to examine the correct tax credit to be given to the assessee. However, the A.O. has not examined the same while passing the final assessment order. 7.1 The learned Departmental Representative was duly heard. 7.2 We have heard rival submissions and perused the material on record. The DRP in its order dated 12.12.2013 had directed the Assessing Officer to verify and give credit for the entire amount of TDS after due verification. On perusal of the final assessment order, it is seen that the A.O. has not examined this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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