TMI Blog2018 (7) TMI 2266X X X X Extracts X X X X X X X X Extracts X X X X ..... g the business needs of the assessee and the aircraft was used by very senior officials of the company for the purposes of business and furtherance thereof - Decided against revenue. Allowability of retainer ship fees paid - HELD THAT:- As relying on own case [ 2016 (10) TMI 323 - ITAT KOLKATA] allowed the claim of assessee regarding retainership fees paid to M/s. Sree Bala P.Ltd Disallowance of 25% towards guest house expenses - HELD THAT:- We find that the issue in hand is covered by the order [ 2016 (10) TMI 323 - ITAT KOLKATA] in assessee s own case for the A.Ys 2006-07 2008-09 allowed claim of assessee. Allowability of licence fees paid to M/s. RPG Enterprises Ltd . - HELD THAT:- We find that the issue in hand is covered by the order [ 2016 (10) TMI 323 - ITAT KOLKATA] in assessee s own case for the A.Ys 2006-07 2008-09 allowed claim of assessee. Allowability of unrealized loss on foreign exchange fluctuation - HELD THAT:- It is noticed that the assessee claimed loss of Rs.46.58 crores on account of foreign exchange fluctuation. We noticed that the assessee has shown gain in its profit loss account on account of foreign exchange fluctuation for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the AO to delete the same. We find no infirmity in the impugned order of the CIT-A and it is justified. - ITA No. 1273/Kol/2015 & 1274/Kol/2015 - - - Dated:- 4-7-2018 - Shri M. Balaganesh, Accountant Member And Shri S.S.Viswanethra Ravi, Judicial Member Appellant/ department by : Shri S. Dasgupta, Addl. CIT, ld.Sr.DR Respondent/ assessee by : Shri D.S. Damle, FCA, ld.AR ORDER Shri S.S.Viswanethra Ravi, JM: Both the above appeals by the Revenue are against the separate orders dt. 27-07-2015/ 23-07-2015 of the CIT-A, 4, Kolkata for the A.Ys 2009-10 and 2010-11 respectively. 2. Since the issues raised in both the appeals are on identical facts and circumstances, we proceed to hear both the appeals together and dispose of the same by a consolidated order with the consent of both the parties for the sake of convenience. ITA Nos.1273 1274/Kol/2015 A.Ys 2009-10 2010-11- by the revenue Ground no. 1 in 1273/Kol/2015 - A.Y 2009-10 Ground no. 1 in 1274/Kol/2015 - A.Y 2009-10 3. Ground no. 1 in both the appeals raised by the revenue for the A.Ys 2009-10 2010-11 regarding deletion of disallowance of interest and expenses u/s. 14A r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d exempt income by placing reliance on the order of the Hon ble High Court of Calcutta in the case of REI Agro Ltd and referred to para 20.1/at page 43 of the paper book, which reads as under:- 20.1 Now coming to the disallowance made by the AO under rule 8D(2)(iii) of the Rules, we find that Ld. CIT(A) has given direction to AO to consider only those investments which have yielded the dividend income during the year after having reliance in the order of Co-ordinate Bench of this Tribunal in the case of REI Agro Ltd. (supra) in ITA NO.1331/Ko1l2011 which was subsequently affirmed by the Hon'ble jurisdictional High Court. In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. Accordingly, we uphold the same. This ground of Revenue's appeal is dismissed. 10. In view of above, we find no infirmity in the impugned orders of CIT-A and are is justified. Ground no. 1 raised by the revenue in ITA Nos. 1274/Kol/2015 1274/Kol/2015 for the A.Ys. 2009-10 2010-11 are dismissed. Ground no. 2 in A.Y 2009-10 Ground no. 3 in A.Y 2010-11 11. Ground no.2 raised by the revenue fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decided to take on hire the exclusive flying rights of an aircraft and thus entered into the agreement dated 17.11.03 with M/s Spencer Travel Services Ltd (copy attached). By virtue of the said agreement the assessee was always made available of the aircraft for the flying needs of its senior officials. If a reference is made to the aforesaid agreement, Spencer Travel Services Ltd was to incur all costs and expenses associated with the operation of the aircraft. The assessee was not required to pay anything over and above the sum of Rs.340 lacs agreed between the parties irrespective of the use of the aircraft. The aircraft flying rights were taken considering the business needs of the assessee and the aircraft was used by very senior officials of the company for the purposes of business and furtherance thereof . 14. The AO after considering the above submissions of the assessee and following the similar payments made in AY 2005-06 disallowed 25% of the expenditure of Rs.340 lacs, amounting to Rs.85,00,00/- being non-business purpose and added the same to the total income of the assessee. 15. On first appeal, the CIT-A relying on his earlier order dated 30-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the party to render such service was not known ? 19. The AO found that the assessee had made payments of Rs.12,26,700/- to M/s. Sreebala P.Ltd. The assessee has made the following submissions:- During the previous year, retainership fees amounting to Rs.1226700/- was paid to M/s Sreebala Pvt Ltd. The aforesaid party catered to the customers in the non-tyre segment, which are widely scattered, and are in large numbers, and for which purposes the assessee company appointed Sreebala (P) Ltd as their consultant for market development in the non-tyre segment for sale of carbon black in Eastern India since 1994. The role of the party envisages identification of the customers, procurement of the orders from these customers, coordinating supplies and arranges collection from these parties. The payments to the party have always been made by account payee cheques. The details of payments made to M/s. Sreebala Pvt. Ltd are attached herewith. We also attach herewith copy of the renewal agreement with the aforesaid party. 20. The AO after considering the above submissions of the assessee being similar payments made in AY 2005-06 disallowed the amount of Rs.12,26,700/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. On the other hand, the ld. DR did not controvert the same and did not bring on record any material contrary to the above. 24. After hearing both the parties, we find that the issue in hand is covered by the order dt. 12-08-2016 in assessee s own case for the A.Ys 2006-07 2008-09. Relevant portion of which is reproduced herein below:- 24. Ground no.4 raised by Revenue reads as under:- Whether Ld CIT(A)-XII, Kolkata. was justified in holding that expenditure of Rs. 19,33,576/- as 25/'0 of Guest House Expenses was allowable business expenditure on the basis of decision of the Hon'ble ITAT, Kolkata in assessee's own case for Asst year 2000-01 and 2001-02, whereas the Hon'ble Mumbai ITAT in the case of New India Extrusion Ltd -vs- CIT [46 SOT Mum (10 Taxman 165) held the issue in favour of revenue? 25. During the assessment proceedings the AO found that the assessee filed the details of miscellaneous expenses along with Tax Audit Report, wherein it was observed that the assessee has incurred expenditure on guest house of Rs.77,34,306/-. The AO, that being nature of expenses as was in AY 2005-06, disallowed 25% of the total expenses of Rs.19, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the CIT(A)'s decision on same issue for Asst year 2004-05 ? 33. During the assessment proceedings the AO found that the assessee has paid license fees of Rs.2,91,00,000/- to RPG Enterprises. The assessee submitted as under:- Phillips Carbon Black Ltd is one of the licencee companies of Mls RPG Enterprises Ltd having entered into a licence agreement with them (copy of agreement attached}. As a licencee of RPG Enterprises Ltd, we enjoy various services, as and when required, and the services are provided by RPG Enterprises Ltd (at cost), who have experts employed and/or engaged in various areas of business run on modern lines. In competitive environment, the services are absolutely essential but it is very difficult for the company to employ experts in all fields of business on its own. As licencee of RPG Enterprises Ltd we enjoy the services of their experts readily, as and when required, though at cost. Major areas where services are provided by RPG Enterprises Ltd include, amongst others, (a) Human resources, (b) Strategic planning (c) Corporate finance, (d) Management information, (e) Forex management, (f) Taxation and legal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of above, we find no infirmity in the impugned order of the CIT-A. Thus, ground no.6 for the A.Y 2009-10 raised by the revenue is dismissed. 31. Ground no s. 7 8 are relating to allowability of unrealized loss on foreign exchange fluctuation. 32. The ld. DR relied on the order of the AO. On the other hand, the ld.AR submits that the issue in hand is covered in favour of assessee by the decision of the Hon ble Supreme Court in the case of Woodward Governor India Pvt. Ltd reported in 312 ITR 254(SC). The Co-ordinate Bench of this Tribunal in the case of Dhunseri Petrochem Tea Ltd (ITA No. 1224/Kol/2014 dt. 03-05-2017) Hindustan Gum Chemicals Ltd (ITA Nos. 462 752/Kol/2014 dt. 08-03-2017 followed the principle enunciated by the Hon ble Supreme Court in the case of supra and referred to paras 18 to 20 of order dt. 03-05-2017 at pages 45 to 59 of the paper book. He relied on the impugned order of the CIT-A. 33. Heard rival submissions and perused the record including the paper book. It is noticed that the assessee claimed loss of Rs.46.58 crores on account of foreign exchange fluctuation. We noticed that the assessee has shown gain in its profit loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions should be recorded on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transactions. 10 11 (a) At each balance sheet date foreign currency monetary items should be reported using the closing rate. However, in certain circumstances, the closing rate may not reflect with reasonable accuracy the amount in reporting currency that is likely to be realized from, or required to disburse, a foreign currency monetary item at the balance sheet date, e.g. where there are restrictions on remittances or where the closing rate is unrealistic and it is not possible to effect an exchange of currencies at that rate at the balance sheet date. In such circumstances, the relevant monetary item should b reported in the reporting currency at the amount which is likely to be realized from, or required to disburse, such item at the balance sheet date: 11(b) . 11(c) 12. Cash receivables and payables are examples of monetary items . 13. Exchange differences arising on the settlement of monetary items or on reporting an enterp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is justified. Ground nos. 7 8 raised by the revenue in ITA No. 1273/Kol/2015 for the A.Y 2009-10 are dismissed. 35. Ground no. 2 raised by the revenue in the appeal ITA No. 1274/Kol/2015 for the A.Y 2010-11 is relating to deletion of disallowance of Rs.1,58,30,500/- made on account of book profit u/s. 115JB of the Act. 36. The ld. DR relied on the order of the AO. On the other hand, the ld.AR submits that the assessee on its own disallowed a sum of Rs.3,00,500/- for the purpose of section 14A r.w.r 8D of the IT Rules, 1962. The AO disallowed the same by invoking Rule 8D(2)(ii) (iii) while computing the book profit u/s. 115JB of the Act. The CIT-A deleted the same and found suo motu disallowance made by assessee is reasonable for the purpose of disallowance under clause (f) to Explanation 1 to Section 115JB of the Act. 37. The ld. AR refers to the order dt. 15-12-2017 of this Co-ordinate Bench (ITAT, Kolkata) in the case of TMT Viniyogan Ltd Vs. DCIT, in ITA No. 561/Kol/2015, A.Y 2008-09 and referred to para 14 of the said order at pages 81-82 of the paper book. 38. On the other hand, the ld. DR relied on the order of the AO. However, he did not controvert th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO NO.1501 of 2014 (ITAT NO.47 of 2014) dated 19.11.14 wherein it was held that the disallowance in relation to exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- we find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act. In view of above we hold that the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec.115JB of the Act as per direction of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse the impugned order of the CIT-A and restore the order of AO on this issue. Thus, ground no. 5 raised by the revenue in ITA No. 1274/Kol/2015 for the A.Y 2010-11 is allowed to that extent. 44. Ground no. 6 raised by the revenue in ITA No. 1274/Kol/2015 for the A.Y 2010-11 is relating to deletion of disallowance of Rs. 10,89,099/- on account of Puja Temple expenses. 45. The AO found that the assessee claimed Puja Temple expenses of Rs.10,89,099/- and disallowed the same as under:- 8. Puja temple expenses: On perusal of detail furnished wrt miscellaneous expenses of Rs.32.88 Cr, it is seen that the assessee claimed Puja temple expenses of Rs.10,89,099/-. AR of the assessee asked to furnish the detail in this regard and explain the nature of such expenses in respect of business expediency of such expenses. In response it was explained that these are regular expenses generally done to cover the social need of the employee and other compulsion so should be allowable but it was not established that how these expenses are compulsory for business expediency. Considering the facts and circumstances of the case, the expenses claimed under this head of Rs.10,89,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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