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TMI Blog2023 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... sements to AE having been deleted by the Tribunal in appeal for the Assessment Year 2010-11[ 2022 (11) TMI 1341 - ITAT MUMBAI] we deleted the disallowance by respectfully following the aforesaid decision of the Tribunal. Disallowance of lease rental payment in terms of 'Agreement For Provision For Warehousing Services' - HELD THAT:- A perusal of financial statements for the relevant previous year shows that identical disclosures have been made. Payments of lease rentals have also been made in terms of the same agreement. Accordingly for Assessment Year 2011-12 also the issue is remanded back to the file of the Assessing Officer for adjudication afresh after giving the Appellant a reasonable opportunity of being heard. In view of the aforesaid directions Ground disposed off. Computation of Book Profit u/s 115JB - DR submitted that while passing the Final Assessment Order AO has not reduced the brought forward loss from the net profits shown in the Profit Loss Account while computing Book Profits u/s 115JB - HELD THAT:- A perusal of the Profit and Loss Account pertaining to the financial year ending on 31.03.2011 relevant to the Assessment Year 2011-12 shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law the Ld. AO/ TPO/ DRP erred in not considering the evidence and submissions made by the Appellant in a correct perspective and in adjusting an amount of Rs.3,031,427 towards reimbursement of software maintenance expenses. 4. That on the facts and circumstances of the case and in law the Ld. AO/ TPO/ DRP erred in not considering the principle of res judicata as reimbursement of software maintenance expenses was accepted at arm's length in the assessment year ( AY ) 2008-09 and AY 2009-10. 5. That on the facts and circumstances of the case and in law the Ld. AO erred in initiating penalty proceedings under Section 271(1)(c) read with Explanation 7 of the Act. Corporate Tax Grounds 6. Disallowance of lease rental a. Based on the facts and circumstances of the case and in law, the Ld. AO, relying on the directions of the DRP, erred in not allowing lease rent payments of Rs.50,43,085 on the ground that the same was capital expenditure. b. Without prejudice to the above, the learned AO erred in not allowing depreciation on the principal payment of lease rental treated as capital in nature 7. Based on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r also proposed corporate tax disallowances of INR.50,43,085/- being lease rental payments made during the relevant previous year, and the software maintenance expenses of INR 97,89,384/-. The Appellant filed objections to the Draft Assessment Order, dated 23.02.2015, in relation to the aforesaid proposed additions before DRP which were rejected by the DRP, vide order dated 22.10.2015. The Assessing Officer passed the Final Assessment Order, dated 30.11.2015, on the basis of the aforesaid order/directions of DRP making the disallowances/additions: (a) Addition of INR 58,99,019/- on account of Transfer Pricing Adjustment (b) Disallowance of deduction of lease rentals amounting to INR 50,43,085/- (c) Disallowance of deduction of software maintenance expenses of INR 97,89,384/ 6. Being aggrieved, the Appellant is in appeal before us challenging the Final Assessment Order, dated 30.11.2015, on the grounds reproduced in paragraph 2 above which are taken up in seriatim hereinafter. Ground No. 1 7. Ground No. 1 is general in nature and therefore, does not require adjudication. Ground No. 2 8. Ground No. 2 is directed against the transfer pricing adjustment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments pertaining to entire amount of expenses claimed as deduction, we are also alive to the possible burden an assessee would be subjected to during the assessment proceedings in case such a direction is issued to the assessee. However, in cases where the bills and/or supporting documents called for during the assessment proceedings are not furnished, or have been furnished but the same are not found to be sufficient or satisfactory by the assessing officer, the assessing officer would in our view, be justified in calling for any/all details and/or bills supporting documents as the Assessing Officer may deem fit. We note that the Appellant is under obligation to maintain proper books of accounts including voucher and documents to support the claim of expenditure. The Appellant has been subjected to statutory as well as tax audit for the relevant assessment year, and no qualifications regarding accounting systems followed by the Appellant or the books of accounts maintained by the Appellant have been made by the Auditors in the audit report and has certified the financial statements to be true and correct after carrying out verification on test check basis. Further, the TPO/Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has not pointed out any defect/discrepancy in the bills/supporting documents furnished .by the Appellant as the same have been examined and accepted. Accordingly, adopting the reasoning given by the Tribunal in the order of the Tribunal for the Assessment Year 2008-09 [ITA No. 7718/Mum/2012 on 13.10.2022] reproduced hereinabove and following the decision of the Tribunal for the Assessment Year 2010-11 [ITA No.2297/Mum/2015], we delete the transfer pricing addition of INR 28,67,592/- made in relation to reimbursement of out of pocket expenses to AE. Accordingly, Ground No. 2 raised in the appeal is allowed. Ground No. 3 4 12. Ground No. 3 is directed against the transfer pricing adjustment of INR 30,31,427/- pertaining to reimbursement of software maintenance expenses (connectivity charges). 13. During the previous year relevant to the Assessment Year 2011-12, the Appellant made a payment of INR 30,31,427/- to it's AE (i.e., Woolworths limited, Australia) claiming the same to be reimbursement of software maintenance expenses incurred by the AE in the form of connectivity charges which were in addition to Software Maintenance Expenses of INR 55,88,499/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the Tribunal while disposing off the appeal for the Assessment Year 2010-11 [ITA No.2297/Mum/2015]. The relevant extract of the decision of the Tribunal reads as under: 41. We have considered the rival submission and perused the material on record including Annexure 10 and 11 to submission dated 25.11.2013 filed by the Appellant before TPO and the Project Closure Report. The Project Report is dated 10.10.2006. During the hearing the Learned Authorised Representative for Appellant had relied upon Section 2 to the said report giving Cost and Pricing Summary‟ to contend that total amount of USD 5,440/- reflected at the bottom on the column with heading Months 1 to 48‟ payments to contend that this was the communication charge which was reflected in monthly inter-group account statement under the head communication charges‟. On closure scrutiny we note that the amount of USD 5,440/- is the sum total of amount reflected in column with heading Supply and Installation Total Monthly Cost‟ and the column with heading 'Manage and Maintain (per Month). However, on perusal of 'Tesla Scope Statement'it becomes clear that project is for obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as detailed in schedule 7. xx xx Service means the service with respect to Goods that Provider is to provide in the Territory under this agreement as described in schedule 3, and as may be amended in writing by Woolworths India and Provider from time to time. xx xx 2. Provisions of services and equipment 2.1 Provider provides Services: During the Term, Provider shall, subject to and in accordance with this agreement, provide the Service in the Territory to Woolworths India with respect to Goods, as and when Woolworths India requests. xx xx 5.1 Services provided from premises: Provider shall provide the services to Woolworths India from the Premises. 5.2 Adequacy of Premises : Provider shall ensure that the requirements set out in schedule 1 are satisfied at all times with respect to the Premises, and that the Premises are suitable and adequate for provision of the Services required by Woolworth India from time to time. xx xx 5.4 Access: Woolworths India may at any time during Working Hours, having given not less than 24 hours prior notice to Provider (which notice, notwithstanding clause 22.6, may be given oraliy to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income. In appellate proceedings before us, it has been contended that on behalf of the Appellant that the warehouse not been taken on finance lease and the aforesaid amount is allowable as revenue deduction under Section 37(1) of the Act having been incurred wholly and exclusively for the purpose of business. However, we note that in cash flow statement lease rent paid on finance lease of INR 1,00,59,111/- has been shown under the head 'cash flow from the financing activity'. Under Schedule 15 'Operating and Administrative Expenses forming part of financial statement for the previous year relevant to the Assessment Year 2009-10, rent is shown as INR 5,50,82,263/-, and warehouse and facility charges are shown at INR 3,45,86,682/-. Further, Schedule 17 Notes to Accounts mentioned the maturity profile of finance lease obligations. Thus, it is not clear whether the payment of INR 1,00,59,111/- pertain to operating or finance lease obligations of the Appellant. Further, before the Assessing Officer as well as before the DRP the Appellant has maintained the position that the payments of INR 1,00,59,111/- pertain to finance lease. In view of the aforesaid facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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