TMI Blog2023 (4) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter consider granting of refund of the DDT so claimed by deciding the issue in accordance with law. Deduction towards education cess paid on income-tax and DDT as allowable expenditure u/s. 37(1) - HELD THAT:- The issue is no longer res integra as the coordinate bench in the case of Kanoria Chemicals Industries Ltd. [ 2021 (10) TMI 1153 - ITAT KOLKATA ] has held that it is not an allowable expenditure u/s. 37(1) of the Act which has been adequately affirmed by the subsequent amendment vide Finance Act, 2021 with retrospective effect. Accordingly, additional ground raised by the assessee for claim of deduction of education cess as allowable expenditure are admitted and dismissed in terms of observations hereinabove. Disallowance of royalty u/s 40(a)(ia) - payment to Kolkata Port Trust ('KOPT') due to non-deduction of tax at source - HELD THAT:- We find it proper to remit the matter back to the file of Ld. AO for the limited purpose of verification of discharging of tax liability by KOPT on the impugned amount of royalty payable by the assessee to KOPT - In this respect, we also direct the Ld. AO to exercise his powers available under the Act to call for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adverting on the grounds of appeal set out in the Memorandum of Appeal. 3.1. Additional grounds of appeal taken vide application dated 05.12.2022 are reproduced as under: Ground 8.1: That, on the facts and in the circumstances of the case and in law, the subject payment being made by the Appellant to KOPT as a percentage of revenue earned by the Appellant does not qualify as 'royalty' as per the definition prescribed under Explanation (2) to clause (vi) of section 9(1) the Act. Ground 8.2: That, on the facts and in the circumstances of the case and in law, the nomenclature used in the license agreement is not determinative of the nature of payment being 'royalty' as per the provisions of the Act. Ground 8.3: That, on the facts and in the circumstances of the case and in law, the Appellant contends that the subject payments not being in the nature of 'royalty' are not liable to tax deduction at source under section 194J of the Act. Ground 8.4: That, on the facts and in the circumstances of the case and in law, the Learned AO has erred in disallowing the disputed amount payable to KOPT as appearing in the books of accounts of the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground no. 2 as set out in Memorandum of Appeal reproduced supra, we are not inclined to admit these grounds and hence, are not adjudicated upon. Additional ground nos. 8.1 to 8.3 are dismissed as not admitted. Since these additional grounds have been dismissed, we also reject the application for admission of additional evidence made under Rule 29 of ITAT Rules as stated above. However, additional ground nos. 8.4 and 8.5 essentially relate to the ground no. 2 as set out in Memorandum of Appeal, these are admitted for adjudication along with the said ground no. 2. 3.3. Another set of additional grounds of appeal taken in respect of DDT vide application dated 26.11.2021 are reproduced as under: Ground 6.1: That, on the facts and in the circumstances of the case and in law, the learned Assessing Officer ('AO') ought to have restricted levy of Dividend Distribution Tax ('DDT') liability by considering the benefit of applicable DTM between India - Netherlands and India - Germany respectively qua the rate of tax (i.e. 10%) towards payment of dividend to the non-resident shareholders namely NYK Holding Europe BV, Netherlands and IQ Martrade Holding Und Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal dividend of Rs. 2.52 Cr. and paid corresponding DDT of Rs. 40,88,070/- @ 16.225% including surcharge of 5% and cess of 3% on the base rate of 15% as per section 115O of the Act. Additional grounds claim that while calculating the DDT liability in respect of non-resident shareholders, assessee has inadvertently considered the rate of tax as per section 115-O of the Act as against the rates prescribed in the relevant articles of the corresponding Double Tax Avoidance Agreement (DTAA) entered into between Govt. of India and respective countries of the non-resident shareholders. Assessee thus, claims refund of the excess DDT which has been paid to the exchequer in respect of non-resident shareholders. To buttress its contention, Ld. Counsel placed reliance on the decision of coordinate bench of ITAT, Kolkata in the case of Reckitt Benckiser (I) Pvt. Ltd. Vs. DCIT in ITA No. 404/Kol/2015 order dated 17.06.2020 wherein it was held that issue be remitted back to the file of Ld. AO for factual verification in the light of agreement and other relevant documents and the provisions of DTAA. The relevant extract of the above decision is reproduced as under: 54. The assessee has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is pari materia referred to the Special Bench, we are unable to lay our hands on this submission. Be that as it may, in the light of decision of coordinate Bench of Kolkata in the case of Reckit Benkiser India Pvt. Ltd. (supra), we find it proper to remit the matter back to the file of Ld. AO for verification of the amount of dividend paid relating to DDT deposited by the assessee, relevant agreement and documents in respect of non-resident shareholding and the DTAAs of the respective countries of the non resident shareholders and thereafter consider granting of refund of the DDT so claimed by deciding the issue in accordance with law. Accordingly, the additional grounds raised by the assessee on this issue vide ground nos. 6.1 to 6.5 are admitted and adjudicated hereinabove which are allowed for statistical purposes. 3.6. On the another issue raised through additional ground vide ground nos. 7.1 to 7.3 in respect of claim of deduction towards education cess paid on income-tax and DDT as allowable expenditure u/s. 37(1) of the Act, the issue is no longer res integra as the coordinate bench of ITAT, Kolkata in the case of Kanoria Chemicals Industries Ltd. Vs. Addl. CIT, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant that no expenditure has been incurred in earning the exempt income. 4. That, on the facts and in the circumstances of the case and law, the Learned AO be directed to grant interest under section 244A of the Act on refund determined. 5. The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, amend, modify, after, withdraw or vary any grounds of appeal either before or at the time of hearing of appeal proceedings. 4.1. From the perusal of above grounds, there are two following issues involved in the appeals before the Tribunal: (i) Disallowance u/s. 40(a)(ia) due to non-deduction of tax at source on additional amount provided as payable to KOPT; (ii) Disallowance u/s. 14A of the Act read with Rule 8D2(iii); 4.2. The above two issues are dealt hereunder in seriatim: (a) Brief facts of the case are that assessee is engaged in Port operation, cargo handling and other related services. Return of income for AY 2012-13 was filed on 27.11.2012 reporting a total income of Rs. 13,02,02,450/-. Return was selected for scrutiny and was completed u/s. 143(3) of the Act by making, inter alia, additions/disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what the assessee has paid to the KOPT. The Ld. CIT(A) has taken note of the fact that as per the agreement, the final royalty figure has to be computed by the independent auditor and according to the KOPT it is correct and final. So as per the agreement, the amount which the independent auditor has computed as the final royalty figure has crystallized and, therefore, is an allowable business expenditure. In case if the assessee is able to succeed in the arbitration proceedings then the assessee by virtue of the order gets any benefit in any subsequent assessment years by way of cessation or remission which has been allowed as a deduction in the present assessment year then the said amount can be brought for taxation by invoking the provision of Section 41(1) of the Act. Therefore, in view of the above, we do not find any infirmity in the order passed by the ld. CIT(A) and we are inclined to dismiss the appeal of the Revenue. In the result this ground of appeal of the Revenue is dismissed. (e) Based on the above finding of the coordinate bench of ITAT, Ld. CIT(A) held that royalty determined by the independent auditor is an ascertained liability which has crystallise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2) Act, 2004. Ld. Counsel also placed reliance on the decision of Hon'ble High Court of Punjab Haryana in the case of PCIT Vs. Shivpal Singh Chaudhury [2018] 409 ITR 87 (P H) wherein also similar view was taken by the Hon'ble Court. In view of the above submission, ld. Counsel submitted that the matter may please be remitted back to the file of the Ld. AO who would verify the factual position in respect of discharge of tax liability by the KOPT on the amount of royalty paid/payable by the assessee. The contentions made by the Ld. Counsel when confronted to the Ld. Sr. DR, he had no objection on setting it aside to the file of Ld. AO for the limited purpose of verification as submitted by the Ld. Counsel. 5.2. Considering the above submission, factual matrix and the applicable law duly supported by the above referred judicial precedents, we find it proper to remit the matter back to the file of Ld. AO for the limited purpose of verification of discharging of tax liability by KOPT on the impugned amount of royalty payable by the assessee to KOPT of Rs. 31,24,829/-. In this respect, we also direct the Ld. AO to exercise his powers available under the Act to call for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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