TMI Blog2023 (5) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... n Asset Restoration Cost (ARC) - HELD THAT:- In assessment year 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI] this issue was restored back to the file of Assessing Officer for re-examination - In the impugned assessment year we find that the Assessing Officer has failed to examine the issue in right perspective. We deem it fit to restore the issue to the file of Assessing Officer for fresh adjudication Disallowance u/s. 14A r.w.r 8D - case of assessee is that no exempt income was earned by the assessee during the period relevant to assessment year under appeal - HELD THAT:- This fact has not been rebutted by the Department. The settled legal position is, no disallowance u/s. 14A is to be made where the assessee has not earned any exempt income during the relevant period. Thus, the disallowance u/s. 14A of the Act made by Assessing Officer is deleted and ground of the appeal is allowed. Disallowance of interest expenditure - loans given to subsidiaries - HELD THAT:- As decided in own case [ 2023 (5) TMI 508 - ITAT MUMBAI] 2006-07 where the assessee is having mixed bag of interest free funds and interest bearing funds and the assessee has made investment out of such common p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions, however, the same was not adjudicated. In the back drop of above facts, without delving further on the issue, we deem it appropriate to restore this issue back to the file of Assessing Officer for adjudication on merits after affording reasonable opportunity of hearing/making submissions to the assessee, in accordance with law. Thus, ground of the appeal is allowed for statistical purpose. MAT computation u/s. 115JB - deduction of provision for doubtful debts amounting to Rs.246.00 million for the purpose of computing book profits u/s. 115JB - HELD THAT:- We find that in assessment year 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI] held that when the assessee chose to write back the provision for doubtful debts by creating it in its P L Account, which in the present case is Rs.326.79 million, the same would obviously be outside the ambit of provision of section 115JB of the Act. In fact, this is specifically provided in clause (i) of Explantion-1 to section 115JB(2) of the Act under expression as reduced by while computing book profit u/s. 115JB of the Act. TP Adjustment - reimbursement of salary and related costs of seconded employees - contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve disallowance of interest expense in excess of actual interest expense; Ground No.9: Disallowance of expenses incurred in connection with raising loans; Ground No.10: Disallowance of roaming charges under section 40(a)(ia) of the Act; Ground No.11: Non-reduction of foreign exchange gain of capital nature from profits of business; Ground No.12: Computation of Book Profit under section 115JB of the Act; Ground No. 13: Transfer Pricing Adjustment- on reimbursement of salary and related costs of seconded employees; Ground No.14: Non-grant of full credit in respect of Tax Deducted at Source; Ground No.15: Levy of interest under section 234B and 234C of the Act. 3. Shri Salil Kapoor appearing on behalf of the assessee submits at the outset that the facts in appeal are identical to the facts in assessment year 2006-07 and 2007-08. Majority of the issues raised in the instant appeal are squarely covered by the issues decided in appeals for assessment year 2006-07 and 2007-08. The ld.Counsel for the assessee furnished a chart listing the issue that are covered by the appeal of the assessee in ITA No. 216/Chandi/2011 for assessment year 2006-07 and ITA No.1173/Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al CUP to benchmark payment of salary and other related expenses and made adjustment of Rs.12,22,44,320/-. The assessee raised objections before the DRP. In principle the DRP concurred with the submissions of assessee that the employees were seconded by AE to India. The DRP restricted the adjustment to Rs.3,63,31,007/- stating that there is no evidence that the aforesaid amount was paid back to back and they are spent towards travel cost/reallocation cost of the five employees. The ld.Counsel for the assessee submits that secondment of employees is not in dispute anymore. The DRP has disallowed only reallocation charges. Since, the employees were seconded by the overseas AE, therefore, they have to be reallocated and for relocation cost would be involved. The employees will have to be compensated for travel cost/relocation expenses. The assessee has merely reimbursed the charges paid by the AEs. The reimbursement of relocation charges are reflected in Form No.16. The ld.Counsel for the assessee further referred to Rule 2BB(1)(a) of the Income Tax Rules, 1962 (in short the Rules ). The ld.Counsel for the assessee pointed that Rule 2BB(1)(a) refers to the allowances granted to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds raised in appeals for assessment year 2006- 07 in ITA NO.216/Chandi/2011(supra). The aforesaid appeal of the assessee was decided by the Tribunal vide order dated 16/03/2013. FINDINGS: 6. Ground No.1 The ground No.1 of appeal is general in nature, hence, require no adjudication. 7. Ground No.2 3 Disallowance of deduction u/s. 80IA of the Act and disallowance of deduction u/s. 80IA of the Act on Other incomes : The Co-ordinate Bench while deciding the appeal of assessee for assessment year 2005-06 in ITA No.5598/Mum/2017 vide order dated 28/11/2022 held that the assessee started telecommunication services after 01/04/1995 and hence, the assessee is eligible to claim deduction u/s. 80-IA(4) of the Act. Following the order of Tribunal in assessee s own case for assessment year 2005-06, the assessee s claim of deduction u/s. 80-IA of the Act was allowed in assessment year 2006-07 and 2007-08. In the impugned assessment year the assessee s claim of deduction u/s. 80IA of the Act was rejected for the reason similar to assessment year 2006-07.Following the decision rendered in assesee s own case for assessment year 2006-07 (supra), ground No.2 of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No.5 of the appeal is allowed. 10. Ground No.6 : Disallowance of interest on loans given to subsidiaries:The assessee had advanced loans to the following subsidiaries: S.No. Group Company Loans given during the year (In INR Millions) Rate of interest 1. Vodafone South Ltd. 6,281.40 Interest free 2. Vodafone Digilink Ltd. 5,850.00 Interest free 3. Vodafone Essar Cellular Ltd. 10,849.10 7.7% 4. Vodafone Spacetel Ltd. 3,855.00 8.85% 5. Vodafone Infrastructure Limited 1.00 10.50% Total 26,836.50 In the preceding assessment year i.e. 2006-07, the assessee had extended financial support to its subsidiaries including some of the subsidiaries listed herein above. The interest on loans given to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that, where the assessee is having mixed bag of interest free funds and interest bearing funds and the assessee has made investment out of such common pool of funds, the presumption would be that the investments are made out of interest free funds available with the company provided the said funds are sufficient to meet the investments. Thus, in the facts of the case and the decisions discussed above, we find merit in ground No.5 of the appeal. The disallowance of interest expenditure on loans given to subsidiaries is directed to be deleted. The assessee succeeds on ground No.5 of the appeal. Both sides have unanimously stated that the facts in the impugned assessment year are identical, hence, we have no hesitation in applying the same ratio for deciding the issue in the impugned assessment year. Following the order of Co-ordinate Bench(supra), the addition on account of disallowance of interest expenditure is deleted and ground No.6 of the appeal is allowed. 11. Ground No.7: Disallowance of interest on capital work-in-progress: We find that the Assessing Officer has disallowed interest on capital work-in-progress following the assessment order in the immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ground No.7 of the appeal. 12. In ground No.8 of appeal the assessee has made alternate prayer to ground No.5, 6 7. Since, we have allowed ground No.5,6 7 of the appeal, alternate plea raised by the assessee in ground No.8 of the appeal has become infructuous. In the result, ground No.8 of the appeal is dismissed as infructuous. 13. Ground No.9: Disallowance of expenses incurred for raising loans: The assessee has incurred expenditure for raising of loans. The Assessing Officer following the assessment order of the immediate preceding year disallowed expenditure incurred towards raising of secured and unsecured loans. The Tribunal in assessment year 2006-07 and 2007-08 deleted the disallowance qua raising of loans. The Tribunal allowed assessee s claim by observing as under: 26. We have heard the submissions made by rival sides and have examined the orders of authorities below. The assessee during the period relevant to assessment year under appeal has raised secured and unsecured loans. The Assessing Officer has disallowed expenditure on raising of loan for the reason that loan has been disbursed for capital expenditure and not for augmentation of the working cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to be deleted. The assessee succeeds on ground No.9 of appeal. Following the order of Tribunal in assessee s own case on similar facts, ground No.10 of the instant appeal is allowed, for parity of reasons. 15. Ground No.11: Non-reduction of foreign exchange gain of capital nature from profits of business: The assessee has assailed the addition of Rs.8,44,83,220/- in respect of External Commercial Borrowings(ECB) for incurring capital expenditure. The contention of the assessee is that in assessment year 2006-07, the assessee had suffered loss on foreign exchange fluctuations. The said loss was held to be on capital account by the Assessing Officer vide assessment order dated 05/02/2011. The assessee accepted the same. Now that in the impugned assessment year the assessee has gain on foreign exchange fluctuations, the sametreatment should be given to gains i.e. gain on foreign exchange fluctuations should be considered on capital account. Purportedly, the assessee had made claimbefore the Assessing Officer during assessment proceedings,hence, the same was not considered by the Assessing Officer. Thereafter, the assessee raised ground before the DRP in objections. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts on deputation of personnel by overseas AEs in India. The assessee had claimed reimbursement of salary and other related costs on employees seconded by AEs. The TPO disallowed assessee s entire claim of Rs.13,82,44,320/-. The assessee filed objections before the DRP. The DRP held that the TPO had erred in coming to the conclusion that the employees were hired by the assessee. In fact, the employees were seconded to India by AEs of the assessee. The DRP further held that expats had actually performed services in India for which their salary costs has been cross charged. The DRP allowed reimbursement of salary and related allowances of personnel deputed to India to the extent it was found on cost to cost basis i.e. to the extent of Rs.10,19,13,313/-. In so far as the remaining amount of Rs.3,63,31,007/-, the DRP held that no evidences in the nature of back to back invoices were available. Only some debit notes were available, which the DRP refused to accept. 17.1 The contention of the assessee is that the amount disallowed by the DRP was paid towards travel cost/relocation cost of five seconded employees. The reimbursement of salary and other allowances were allowed on debit n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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