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TMI Blog2025 (2) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... 's cross objection for the assessment year 2014-15 is considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to the appeal and cross objection for the assessment year 2015-16. ITA No. 6507/Mum./2024 Revenue's appeal- A.Y. 2014-15 3. In this appeal, the Revenue has raised the following grounds: - "1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the expenses incurred under the head "Public Relation Expenses" without appreciating the fact that the said expenditure was not allowable as business expense with the meaning of section 37 of the Income-tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the amount of Rs. 25,55,28,178/- paid to BASF Asia Pacific Service Centre, Malaysia from with no TDS has been deducted u/s 195 of the Act, ignoring the fact that the said expenditure is not allowable u/s 40(a)(i) of the Income-tax Act, 1961. 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the expenses incurred on "Product Registration", ignoring the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee can at best be called charitable activities and the Act has provided for specific sections to claim such charitable expenditures and the same by no stretch of imagination will qualify as business expenditure under section 37 of the Act as laid out wholly and exclusively for the purpose of the business. The AO further held that the said expenditure may not have a direct benefit to the business though it will benefit the company indirectly in the form of a better public image of the company, motivation to the employees resulting in better productivity, increase in turnover. Thus, it was held that the assessee has failed to substantiate that the said expenditures are towards the business of the assessee. The AO also took into consideration the fact that similar additions were made in the earlier assessment years, i.e. assessment years 2007-08 to 2013-14, and the assessee has filed the appeals against the disallowance in all these years. Since in the assessment years 2008-09 and 2011-12, the learned CIT(A) and learned DRP, respectively, have allowed the expenditure incurred on advertisement and employee welfare, which was accepted by the Revenue, the AO allowed the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of sponsorship of the professional bodies like CI1, IGCC etc., which were related to corporate relations with these institutions. The assessee officer was of the view that the same was not incurred for the business purpose therefore, the disallowed the same. CIT(A) confirmed the finding of the Assessing Officer on this issue. The Ld. representative of the assessee has argued that the expenses were incurred for the sponsorship of the events and miscellaneous charitable activities and contributing to the educational exhibition which are not liable to be disallowed in view of law settled in HPCL Vs. Dy.CIT 2005 96 ITD 186 Mumbai& ACIT, CIRCLE 1(1) Bilaspur Vs. Jindal Power Limited, ITAT 99/BLPR/2012 dated 23 June, 2016 Raipur Bench and NMDC Ltd. Vs. Joint Commissioner of Income Tax, Range- 16 Hyderabad (ITAT2015 56 taxmann.com 396 (Hyderabad) Tribunal. On the other hand, the Ld. representative of the department has placed reliance upon the order passed by the CIT(A) in question. With due to regard of the contention raised by the Ld. representative of the parties and perusing the record, we find that the assessee was contributing fees to the education institution and for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Representative ("learned DR") could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years. Since the learned CIT(A) has followed the decision of the coordinate bench of the Tribunal cited supra, we do not find any infirmity in the findings of the learned CIT(A) on this issue. Accordingly, the same are upheld and ground no.1 raised in Revenue's appeal is dismissed. 12. The issue arising in ground no.2, raised in Revenue's appeal, pertains to the deletion of disallowance made under section 40(a)(i) of the Act. 13. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, from the perusal of the details filed by the assessee, it was observed that the assessee has paid a sum of INR 25,55,28,178 to BASF Asia Pacific Service Centre, Malaysia ("BASC") from which no tax was deducted under section 195 of the Act. Accordingly, during the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he perusal of the agreement, we find that both parties agreed that this agreement shall be valid from 01/01/2007 and shall remain valid until further changes are made to service items, service level or other relevant areas. In the present case, there is no dispute regarding the fact that under this agreement only the aforesaid services were provided to the assessee during the year under consideration and in respect of same the assessee made the payment to BASC. As per the Revenue, since the assessee did not deduct the TDS under section 195 of the Act at the time of making the payment to BASC, these payments are disallowable under section 40(a)(i) of the Act. 17. We find that while considering a similar issue in assessee's own case for the assessment year 2008-09, the coordinate bench of the Tribunal vide order dated 18/09/2017 (cited supra), following the decision of the coordinate bench of the Tribunal in the case of the assessee's sister concern in DCIT v/s BASF Catalyst India Private Limited, in ITA No. 650 and 651/Mds/2016, held that the provisions of section 40(a)(i) of the Act are not applicable to the payment made to BASC for rendering Finance and Accounting and Human Resou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the assessee company. The Ld. AR demonstrated with copy of vouchers filed in the paper book at page 36 and invoice copies of service at page 40 to substantiate that the services are in the nature of data entry operations and there is no expertise is necessary for making such transactions. We also perused the provisions of section 9(1)(vii) of the Act where the fees for technical services have been considered and the services being international transaction the DTAA agreement between India and Malaysia shall come into effect. In Article 13 of DTAA fees for technical services being rendering of any managerial, technical or consultancy services and includes the provision of services for technical or other which does not include payment for services mentioned in Artic le 15, 16 of the agreement." "11. The Malaysia Company (BASC) provides services under Article 13 r.w.s. Article 5 and Article 7 of DTAA. The article 5 deal with permanent establishment defined as the fixed place of business through which the business of enterprise is wholly or partly carried on. The facts are not disputed by the Revenue that there is no PE of the Malaysia Company in India and the services are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the profit and loss account, it was noticed that the assessee has debited a sum of INR 5,55,30,348 on account of product development expenses. Accordingly, the assessee was asked to submit the detailed submission and was also asked to justify its claim as there was a similar disallowance in earlier assessment years, viz assessment years 2008-09 to 2013-14. In response, the assessee submitted that in the assessment year 2008-09, the product registration expenditure was disallowed for the first time by the AO by holding the same to be capital in nature representing intangible rights on which depreciation at 25% was allowable and as such depreciation was allowed. It was further submitted that similar expenditure has also been disallowed in the subsequent assessment years, i.e. assessment years 2009-10 to 2013-14. The assessee submitted that it has incurred product development and registration expenditure of INR 5,55,30,348, which includes testing charges, travelling expenses of the staff of the assessee incurred in connection with the registration of products, gathering data, etc. The assessee submitted that the facts, in the year under consideration, regarding project regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sold in India, it needs to be registered with "Central Insecticides Board and Registration Committee" Board, which operates under the Ministry of Agriculture of the Central Government. This is the regulatory requirement under the Insecticide Act 1968. Thus, although the registration expense incurred is a one-time expenditure in relation to a new product: being incurred is a one-time expenditure in relation cannot be categorized to be capital in nature. We also found that the matter of controversy has already been adjudicated in favour of the assessee in the case of title as ACIT Vs. Sanofi Synthelabo (India) Ltd. ITA No. 6720, 6755 & 7592/Mum/2011, Mumbai Bench decided on 20.11.2016. Since, this issue is squarely covered by this order therefore, we are of the view that the CIT(A) has passed the order judiciously and correctly which is not required to be interfere with at this appellate stage. No distinguishable material has been produced before us. Accordingly, this issue is decided in favour of the assessee." 24. During the hearing, the learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the amount of Rs. 21, 19,86,613/- paid to BASF Asia Pacific Service Centre, Malaysia from with no TDS has been deducted u/s 195 of the Act, ignoring the fact that the said expenditure is not allowable u/s 40(a)(i) of the Income-tax Act, 1961. 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the expenses incurred on "Product Registration", ignoring the fact that the said expenditure is capital in nature and not allowable as revenue expenditure." 30. Since similar issues have been decided in Revenue's appeal for the assessment year 2014-15, our findings/conclusions as rendered therein shall apply mutatis mutandis to the present appeal. Accordingly, the impugned order passed by the learned CIT(A) on the issues raised before us is upheld and the grounds raised by the Revenue are dismissed. 31. In the result, the appeal by the Revenue is dismissed. CO No. 25/Mum./2025 Assessee's Cross objection- A.Y. 2015-16 32. In its cross objection, the assessee has raised the following grounds: - "On the facts and in circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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