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2015 (3) TMI 931 - AT - Income TaxInterest under section 244A on interest granted - whether while issuing refund interest amount will take priority before principal amount? - CIT(A) allowed claim - Held that - The learned Commissioner of Income-tax-Departmental representative stated that the computation of the Commissioner of Income-tax (Appeals) is wrong but he could not point out which part of the Commissioner of Income-tax (Appeals)'s order is wrong and how. He could not identify mistake in allowing interest under section 244A of the Act. Despite the entire facts available in the order of the Commissioner of Income-tax (Appeals), the learned Commissioner of Income-tax-Departmental representative could not point out any error, we feel that the directions of the Commissioner of Income-tax (Appeals) are as per law and we uphold the same - Decided against revenue. Non-deduction of TDS on reimbursement of cost for providing access to system and management audit methodology updates, etc. - CIT(A) deleted disallowance u/s 40(a)(ia) - Held that - We find the factual position that the assessee-company is a member of the international organisation of Ernst and Young and its several associate concerns worldwide. Ernst and Young Global Services LLP and Ernst and Young U. K. LLP provide administrative and management support services in connection with technology updates, system and methodology and upgrades, training through webs, etc. to the assessee and to other associate concerns of the group. The assessee and its other associate concerns share the costs. A sum of ₹ 6,88,12,554 was reimbursed to Ernst and Young Global Services LLP and a sum of ₹ 23,78,781 to Ernst and Young U. K. LLP by the assessee during the current assessment year on account of its share of costs for such services. Accordingly, arrangement was arrived at for such services to be developed in a pool by the said two concerns to which the member firms would have access to it and reimbursing their respective shares of cost incurred therefor. Such reimbursement was agreed on the basis of respective turnover of the member firms. These facts are not denied by the Revenue even now before us and these are reimbursement of expenses. Once these are reimbursement of expenses the assessee is not liable to deduct TDS under section 195 of the Act. - Decided against revenue. Disallowance invoking the provisions of section 14A read with rule 8D - Held that - Exempted income is to the extent of ₹ 76,34,047 in assessment year 2006-07. Rule 8D of the Rules is not applicable in this assessment year in the assessee's case as held by the hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. 2010 (8) TMI 77 - BOMBAY HIGH COURT being prospective. We direct the Assessing Officer to restrict the disallowance at one per cent. of the exempted income. - Decided partly in favour of assessee. Disallowance of provision for leave encashment - Held that - According to assessee this amount was added back in the computation of income filed with original return of income in pursuance to section 43B(f) of the Act. The hon'ble apex court in the case of Exide Industries Ltd. 2009 (5) TMI 894 - SUPREME COURT has stayed the operation of the judgment of the hon'ble Calcutta High Court 2007 (6) TMI 175 - CALCUTTA High Court who stuck down the provisions of section 43B(f) of the Act as being arbitrary and ultra vires. Once this is the position, we restore back this issue to the file of the Assessing Officer to adjudicate the same afresh - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Granting interest under section 244A of the Income-tax Act. 2. Disallowance under section 40(a)(ia) for non-deduction of TDS. 3. Disallowance under section 14A read with Rule 8D. 4. Disallowance of provision for leave encashment. 5. Withdrawal of interest under section 234D. Issue-wise Detailed Analysis: 1. Granting Interest under Section 244A: The Revenue's appeal contested the Commissioner of Income-tax (Appeals)'s decision to grant interest under section 244A on interest and prioritize interest amount over the principal amount during refunds. The Commissioner of Income-tax (Appeals) identified errors in the Assessing Officer's computation of interest under section 244A, highlighting eight specific aspects where interest was either incorrectly calculated or not granted. Despite the Revenue's arguments, no specific errors in the Commissioner of Income-tax (Appeals)'s order were pointed out. Consequently, the Tribunal upheld the Commissioner of Income-tax (Appeals)'s directions as per law, dismissing the Revenue's appeal. 2. Disallowance under Section 40(a)(ia) for Non-deduction of TDS: The Revenue's appeal challenged the deletion of disallowance made by the Assessing Officer under section 40(a)(ia) for non-deduction of TDS on reimbursement of costs to EYGS LLP and Ernst and Young LLP, U.K. The Commissioner of Income-tax (Appeals) deleted the disallowance, following the Tribunal's decision in the assessee's own case for the assessment year 2003-04, which held that reimbursements do not require TDS deduction as they are not income chargeable under section 195. The Tribunal, noting the consistent deletion of such disallowances in previous years and the factual position of the reimbursements, upheld the Commissioner of Income-tax (Appeals)'s order, dismissing the Revenue's appeal. 3. Disallowance under Section 14A read with Rule 8D: For the assessment year 2006-07, the Commissioner of Income-tax (Appeals) invoked Rule 8D retrospectively, restricting the disallowance to one percent of the exempt income. However, the Tribunal noted that Rule 8D, as per the Bombay High Court's decision in Godrej and Boyce Mfg. Co. Ltd., is applicable prospectively from the assessment year 2008-09. The Tribunal directed the Assessing Officer to restrict the disallowance to one percent of the exempt income, partly allowing the assessee's appeal. For the assessment year 2008-09, the Commissioner of Income-tax (Appeals) restricted the disallowance to one percent of the exempt income despite Rule 8D being applicable. The Tribunal, noting the prospective application of Rule 8D from the assessment year 2008-09, allowed the Revenue's appeal, confirming the Assessing Officer's computation under Rule 8D. 4. Disallowance of Provision for Leave Encashment: The assessee contested the disallowance of provision for leave encashment based on actuarial valuation, citing the Calcutta High Court's decision in Exide Industries Ltd., which struck down section 43B(f) as ultra vires. The Tribunal noted that the Supreme Court had stayed the Calcutta High Court's judgment and restored the issue to the Assessing Officer to adjudicate afresh in light of the Supreme Court's final decision in Exide Industries Ltd., allowing the assessee's appeal for statistical purposes. 5. Withdrawal of Interest under Section 234D: The assessee raised the issue of withdrawal of interest under section 244A not being subject to interest under section 234D. The Tribunal, considering this a consequential issue, directed the Assessing Officer to recompute the withdrawal of interest as per the provisions of the Act, allowing the assessee's appeal for statistical purposes. Conclusion: The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals for statistical purposes, directing the Assessing Officer to adjudicate specific issues afresh based on the Tribunal's findings and relevant judicial precedents.
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