2015 (11) TMI 1792 - AT - Income Tax

Broken period interest - HELD THAT - Issue raised by the revenue in this appeal is now stands covered in favour of the assessee and against the revenue by various decisions and orders of the Tribunal rendered in assessee s own case. See BRITISH BANK OF MIDDLE EAST 2001 (8) TMI 12 - SUPREME COURT Salaries paid to expatriate employees - HELD THAT - Tribunal in assessee s own case including the cases relied upon, we find that that the facts of the case relied upon by the assessee and case in hand are similar. The order relied upon by the assessee is dated 22.2.2006 and the present appeal pertains to the assessment year 1999- 2000, and even today the revenue could not bring any material contrary to constrain to take a different view. Therefore, respectfully following the order of the Tribunal in assessee s own case, we allow Ground No.2 taken by the assessee. Disallowance of fees paid to Master card and Visa towards services rendered by them - HELD THAT - As relying on own case order has restored this issue to the file of the AO. Facts being the same, we have no other alternative but to following the said decision of the precedent laid down by the Tribunal. Accordingly, we restore this ground to the file of the AO for verification of the facts and fresh decision. Ground No.3 of assessee s appeals is allowed for statistical purposes. Payment to the Great Eastern Shipping Company Limited (GESC) - claim regarding depreciation rejected - HELD THAT - We are of the considered opinion the expenditure incurred by the assessee for vacating the premises given to the tenant is a business expenditure and allowable as revenue expenditure. Therefore, we allow Ground No.4 in part. Disallowing the loss in respect of replacement of shares of Zee Telefilms to a foreign Institutional Investors (FII) - HELD THAT - No further transactions could be continued with respect of these shares. Thereafter Chase Manhattan Bank, who acted as the Global Custodians for EMGF raised a claim against the bank on the ground that the FII and the Global Custodians were not duly notified of the notices/objections as required under the Custody Agreement. In these transactions, Chase and EMGF suffered loss of 3.5. These client being reputed clients and to maintain dignity in the market, the assessee company paid this amount to them and claimed as business expenses. He contended that in such type of business whatever losses suffered by the bank is business loss and should be allowed as business loss. Therefore, the AO was not justified in disallowing this payment as business loss. Addition of bonus point on credit cards - HELD THAT - An identical issue had come up before the various forums/ Judicial authorities, and therein the Courts have decided this issue in favour of the assessee. Hence, this issue stands covered in favour of the assessee. Therefore, we do not find any infirmity in the order of ld.CIT(A). Accordingly, we confirmed his findings. Ground No.2 taken by the revenue is dismissed. Addition made on account of Deferred Guarantee Commission - HELD THAT - As decided in BANK OF TOKYO LTD. 1993 (5) TMI 172 - CALCUTTA HIGH COURT Revenue's contention that the accrual of the entire commission is a point of time accrual is not tenable. The contesting submissions boil down to one question whether accrual is co-eval with the pay ability, the same may be payable but may not be apportionable until the happening of an event; in the present case the expiry of the period, for, the guarantee beyond the expiry date of the previous year the right to receive for unexpired period, for, the guarantee beyond the expiry date of the previous year remains in a suspense. It may or may not fructify into an actual right to receive for the subsequent period of the term of the guarantee as the sooner determination of the guarantee is a contingency not ruled out by the agreement. It is only upon certain conditions being fulfilled, viz., the guarantee running the full course or period of the debt guaranteed, that the right to the entirety of the commission can be said to have accrued. Addition u/s 40(a)(i) - commission income paid to the outside parties - HELD THAT - We find that the an identical issue has come up before the Tribunal in number of cases CREDIT LYONNAIS 2012 (12) TMI 640 - ITAT MUMBAI , ABU DHABI COMMERCIAL BANK LTD. OTHS. 2013 (9) TMI 603 - ITAT MUMBAI and the Tribunal in the above cited cases decided the issue in favour of the assessee. Before us, the ld.DR could not bring any material contrary to the findings of the Tribunal. Therefore, we have no other alternative but to dismiss the Ground No.8 taken by the revenue. Loss made on the outstanding forward contracts - HELD THAT - We find that the issue raised by the assessee stands covered by the decision of Hon ble Supreme Court in the case of Woodward Governor India P. Ltd 2009 (4) TMI 4 - SUPREME COURT as held the loss suffered by assessee on account of fluctuations of foreign exchange as on the date of Balance Sheet is an item of expenditure under section 37(1), allowed the mark to market loss in the case of equity index/stock future as an allowable loss

Issues Involved:
1. Broken period interest.
2. Salaries paid to expatriate employees.
3. Disallowance of expenses on guest house and holiday home.
4. Disallowance of expenses on library subsidy, contributions to staff cultural committee, and recreation club.
5. Disallowance of entertainment expenses.
6. Exemption of interest earned on tax-free bonds.
7. Deferred guarantee commission.
8. Disallowance under section 40(a)(i) for non-deduction of TDS.
9. Interest accrued but not due on securities.
10. NRI deposit mobilization expenses.
11. Fees paid to MasterCard and Visa.
12. Payment to Great Eastern Shipping Company Limited.
13. Loss on outstanding forward contracts.
14. Bonus points on credit cards.

Detailed Analysis:

1. Broken Period Interest:
The assessee claimed deductions for broken period interest on securities. The AO disallowed this based on the precedent set by the Supreme Court in Vijaya Bank Ltd. However, the CIT(A) allowed the claim based on the Bombay High Court's decision in American Express International Banking Corporation. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

2. Salaries Paid to Expatriate Employees:
The AO disallowed the salaries paid to expatriate employees, suggesting they were not eligible for deduction. The CIT(A) allowed the deduction, following previous decisions in the assessee's favor. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

3. Disallowance of Expenses on Guest House and Holiday Home:
The AO disallowed expenses incurred on guest house and holiday home under section 37(4). The CIT(A) deleted the addition based on the Finance Act, 1997, which deleted section 37(4). The Tribunal found the ground infructuous and dismissed the revenue's appeal.

4. Disallowance of Expenses on Library Subsidy, Contributions to Staff Cultural Committee, and Recreation Club:
The AO disallowed these expenses under section 40A(9). The CIT(A) allowed the expenses, following previous favorable decisions for the assessee. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

5. Disallowance of Entertainment Expenses:
The AO disallowed entertainment expenses under section 37(1). The CIT(A) restricted the disallowance to Rs. 1 lakh. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

6. Exemption of Interest Earned on Tax-Free Bonds:
The AO disallowed interest earned on tax-free bonds, calculating proportionate interest. The CIT(A) allowed the claim, noting the assessee had sufficient interest-free funds. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

7. Deferred Guarantee Commission:
The AO added the deferred guarantee commission to the total income. The CIT(A) deleted the addition, following the Calcutta High Court's decision in CIT vs. Bank of Tokyo Ltd. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

8. Disallowance under Section 40(a)(i) for Non-Deduction of TDS:
The AO disallowed expenses paid to non-residents for non-deduction of TDS. The CIT(A) allowed the claim, noting the payments were not chargeable under the Act. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

9. Interest Accrued but Not Due on Securities:
The AO added interest accrued but not due on securities to the total income. The CIT(A) confirmed the AO's action. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's appeal.

10. NRI Deposit Mobilization Expenses:
The AO disallowed NRI deposit mobilization expenses. The CIT(A) allowed the claim. The Tribunal upheld the CIT(A)'s decision, allowing the assessee's appeal.

11. Fees Paid to MasterCard and Visa:
The AO disallowed fees paid to MasterCard and Visa. The Tribunal restored the issue to the AO for verification and fresh decision, allowing the assessee's appeal for statistical purposes.

12. Payment to Great Eastern Shipping Company Limited:
The AO treated the payment to vacate premises as capital expenditure. The CIT(A) confirmed the AO's action. The Tribunal allowed the claim as revenue expenditure, following precedents.

13. Loss on Outstanding Forward Contracts:
The AO disallowed the loss on outstanding forward contracts as notional. The CIT(A) confirmed the AO's action. The Tribunal allowed the claim, following the Supreme Court's decision in CIT vs. Woodward Governor India P. Ltd.

14. Bonus Points on Credit Cards:
The AO disallowed the expenditure on bonus points on credit cards. The CIT(A) allowed the claim, noting the liability accrued in the year of consideration. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

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