2018 (11) TMI 315 - AT - Income Tax

Disallowance of Deferred revenue expenditure - AO held that the said claim is in the nature of capital - Held that - We find that the revenue has accepted and allowed 1/5th of the some expenditure in the earlier years as claimed by the assessee. The CIT-A found satisfied on perusal of record that no material changes caused effect in respect of facts involved the issue in hand. DR did not bring on record any decision contrary to the finding of the CIT-A. No infirmity in the impugned order of the CIT-A. We uphold the same. Ground no. 1 raised by the revenue is dismissed. Long term capital loss - disputed loss has arisen on account of transfer of shares and debentures in terms of said settlement approved by Hon ble High Court - CIT-A examined the record and found that cost of share was made in terms of approval of the Hon ble High Court of Calcutta - Held that - We are of the view that the CIT-A was correct in directing the AO to carry forward the said loss as the genuineness of the loss had been upheld. We find no infirmity in the impugned order of the CIT-A. Ground no. 2 raised by the revenue is dismissed. Addition on account of loans - According to assessee an amount was outstanding - Held that - In terms of settlement the assessee received only ₹ 1 crore as full and final settlement. The assessee contended that it suffered loss and as such made a claim of bad debt written off for the interest portion. The CIT-A considering the submissions of assessee granted the benefit of bad debt written off. We find that the amount recovered by the assessee is less than the principal amount as given by assessee under loan. The assessee recovered an amount of ₹ 1 crore out of total dues of ₹ 3,04,45,954/- only the interest portion of ₹ 81,95,954/- which is part of ₹ 3,04,45,954/- was claimed as bad debt. The same was allowed by the ld. CIT(A). We find no infirmity in the impugned order of the CIT-A. TDS u/s 195 - commission paid to selling agents, who are based abroad and has no permanent establishment in India - PE in India - Held that - Since the commission has been paid to non resident agents for services rendered outside India and the same is not chargeable to tax in India under the Act. Therefore, in our opinion, the CIT A has rightly observed that the tax is not required to be deducted on payments made to them as per section 195 of the Act and with Circular No 786 dt 07.02.2000 issued by the CBDT. All the parties are nonresidents and for deducting tax at source is not required

Summary

Issues Involved:
1. Deletion of disallowance on account of Deferred revenue expenditure.
2. Holding as long-term capital loss.
3. Deletion of addition on account of loans.
4. Deletion of addition made on account of non-deduction of TDS.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance on Account of Deferred Revenue Expenditure:
The assessee claimed a deduction of ?71,71,319 towards deferred revenue expenses, which the AO disallowed, categorizing it as capital expenditure. The CIT-A, however, allowed the deduction based on the principle of consistency, noting that similar claims had been allowed in previous years. The CIT-A referenced the Supreme Court's decision in Radhasoami Satsang Vs. CIT, emphasizing that unless there is a material change in facts, the same view should be taken in subsequent years. The Tribunal upheld the CIT-A's decision, noting that the revenue had accepted and allowed the same expenditure in earlier years and found no material changes affecting the facts of the case.

2. Holding as Long-Term Capital Loss:
The AO denied the claim of carry forward of a long-term capital loss of ?2,97,59,407, deeming it notional. The CIT-A, however, allowed the carry forward, noting that the loss arose from a transfer of shares as per a settlement approved by the Hon’ble High Court of Calcutta. The Tribunal agreed with the CIT-A, stating that the loss was genuine and resulted from a transaction mandated by the High Court. The Tribunal found no infirmity in the CIT-A's order, which directed the AO to allow the carry forward of the loss.

3. Deletion of Addition on Account of Loans:
The AO added ?2,04,45,954 to the total income of the assessee under the head ‘income from other sources,’ noting that the assessee received only ?1 crore as full and final settlement against a loan of ?3,04,45,954. The CIT-A allowed the claim of bad debt written off for the interest portion of ?81,95,954, recognizing the loss suffered by the assessee. The Tribunal upheld the CIT-A's decision, agreeing that the amount recovered was less than the principal loan amount, and the interest portion claimed as bad debt was rightly allowed.

4. Deletion of Addition Made on Account of Non-Deduction of TDS:
The AO disallowed ?1,68,40,499 under section 40(a)(ia) of the Act, claiming that the assessee failed to deduct TDS. The CIT-A deleted the disallowance, noting that TDS was deducted and paid on the specified amounts and that the remaining amount of ?20,65,280 towards commission paid to foreign selling agents was not taxable in India as the services were rendered outside India. The Tribunal upheld the CIT-A's decision, referencing the Co-ordinate Bench's order in the case of M/s. HSIL Ltd, which dealt with similar facts and issues. The Tribunal found no contrary judgment and affirmed that the payments were not liable to TDS, thus deleting the disallowance.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue, upholding the CIT-A's decisions on all four grounds. The judgment emphasized the principles of consistency, the genuineness of transactions approved by the High Court, and the correct application of TDS provisions.