2023 (7) TMI 1082 - AT - Income Tax

TP Adjustment - Determination ALP of Management Fees - HELD THAT - As gone through the evidences filed before us and noted that these evidences need to be examined by the Assessing Officer/ TPO afresh in regard to management fee paid by assessee to its associated enterprises for the services rendered. The AO/TPO will also go into the details of e-mail correspondence and other evidences before deciding the issue. Hence this issue is remitted back to the file of the AO/TPO for fresh consideration. This issue of Revenue s appeal is allowed for statistical purposes. Disallowance of deduction claimed by assessee u/s.80IA - HELD THAT - As assessee company is engaged in the business of operation of container freight station at various locations Irungattukotta Tripuru Karur Pondicherry Tuticorin and Mumbai. According to assessee CFS facility is duly approved and recognized as an offshore facility by customs/port authorities originally existed alongside the seaport/airport. Even this CFS was notified vide notification No. 10682 dated 01.09.1998 as an infrastructure facility for the purpose of provisions of section 80IA(4) of the Act. Since the issue is covered by the case of Ennore Cargo Container Terminal 2017 (4) TMI 615 - MADRAS HIGH COURT we dismiss this issue of Revenue s appeal. Disallowance made on business development expenses - This business expenditure claimed to be on account of tamil film produced by the Chairman of assessee company Sattam Oru Iruttarai and there was a request from the staff of the clients for tickets and accordingly the same were provided - HELD THAT - This expenses of tickets for staff of clients was for the purpose of maintaining good relations with the clients and hence this being business expenditure was allowed by CIT(A). We find no infirmity in the order of CIT(A) and hence the same is confirmed. This issue of Revenue s appeal is dismissed. Addition u/s 36(1)(va) 2(24)(x) - Payment made on account of provident fund and ESI being employees contribution beyond the due dates as prescribed under the respective statutes - HELD THAT - As noted that this issue is now stands covered by the decision of Checkmate Services P. Ltd 2022 (10) TMI 617 - SUPREME COURT wherein held that the amounts beyond the due dates under the Provident Fund Act and ESI Act is not to be allowed in term of provisions of section 36(1)(va) 2(24)(x) of the Act. Hence this issue being covered in favour of Revenue.

Issues Involved:
1. Preliminary Objection of "Conflict of Interest"
2. Addition of Management Support Fee
3. Disallowance of Deduction Claimed u/s. 80IA
4. Disallowance of Business Development Expenses
5. Disallowance of Provident Fund and ESI Payments

Summary:

1. Preliminary Objection of "Conflict of Interest":

The Revenue raised a preliminary objection regarding the "conflict of interest" involving advocates Shri I. Dinesh and Shri N. Arjun Raj, who represented both the ITAT and private clients before the Tribunal. The CIT-DR, Dr. S. Palanikumar, argued that this dual representation jeopardizes the neutrality and impartiality of the Tribunal. The Tribunal concluded that there was no conflict of interest, as the engagement of advocates by the ITAT for administrative purposes does not preclude them from representing private clients in judicial proceedings. The Tribunal emphasized that such issues should be addressed by appropriate disciplinary bodies and not by obstructing judicial proceedings. The objection was dismissed as frivolous and without basis.

2. Addition of Management Support Fee:

The Revenue challenged the CIT(A)'s deletion of the addition of Rs. 80,32,102/- made by the Assessing Officer towards Management Support Fees. The TPO had made a downward adjustment, claiming the assessee did not provide sufficient documentary evidence for the services received. The CIT(A) deleted the addition, relying on the nature of the business and previous ITAT decisions. The Tribunal remitted the issue back to the AO/TPO for fresh consideration, directing them to examine the evidences submitted by the assessee.

3. Disallowance of Deduction Claimed u/s. 80IA:

The Revenue contested the CIT(A)'s decision to allow the deduction claimed by the assessee u/s.80IA, amounting to Rs. 15,38,64,455/-. The CIT(A) relied on the decision of the Hon'ble Madras High Court in the assessee's own case. The Tribunal noted that the issue is covered by the decision of the Hon'ble Madras High Court, which had ruled in favor of the assessee. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.

4. Disallowance of Business Development Expenses:

The Revenue appealed against the CIT(A)'s decision to delete the disallowance of Rs. 1,37,880/- on business development expenses. The CIT(A) allowed the expenses, stating they were incurred for maintaining good relations with clients. The Tribunal found no infirmity in the CIT(A)'s order and confirmed the deletion of the disallowance.

5. Disallowance of Provident Fund and ESI Payments:

The Revenue challenged the CIT(A)'s deletion of the disallowance of Rs. 64,63,513/- and Rs. 10,18,815/- on account of provident fund and ESI payments made beyond the due dates. The Tribunal noted that this issue is covered by the Hon'ble Supreme Court's decision in the case of Checkmate Services P. Ltd., which held that such payments are not allowable if made beyond the due dates. The Tribunal upheld the addition and reversed the CIT(A)'s order on this issue.

Conclusion:

The Tribunal dismissed the preliminary objection of "conflict of interest," remitted the issue of management support fee back to the AO/TPO, upheld the CIT(A)'s decision on the deduction u/s. 80IA and business development expenses, and reversed the CIT(A)'s order on the disallowance of provident fund and ESI payments. The appeal filed by the Revenue was partly allowed for statistical purposes.

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