2021 (3) TMI 669 - AT - Income Tax

TDS on payments to VISA/Master Card - assessee submitted that as per the terms of respective agreement, the assessee had to bear all tax liability on payment made to Visa / Master Card and therefore, the expenditure was business expenditure allowable u/s 37(1) - HELD THAT - As decided in own case 2020 (2) TMI 1466 - ITAT MUMBAI whether the said expenditure was reimbursable by VISA or not, was not brought on record. The answer to the same would be vital to clinch the issue in proper perspective. Obviously, if the expenditure was non reimbursable in nature and it was borne by the assessee himself, the same would certainly become assessee s liability and hence an allowable expenditure as held in earlier years. On the contrary, if the expenditure was reimbursable in nature, it would materially alter the assessee's claim of deduction. The submissions made by Ld. AR also do not throw much light on this fact and the observation made by Ld. CIT(A) has remained unaddressed. Therefore, with a view to bring on record clear facts and to dispel the concerns raised by Ld. DR, we restore the matter back to the file of Ld. CIT(A) with a direction to ascertain the correct facts. The assessee is directed to provide the requisite details / information. MAT computation u/s 115JB - Write-back of provision for Card NPA - While computing Book Profits u/s. 115JB, the assessee reduced provision of card receivables written-back - as provision for card receivable, in earlier years, was not added back to compute Book Profits for AYs 2007-08 to 2010-11 therefore, Ld.AO opined that reduction in Book Profits would not be available to the assessee in this year - HELD THAT - As decided in own case 2019 (7) TMI 790 - ITAT MUMBAI we hold that the assessee was entitled for deduction of write-back while computing Book Profits u/s 115JB. The Ld. AO is directed to re-compute Book Profits u/s 115JB. The ground thus raised stand allowed.

Summary

Issues:
1. Disallowance of TDS paid on License Fees on VISA Cards
2. Addition of provision for Card receivable written back while computing book profit under Section 115JB

Issue 1: Disallowance of TDS paid on License Fees on VISA Cards:
The appeal by the assessee for AY 2014-15 contests the order of Ld. CIT(A) on grounds related to TDS disallowance on License Fees on VISA Cards and addition of provision for Card receivable written back. The assessee claimed TDS paid on VISA and Master Card as business expenditure under Section 37(1), citing non-reimbursable nature. However, the AO denied the deduction, stating it was not the assessee's liability and that the expenditure was not wholly and exclusively for business. The CIT(A) denied deduction for VISA Card payments but allowed for Master Card payments. The Tribunal found discrepancies in the terms of Master Card and VISA Card agreements, directing the CIT(A) to ascertain if the expenditure was reimbursable, crucial for determining its allowability. The issue was restored to the CIT(A) for clarity, based on similar past cases.

Issue 2: Addition of provision for Card receivable written back:
Regarding the provision for Card receivable written back while computing Book Profits under Section 115JB, the AO disallowed the reduction in Book Profits, contending that it was not added back in previous years. The assessee argued that the write-back represented NPA provisions made in compliance with RBI guidelines in earlier years. The AO rejected the plea, and the CIT(A) upheld the decision. The Tribunal referred to a previous case for AY 2012-13, where a similar issue was resolved in favor of the assessee. The Tribunal held that the assessee was entitled to the deduction of write-back while computing Book Profits under Section 115JB, directing the AO to re-compute Book Profits accordingly. The appeal was partly allowed based on the Tribunal's earlier view.

In conclusion, the Tribunal addressed the issues of TDS disallowance on VISA Cards and provision for Card receivable written back, providing detailed analysis and directions based on past cases and legal provisions. The judgment clarified the allowability of deductions and upheld the assessee's contentions in certain aspects, resulting in a partial allowance of the appeal.