9911796707
TMI Blog2008 (8) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... movement of goods and cargo within India and outside India by road, rail, air or ship. This business involves activities of packaging, warehousing, loading/unloading, transportation, customs clearance and other cargo handling functions at both ends besides moving the goods by air or sea where goods are crossing the international borders. A return of income for the year under consideration was filed by it on 30th Oct., 2001 declaring a total income of Rs. 10,22,24,010. Along with the said return, annual accounts were also filed by the assessee company and the notes to accounts forming part thereof contained the following note as Note 10: The company has provided for communication (VSAT uplink charges) and other expenses (global account managers salary aggregating to Rs. 1,14,68,763 (amount provided during the year ended 31st March, 2001 Rs. 62,21,646) as payable to the holding company which are subject to approval of RBI. 4. During the assessment proceedings, the assessee company was required by the AO to explain the exact nature of amount provided as mentioned in the aforesaid note. In reply, it was submitted on behalf of the assessee company that global account managers are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same represented reimbursement of expenses incurred by global account managers for taking care of global customers of Expeditors Group who had operations in many countries. He held that the said amount thus was not in the nature of payment of salary and the same being in the nature of reimbursement of expenses by the assessee company, it was not chargeable to tax in India. He held that no tax at source thus was deductible from the said amount also and the question of disallowance of the same under Section 40(a)(iii) did not arise. Accordingly, he deleted the entire disallowance of Rs. 62,21,646 made by the AO on this issue. 6. At the time of hearing before us, the learned Departmental Representative strongly supported the order of the AO on this issue making the disallowance under Sections 40(a)(i) and 40(a)(iii). He submitted that the nature of amounts in question as rightly held by the AO was such that tax at source was deductible therefrom and the assessee having failed to deduct such tax, the disallowance was rightly made by the AO by invoking the provisions of Sections 40 and 40(a)(iii) which were clearly applicable. He contended that the learned CIT(A), however, has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprises including the assessee company on the basis of revenue generation. He submitted that the expenses so apportioned are reimbursed by all the associate concerns to the parent company periodically. He contended that the employees belonging to global management staff placed at headquarters thus are not the employees of the assessee company but they are the employees of the parent company and there being no relation of employer employee between the assessee company and the said employees, the reimbursement of expenses incurred on them could not be treated as salary so as to attract the provisions of Section 40(a)(iii). 9. We have considered the rival submissions and also perused the relevant material on record. It is observed that the "amount payable by the assessee company to its parent company on account of VSAT uplinking charges was held to be in the nature of fees for technical services by the AO without giving any reason whatsoever in his order. It was explained on behalf of the assessee company before him that the said charges being only for internet linking were in noway in the nature of consultancy or technical fees. The nature of the said payment as explained by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial pronouncements cited by the learned Counsel for the assessee and having regard to all the facts of the case, we are of the view that the VSAT uplinking charges paid by the assessee company to its parent company were not in the nature of fees for technical services and the same being not liable for deduction of tax at source, the disallowance made by the AO by invoking the provisions of Section 40(a)(1) was not sustainable. Similarly, we are of the view that the amount paid by the assessee company to its parent company on account of reimbursement of expenditure incurred in respect of global accounts manager cannot be treated as payment of salary so as to attract the deduction of tax at source. Undisputedly, the global management staff employed at headquarters were the employees of the parent company viz. Expeditors, USA and there being no employer employee relationship between the said employees and the assessee company, the reimbursement of expenses incurred in relation to them on proportionate basis by the assessee company to the parent company could not be treated as in the nature of salary paid by the assessee company. It was a case of reimbursement of common expenses incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign currency in relation to Indian currency thus was a fait accompli and such increase in liability as per the exchange rate prevailing on the last date of the financial year was allowable as deduction being not notional or contingent. Respectfully following the said judgment of Hon'ble jurisdictional High Court, we uphold the impugned order of the learned CIT(A) on this issue and dismiss ground No. 2 of the Revenue's appeal. 13. In ground No. 3, the Revenue has challenged the action of the learned CIT(A) in deleting the disallowance made by the AO on account of depreciation on computer to the extent it was attributable to the increase in WDV as a result of foreign exchange fluctuation. 14. The liability payable in foreign exchange towards acquisition of computer was reinstated by the assessee company in its books of account at the exchange rate prevailing on the balance sheet date and the corresponding loss was added to the WDV for the purpose of claiming depreciation. According to the AO, the impact of foreign exchange fluctuation could be considered only at the time of actual repayment and not at the intermediary stage. He held that the depreciation claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64/Del/2006 wherein it was held that the peripherals such as printers, scanners, NT server, etc. form integral part of the computer and the same, therefore, are eligible for depreciation at a higher rate as applicable to a computer. Respectfully following the said decision of the Tribunal in assessee's own case, we set aside the impugned order of the learned CIT(A) on this issue and direct the AO to allow the depreciation on the computer peripheral items at a higher rate of 60 per cent as claimed by the assessee company. Ground No. 1 of the assessee's appeal is accordingly allowed. 18. Ground No. 2 of the assessee's appeal relates to the disallowance made by the AO and confirmed by the learned CIT(A) on account of expenditure incurred by the assessee company on leasehold improvements and temporary erections treating the same as of capital nature. 19. In its return of income, depreciation @ 100 per cent was claimed by the assessee on temporary erections amounting to Rs. 8,64,918 stating that it was a case of temporary wooden structures erected in warehouses which were taken on lease as per the requirement of the customers for warehousing. On examination of the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erior works by Vriksha Consolids amounting to Rs. 10,63,857 for civil work, wood work, flooring, electricals, additional works, etc. Keeping in view the description of the work given therein, he held that the said expenditure incurred in relation to Chennai office was of capital nature. Relying on Expln. 1 to Section 32(1), he held that the said expenditure incurred on the leasehold premises was not allowable being of capital in nature and only depreciation thereon could be allowed. He also found on verification of other bills that the expenditure in question incurred by the assessee company was inclusive of purchase of Exide batteries, providing of workstations, filing units, painting, aluminium partitions etc. According to the learned CIT(A), the said expenditure did not come under the block of assets "building" and therefore, depreciation @ 100 per cent was not allowable thereon as claimed by the assessee. He further found that there was one bill of M/s Spring Field dt. 20th Sept., 2000 amounting to Rs. 2,93,750 for providing of flooring, workstations, fax table, filing units etc. at Bombay office of the assessee company. According to the learned CIT(A), the said' expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee company being in the nature of repairs, the same have to be allowed irrespective of whether the same are of capital nature. In support of this contention, he relied on the decisions of Hon'ble Delhi High Court in the case of Installment Supply (P) Ltd. v. CIT and in the case of CIT v. Escorts Finance Ltd. (2006) 205 CTR (Del) 574 . He also contended that the treatment given by the assessee company in its books of account to the expenditure incurred on repairs is not decisive to decide the nature thereof, whether capital or revenue. 23. The learned Departmental Representative, on the other hand. strongly relied on the Impugned order of the learned CIT(A) in support of the Revenue's case on this issue. He submitted that the nature of expenses incurred by the assessee company on repairs is required to be ascertained on examination of the expenses actually incurred and after having done such examination, the learned CIT(A) has found that the expenses claimed by the assessee on repairs were mainly of capital in nature. He submitted that in its books of account, the assessee company itself has capitalized the said expenses which again supports the case of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any on temporary erections in the premises taken on lease for godown purposes as the perusal of the details of the said expenses clearly shows that some of them were of capital nature whereas some of them were of revenue nature being incurred on repairs. As this exercise has not been done either by the AO or by the learned CIT(A) appropriately in the desired manner, we find it Just and proper to restore this matter to the file of the AO for deciding the issue afresh after doing such exercise. 25. As regards the distinction sought to be made out by the learned Counsel for the assessee between "repairs" and "current repairs" relying on the decisions of Hon'ble Delhi High Court in the case of Installment Supply (P) Ltd. (supra) and Escorts Finance Ltd. (supra), we are of the view that what is relevant in the context of allowability of expenses incurred on repairs is the nature of the said expenditure, whether capital or revenue, and once it is found that the expenses are of capital nature, the same cannot be allowed as deduction irrespective of whether the same are incurred on repairs or current repairs. Similarly, if the relevant expenses are found to be of revenue nature, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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