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TMI Blog2013 (2) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, procurement of fixed assets, liaison with Government authorities for various approvals and other activities pertaining to various projects proposed to be undertaken in respect of its CNG business - Held that:- Following the decision in case of LIC Housing Finance Limited. (2006 (4) TMI 183 - ITAT BOMBAY-H) that all the expenditure specified in Sec. 35D (2) incurred before commencement of business is eligible for amortisation u/s. 35D (1)(i). Direct to A.O. to consider said expenditure u/s 35D – In favour of assessee - IT Appeal Nos. 588 & 589 (Hyd.) of 2012 - - - Dated:- 14-9-2012 - Chandra Poojari And Smt. Asha Vijayaraghavan, JJ. C.S Subramanyam for the Appellant. Smt. Amisha S. Gupta for the Respondent. ORDER Smt. Asha Vijayaraghavan, Judicial Member - Both these appeals preferred by the assessee are directed against the respective orders of the CIT(A)-II, Hyderabad, for the assessment year 2007-08 and 2008-09. Since identical issues are involved in both these appeals, they were heard together and therefore a common order is passed for the sake of convenience. ITA NO. 588/HYD/2012 FOR ASSESSMENT YEAR 2007-08 2. The substantial ground raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, brokerage etc., mentioned in section 40(a)(ia) remain payable and that the said provision has no application where the amounts of the nature specified in the said section have already been paid and consequently he ought not to have disallowed the amounts towards reimbursement to the extent they were already paid to HPCL and GAIL." 6. After considering the submissions of the assessee, the CIT(A) disallowed the claim of the assessee on the ground that in the case under consideration it is not a question of reimbursement of salaries but issue is contractual payment made by the appellant to GAIL and HPCL. CIT(A) held that provision of management support to the Assessee, by GAIL and HPCL, the JV partners is part of the MOU and hence supply of the manpower should be considered as payment for services rendered by GAIL and HPCL under the contract and accordingly provisions of Section 40(a)(ia) apply to such contractual payments. 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 8. We have heard the arguments of both the parties and perused the record. The assessee is a Joint Venture Company promoted by GAIL HPCL for distribution and marketing of CNG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee and payment for any services rendered by GAIL and HPCL. 12. In our opinion such payment cannot be considered as payment towards work executed by GAIL and HPCL in the course of work contract. In the Case of United Hotels Ltd. v ITO [2005] 2 SOT 267 (Delhi) under similar circumstances, the ITAT, Delhi has held that reimbursement of salary to the deputed personnel would not attract deduction of tax at source. We find that these decisions are squarely cover the issue on appeal. In the following cases it has been held that reimbursement of expenses are not subject to tax deduction at source. The following decisions also support the case of the assessee: (1) CIT v. Industrial Engineering Projects (P.) Ltd. [1993] 202 ITR 1014 (Delhi) (2) CIT v. Siemens Aktiongesellschaft [2009] 310 ITR 320 (3) CIT v. Dunlop Rubber Co. Ltd. [1982] 13. Respectfully following the decision of the co-ordinate bench, we delete the addition made by the AO under Section 40(a)(ia). 14. In this view of the matter the alternate ground raised by the assessee, for applying the ratio of the decisions of the Special Bench of ITAT, Vizag in the case of Merilyn Shipping Transports v. Addl. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to various projects proposed to be undertaken by the assessee in respect of its CNG business. Given that these projects were not operational during the earlier years, the expenditure was deferred and was charged to P L account/capitalized as and when the projects were commenced. However, during the Financial year 2007-08, since the projects being undertaken by the assessee were not commenced and the expenditure of Rs. 59,38,916/- was not allocable to particular project, the same was charged off to P L account. The assessee claimed the expenditure to be in the nature of revenue expenditure and hence the same is allowable under Sec.37 of the I.T Act. The assessee relied on the decision of the Delhi High Court in the case of CIT v. Diamond Products Ltd. [2009]. 21. The A.O did not accept the claim of the assessee. He was of the view that the expenditure does not pertain to A.Y 2008-09. Besides, he was also of the view that the expenditure was capital in nature. He was of the view that the nature of expenditure does not change on the basis of the project becoming operational or non-operational. He further stated that in the case of the assessee, the projects i.e., setting up of ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) also declined to direct that the expenditure should be allowed to be capitalised and form part of capitalised assets. 28. The assessee is in appeal before us and reiterated the submissions made before the revenue authorities. 29. The assessee contended that the CIT(A) ought to have allowed the claim which is supported by the decision in the case of Assam Asbestos Ltd. (supra) and Diamond Products Ltd.'s case (supra). 30. We have heard the rival submissions and perused the record as well as gone through the orders of the authorities below. We are of the opinion that all the expenditure specified in Sec.35D(2) incurred before commencement of business is eligible for amortisation under Sec.35D(1)(i). Relying on the decision of the Hon'ble ITAT in the case of LIC Housing Finance Ltd. v. Dy. CIT [2007] 105 ITD 86/11 SOT 653 (Mum.), we direct the Assessing Officer to consider said expenditure u/s.35D. 31. Further, the nature of expenditure being salaries of deputed employees, liability to deduct tax does not arise for the same reasons advanced by the assessee in connection with the disallowance of current salaries, which we have decided in para Nos. 12 to 14 of ITA No. 588 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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