9911796707
TMI Blog2013 (11) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... pal tax - Documentry evidence not produced to prove payments - Held that:- CIT(A) has given direction to the AO to verify the claim and allow the claim on the basis of actual payment in respect of taxes paid relating to assessee's New York and Tokyo Branch and hence, there is no grievance of the assessee - Therefore, decided in favour of Revenue. Disallowance u/s 14A - Expenses incurred in relation to exempt income - Disallowance of expenditure of 0.5% of average investments - Held that:- disallowance made by the AO by following 12% of the income as expenses is not justified and is not based on any rational basis. There is no dispute to the fact that for making the disallowance u/s.14A of the Act, the expenditure which is related to the income which does not form part of total income under the Act has to be identified. AO has to identify the expenditure which can reasonably said to have been incurred on tax exempt income before making any disallowance u/s.14A of the Act - Assessee in the assessment for the year 2003-04 has stated that the disallowance of 0.5% of tax free income would be reasonable - It is prudent to restore this issue to the file of AO with a direction to make r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authority. 5. On behalf of assessee, it was contended that provisions of section 40(a)(i) are not applicable as the amount of licence fee paid to Master Card is not payment of royalty as per section 9(1)(vi) and Article 12 of DTAA agreement. It was further submitted that the activities of Master card are carried out in India. Hence, there is no question of deducting tax. Ld CIT(A) vide para 14 confirmed the action of AO by following the ITAT order in assessee's own case in earlier years. Hence, this appeal by the assessee. 6. At the time of hearing, ld A.R. fairly conceded that above issue is covered against the assessee in assessee's own case for assessment years 1996-97 in I.T.A. No.2223/M/2000 and in A.Y. 1998-99 in I.T.A. No.4579/M/2003 by a common order dated 27.3.2008, which was also followed by the Tribunal in assessment year 1999-2000 in I.T.A. No.4580/M/2003 vide order dated 30.11.2010 against the assessee. We consider it useful to reproduce para 2.5 of the order of the Tribunal dt.27.3.2008, which is as under: "The assessee in this case has made certain payments to US company for allowing use of certain services, etc. in India. The contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed. 8. Considering above submissions of ld representatives of parties and the earlier orders of the Tribunal in assessee's own case for assessment years 1996-97, 1998-99 and 1999-2000 (supra) and also in the absence of any evidence on record that payee has paid the taxes on the amount paid by the assessee as fee to Master Card, we do not find any reason to interfere with the order of ld CIT(A). Hence, Ground No.1 of appeal is rejected. 9. Ground Nos.2 3 are as under: "2. On the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing the losses incurred of Rs.17,21,15,970 and the learned CIT (A) has erred in setting aside this issue to the AO with a direction to allow the claim after verification. The learned AO be directed to allow the deduction for losses written off of Rs.17,21,15,970 and reduce the total Income accordingly. 3. On the facts and in the circumstances of the case and in law, the learned AC has erred in disallowing expenses of Jakarta office of Rs.42,21,790 and the learned CIT (A) has erred in setting aside this issue to the AO with a direction to allow after verification of details filed .The learned AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to verify the claim and allow the claim on the basis of actual payment in respect of taxes paid relating to assessee's New York and Tokyo Branch and hence, there is no grievance of the assessee. 16. We agree with ld D.R. that assessee should have no grievance against the order of ld CIT(A) as ld CIT(A) has directed the AO to allow claim of the assessee on the basis of actual payment in respect of taxes paid relating to assessee's New York and Tokyo Branch after verification. Hence, Ground No.4 of appeal is rejected. 16. Ground No.5 of appeal reads as under: "5. On the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing expenses of Rs.13,18,63,913 u/s 14A being expenses incurred in relation to exempt income and learned CIT(A) has erred in disallowing expenditure of 0.5% of average investments . The learned AO be directed not to disallow any expenses u/s 14A of the Act. Without prejudice to the above and on the facts and in circumstances of the case and in law, it is submitted that disallowance of expenditure of 0.5% of average investments is substantially on higher side and same be reduced substantially." 17. Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend exempt income and interest on tax free bonds. Ld CIT(A) has stated that the disallowance worked out by the assessee of Rs.17,24,525 relating to earning of exempt income is not a reasonable method. He has stated that assessee has not incurred any direct interest expenses and directed the AO to disallow 0.5% of average investment for expenses on account of earning of exempt income and, accordingly, recompute the disallowance to be made. Being aggrieved, assessee is in further appeal before the Tribunal. 20. During the course of hearing, ld A.R. referred ITAT order in assessee's own case for assessment year 1999-2000 I T.A. No. 4580/M/2003 dated 30.11.2010 (supra) and submitted that the Tribunal restored the matter on the above issue to the file of AO with a direction to reexamine the issue to decide the disallowance to be made. Ld A.R. further referred page 69 of PB and submitted that the disallowance @ 0.5% of the average investment comes to Rs.2.1221 crore. However, ld D.R. submitted that ld CIT(A) has only given the direction to the AO to make disallowance @ 0.5% of the average investment. He submitted that similar issue has recently been considered by the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. , wherein, the issue was whether 1% disallowance was justified on the total dividend income and the Tribunal directed the AO to restrict the disallowance of 1% of the exempt income as expenses relating to exempt income. Now the question arises as to whether the disallowance of Rs.17,24,525/- proposed by the assessee as per calculations made at page 16 of the ld CIT(A)'s order and also mentioned hereinabove, is reasonable or the disallowance @ 0.5% of average investment should be disallowed towards expenses on account of earning of exempt income. Since similar issue was considered by the Tribunal in assessee's appeal for assessment year 2003-04 (supra) and the Tribunal restored the matter to the file of AO with a direction that a reasonable disallowance u/s.14A may be arrived at, as per law and taking into consideration the directions given in various benches of the coordinate benches of the Tribunal, we consider it prudent to restore this issue to the file of AO with a direction to make reasonable disallowance u/s.14A as per law and taking into consideration the details as may be filed by the assessee and the decisions of the coordinate benches that may be relied upon before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in assessment year itself. However, ld D.R. submitted that there is no discussion on the above issue in the assessment order but ld CIT(A) has given the direction to the AO to allow the claim as per law on verification and there should be no grievance to the assessee on it. 24. We find substance in the submission of ld D.R. that ld CIT(A) has given direction to the AO to allow claim of the assessee per law after verification and, therefore, no interference is called for. Before we part with this ground, we observe that in the statement of facts and also at page 75 of PB, assessee has stated the total amount of Rs.96,18,000 but in the order of ld CIT(A) in para 33 and also in the ground of appeal taken, the amount mentioned is Rs.98,18,000. We direct that assessee will state the correct amount to the AO at the time when AO give effect to this order. Ground No.6 of appeal is rejected subject to above direction. 25. Assessee has also taken additional ground as under: "On the facts and in the circumstances of the case and in law, the appellant bank prays that while computing the total income, the provisions of Minimum Alternate Tax (MAT) u/s.115JA be not applied to the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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