9911796707
TMI Blog2014 (2) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... fined in the Act shows that it does not include any information provided in the course of advisory services - payments made to M/s. Fund Quest are not in the nature of 'Royalty' and the services were rendered abroad, no part of income had accrued or arisen in India - The assessee is not liable to deduct tax at source on the payments so made – order of the CIT(A) set aside – Decided in favour of Assessee. Repairs of lease-hold premises – Held that:- The decision in Sundaram BNP Paribas Asset Management Co. Ltd. [2011 (1) TMI 1242 - ITAT CHENNAI] - A perusal of the break up of the expenses which have been disallowed clearly shows that the expenditures are on the interior decorations and creation of the office atmosphere - The expenditure has not resulted in any building coming into existence nor has the existing building been modified or the structure altered - As the existing building has not been altered and there is no change to its structure as a result of the expenditure incurred by the assessee, it cannot be said that the expenditure incurred by the assessee is in the capital field - the expenditure incurred is in the revenue field - the expenditure on the repairs and maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sumeet Khurana. For the Respondent : T.N. Betgiri. ORDER:- PER : Vikas Awasthy The appeal has been filed by the assessee against the order of the Commissioner of Income-tax(Appeals)-XII, Chennai dated 03-07-2012 relevant to the Assessment Year (AY) 2008-09. 2. The assessee is engaged in the business of asset management. For the AY. 2008-09, the assessee filed its return of income on 26-09-2008 declaring its total income as Rs. 20,86,48,690/- under normal provisions and Rs. 26,12,06,395/- u/s. 115JB (MAT provisions) of the Income-tax Act, 1961 (herein after referred to as 'the Act'). The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued to the assessee on 12-08-2009. The Assessing Officer vide assessment order dated 24-11-2010 made additions/dis-allowances in the income returned by the assessee on following counts: i. Dis-allowance u/s. 14(a)(i) r.w. rule 8D Rs. 6,28,950/-. ii. Dis-allowance u/s. 40(a)(i) Rs. 33,48,666/- on account of non-deduction of tax at source u/s. 195 on the payments made to M/s. Fund Quest a non-resident firm. iii. Dis-allowance u/s. 40(a)(ib) Rs. 85,929/- in respect of Securities Transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds renovation of existing lease building as a capital expenditure ignoring the fact that the expenditure has neither resulted in any structural change to the building nor in the creation of new capital asset. 4.1 The learned CIT(A) has erred in not following the principles laid down in the decision of the Hon'ble Chennai ITAT in the Appellant's own case for the Assessment Year ('AY') - 2006-07. 5. The learned CIT (A) erred in confirming the order of AO in not treating UPS as part of computers and adding back Rs. 18,68,338/- on account of excess depreciation claim. 5.1 The learned CIT (A) erred in rejecting the alternative claim of Appellant in treating the UPS as energy saving device and claiming depreciation at the rate of 80 per cent on the same. 6. The learned CIT (A) has erred in confirming the order of AO, in adding back an amount of Rs. 15,82,291/- as income of the Appellant based on Form 16A ignoring financial statements filed. 7. The learned CIT (A), has erred in upholding the order of the AO, in disallowing the commission and brokerage payments made amounting to Rs. 16,41,14,706/- to various distributors of Mutual Fund schemes by invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge and understanding of Mutual Funds by virtue of its business operations. The assessee had not taken any funds bearing interest, therefore, the assessee has not incurred any interest cost. The ld. Counsel for the assessee further submitted that provisions of Rule 8D will not apply to short term investments, as the capital gain arising there from is taxable. The ld. Counsel contended that the authorities below have not given any specific finding while rejecting the contentions of the assessee. The AR in support of his contentions on the issue, relied on the following decisions: 1. Maxopp Investment Ltd., Vs. CIT reported as 347 ITR272 (Del) 2. CIT Vs. Hero Cycles Ltd.,reported as 323 ITR 518 (P H) 3. Avshesh Mercantile (P.) Ltd. v. Dy. CIT [2012] 54 SOT 19 (URO). 5. The ld. Counsel on ground No. 3 of the appeal submitted that an amount of Rs. 33,48,666/- was paid to M/s. Fund Quest for the services rendered abroad. M/s. Fund Quest does not have PE in India and the services rendered by them were advisory in nature. The Assessing Officer has erred in come into the conclusion that the payment is in the nature of 'Royalty'. The assessee had not obtained an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of audit. Therefore, the difference of Rs. 15,82,291/- is the amount reversed by the assessee after audit of the accounts. This difference in the TDS has occurred on account of the amount reversed by the assessee, therefore, the excess TDS deducted by the trust has to be adjusted. The Assessing Officer has erred in coming to the conclusion that the assessee has understated the income received from the Trust. In support of his contentions, the ld. Counsel relied on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Sudhir Sekhri in ITA Nos. 438/2010 and 460/2010 decided on 15-04-2010. 9. The seventh ground of appeal relates to the TDS on the brokerage paid to the distributors of the mutual fund schemes. The ld. Counsel submitted that the commission/brokerage paid to brokers for sale of various Mutual Funds are covered under the provisions of Section 194H. Such commissions paid to the brokers has been specifically excluded from tax deduction. The Assessing Officer has erred in applying the provisions of Section 194J relating to managerial and professional services. To support his contentions, the ld. Counsel relied on the judgment of the Hon'ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments to be carried outside India. M/s. Fund Quest has been providing advisory services. For the services rendered, the assessee paid fee in accordance with mutual agreement. In the course of providing advisory services, M/s. Fund Quest is providing certain data of the companies which facilitates the assessee to make investment decisions. The information provided to the assessee by Fund Quest in the form of database is published information which is available in public domain. M/s. Fund Quest has merely compiled the information and transmitted the same to assessee. The authorities below termed the payments made by the assessee to M/s. Fund Quest for the services and data provided as 'Royalty'. We are of the considered opinion that such payments cannot be termed as 'Royalty' as defined under the provisions of the Act. The term 'Royalty' has been defined in Explanation (2) to Section 9, Sub-section (1), Clause (vi) which is re-produced here in below: Explanation 2. For the purposes of this clause, "Royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be capital expenditure. The assessee has taken office building on lease for the period of three years with an option to extend with the consent of both parties. An Explanation 1 to Section 32(1) clearly spells out that where the business or provision of the assessee is carried on in a building not owned by him, in respect of which the assessee holds a lease or other rights of occupancy, any capital expenditure is incurred by the assessee for the purpose of the business or profession on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension or improvement to the building, then the provisions of this clause shall apply as if the said structure or work is building owned by the assessee. However, the aforesaid provisions are applicable where new asset has come into existence. The assessee in support of his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of Sundaram BNP Paribas Asset Management Co. Ltd. (supra), the Tribunal in the aforesaid order has held as under: 5. We have considered the rival submissions. A perusal of the break up of the expenses which have been disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) and Macawber Engg. Systems (India) (P.) Ltd. (supra) wherein it has been held that UPS is an integral part of the computer. This view has been consistently followed by the Tribunal in various other appeals. Accordingly, this ground of appeal of the assessee is allowed and the assessee is entitled to claim depreciation @ 60% on UPS. vi. The sixth ground of appeal of the assessee relates to Investment Management Fee. The case of the assessee is that the difference between the TDS and actual tax has occurred as the excess amount was invoiced to M/s. Sundaram Mutual Fund Trust (herein after referred to as 'the Trust') for whom the assessee is managing the funds. After audit of the accounts, the excess amount invoiced was reversed by the assessee. The trust made payments on daily accrual basis to the assessee after deduction of tax. Since excess amount was invoiced to the Trust, tax was deduced on the said excess amount at the time of payments, whereas the tax liability of the assessee is on the net amount after adjustment. The CIT (Appeals) has held that the assessee is following mercantile system of accounting. As and when it raises an invoice, the same was accepted by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions regarding deduction of tax at source on commission and brokerage are contained in Section 194H of the Act. The relevant extract of the section is reproduced herein below: 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent : The terms commission and brokerage and securities are defined in Explanation to Section 194H. the same are extracted herein under: Explanation - (i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above definition makes it abundantly clear that services rendered by Mutual Fund brokers do not fall within the term 'Professional Services'. The services of Mutual Fund brokers cannot be termed as technical services as well, as the brokers do not require any special qualification in the field of law, engineering, accountancy or technical consultancy. Even an ordinary graduate from humanities group can be a broker. The brokers do not provide any technical know-how either, thus services rendered by them cannot be termed as technical services. We do not concur with the findings of CIT (Appeals) on the issue for the aforesaid reasons. Accordingly, this ground of appeal of the assessee is allowed. viii. The next ground of appeal relates to re-computation of books profits u/s. 115JB. The ld. Counsel for the assessee has stated that since the net profit under normal computation is higher than book profits computed u/s. 115JB, therefore, this ground of appeal has become academic. The ld. DR has not controverted the statement made by the Counsel of the assessee. This ground of appeal is dismissed accordingly. ix. The last effective ground of appeal relates t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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