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TMI Blog2014 (6) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 52 provides and enables the AMC like the present assessee to bear the expenditure in excess of the said 6% limitation - the relief granted by CIT(A) does not call for any interference – Decided against Revenue. Disallowance of foreign travel expenses – Held that:- As decided in assessee’s own case for the previous assessment year, it has rightly been held by the CIT(A) that the disallowance made by the AO on account of foreign traveling expenses and expenses incidental to foreign travel are set aside where no specific adverse material is not in possession of the AO – Decided against Revenue. Disallowance of nontechnical expenses – Held that:- Following Amway India Enterprises Versus Union of India And Another [2003 (5) TMI 55 - KERALA High Court] - there is no specific discussion appearing in the orders of the lower authorities - the orders of the lower authorities cannot be described as speaking order on each of such grounds - the AO is directed to allow the claim of the assessee after due verification of the genuineness and business nexus and also in accordance with the provisions of section 37 of the Act – Decided partly in favour of Assessee. - ITA No. 2854/MUM/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the interest expenditure. 2.2 On these facts Ld. AR brought to our notice the judgment of Hon ble Bombay High Court in the case of Godrej Agrovet Ltd. Income Tax Appeal No.934 of 2011, which is relevant for the proposition that for the AYs prior to the insertion of the said Rule 8D, making disallowance @ 2% of the exempt income shall constitute a reasonable basis . On the other hand, Ld CIT-DR for the revenue relied on the order of the AO and the CIT(A). 2.3 On hearing both the parties we are of the opinion that making disallowance at 2% of the exempt income of Rs. 15,76,758/- will meet both ends of justice of the facts of the present case. In fact, Ld Counsel for the assessee has no objection for applying the said binding judgment of the jurisdictional high court. Accordingly Ground No.1 of the assessee s appeal is partly allowed as above. 3. Ground No 2 relates to disallowance of market support service expenses by invoking provisions of section 40(a)(ia) of the Act. AO made disallowance of Rs.41,58,078/- holding that this expenditure constitute Fee for Technical Services (FTS)/Royalty . CIT(A) confirmed the disallowance of Market Support Services amounting to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure could not be said to have been laid out or expended wholly and exclusively for the business of the assessee and allowable u/s 37(1) of the Income Tax Act, 1961. 2(i). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign travel expenses of Rs.1,05,900/- on the ground that the expenses were incurred for meetings held outside India by the assessee company for promoting its business. 2(ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that in the course of the assessment proceedings, the assessee was not able to prove the commercial expediency of the foreign travel expenses and the Assessing Officer should have been allowed an opportunity to examine the contention of the assessee that the details of the foreign travel expenses including the names of persons who travelled, place of travel and purpose of travel was given in the course of the assessment proceedings and the expenditure was incurred for promoting the business of the assessee. 3(i). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that AO disallowed a sum of Rs.1,05,900/- and also mentioned about the adjudication of similar issue by the Tribunal in the assessee s own case for A.Y 2003-04 in ITA No 1571/Mum/08. In this regard he brought to attention to the contents of the said order of the Tribunal copy of which is placed at page 29 to 30 of the paper book. In particular, the assessee;s counsel read out the contents of para 6.3, which is reproduced as under: 6.3 After considering the submissions and perusing the material on record, the CIT(A) observed in view of the factual and legal submissions made before me, as above the disallowance made by the AO of Rs.9,21,795/- on account of foreign traveling expenses and expenses incidental to foreign travel are deleted in the facts and circumstances of the instant case where no specific adverse material is not in possession of the AO. On hearing the parties and after perusing the facts of the present case, in view of the above finding, this ground 2 of the revenue is dismissed. 6. Ground No.3 of revenue s appeal relates to disallowance of nontechnical expenses (IT expenses) of Rs.1,53,92,923/-. In this regard Ld. Counsel mentioned that an identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, direct the AO to allow the claim of the assessee after due verification of the genuineness and business nexus and also in accordance with the provisions of section 37 of the Act. Accordingly, this ground is partly allowed for statistical purposes. c. In the result, the appeal of the revenue is partly allowed for statistical purpose. 6.2 Now we shall take up the cross appeals for the AY 2007-08. III. ITA No.2853/Mum/2011: A.Y.2007-08-Assessee s Appeal: 7. Grounds of appeal raised by the assessee read as under: Ground No. 1: Market Support Services - Rs. 43,26,130 On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) - 21 [hereinafter referred to as CIT(A) ] has erred in confirming the disallowance of Market Support Services amounting to Rs.43,26,130 under section 40(a)(ia) of the Incometax Act ( the Act ). Further, the learned CIT(A) has also erred in upholding the said disallowance on the ground that the Appellant has failed to explain that the said payment was made wholly and exclusively for the purpose of business. Ground No. 2: Re-imbursement of office license fees - Rs.43,1O,465 On the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eking admission of additional evidences (ie TDS Certificate). The assessee pressed for admission of these copies of TDS Certificates as additional evidence in support and prayed for deletion of the additions made by the AO on account of the office License Fee. 8.1 On hearing Ld. DR for the Revenue, we are of the opinion that the said evidences are required to be admitted in the interest of justice. In accordance with the principle of natural justice, we remand this issue to the file of AO for fresh adjudication after considering the additional evidences and other facts on record. Accordingly, Ground No.2 is allowed for statistical purposes. 9. Ground No.3 relates to disallowance of Non-Technical Expenses . These expenditure claim is identical to the ones claim by the assessee in the preceding AY, which is adjudicated above. The contents of the discussion given in para 6.1 above is mutatis mutandis applicable here. At the very outset Ld. Counsel mentioned that this issue is required to be remanded to the files of AO in accordance with rule of consistency for deciding the issue afresh after considering the judgment in the case of Amway Enterprises (supra). Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Technology expenses were in the nature of general/routine/recurring expenses and the assessee did not acquire any asset of enduring nature and, hence, the expenditure was allowable as business expenditure. Further, the CIT(A) erred in deleting the balance disallowance incurred towards upgradation of existing software, annual maintenance contract, internet revenue charges paid to M/s. Optimix Technologies Pvt. Ltd. treating it as revenue expenses ignoring the fact that expenses incurred on information technology is capital in nature. 5. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in restricting the disallowance to Rs.1,00,000/- as against Rs.6,19,8831- holding that the provisions of Rule 8D were not applicable in the year under consideration in view of Bombay High Court decision in the case of Godrej Boyce Mfg. Co. 14. Grounds No.1 4 are inter-connected ones. Ground No.1 is factually amounts to double disallowance for reasons discussed in the orders of the lower authorities. In principle, CIT-DR agrees with the same. Regardng ground 4, it is demonstrated that an ientical issue was raised and adjudicated by us in connection with Re ..... 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