9911796707
TMI Blog2014 (6) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT (A) erred in deleting the addition made by the AO in respect of disallowance of foreign travel expenses of Rs. 19, 39, 693/- 5. On the facts and the circumstances of the case, the Ld. CIT (A) erred in deleting the addition made by the AO in respect of disallowance of Rs. 1, 13, 51, 364/- being information technologies expenses. 6. The Appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. 7. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. Grounds of appeal filed by the assessee, read as under : "On the facts and in the circumstances of the case, the learned CIT(A) has legally erred in disallowing re-imbursement of office license fees amounting to Rs. 1, 484, 572 (Rs. 2, 663, 899 less amount on which tax has been deducted at source of Rs. 1, 179, 327/- under section 40(a)(i) to its group company Optimix Technologies Pvt. Ltd. The Appellant prays that the learned CIT(A) be directed to consider the payments in the nature of re-imbursement of expenses and delete the said disallowance. " The Appellant craves leave to add, alter, amend or withdraw all or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of asset management, filed its return of income on 30. 09. 2008, declaring loss of Rs. 35, 35, 12, 947/-. AO finalised the assessment order u/s. 143(3) of the Act, on 30. 11. 2010, determining the total income at Rs. (-)29. 89 Crores. First Ground of appeal pertains to deleting the addition in respect of disallowance of Rs. 10, 17, 315/-made by the AO, u/s. 14A of the Act. During the assessment proceedings AO found that the assessee had received dividend of Rs. 2, 225/- which was claimed as exempt. He did not accept the claim made by the assessee that it had not incurred any expenditure for earning the exempt income. He worked out the disallowance u/s. 14A, as per formula provided in Rule 8D as under: (i)Direct expenses Rs. Nil (ii)Indirect expenses Rs. Nil (iii)Administrative and Managerial Expenses being 0. 5% of average Investments at Rs. 20, 35, 83, 000/- Rs. 10, 17, 315 Rs. 10, 17, 315 In the above working of average investments the AO considered opening balance of investments at Rs. 7. 65 crores and closing balance at Rs. 33. 06 crores. He took average of Rs. 20. 35 crores for calculating disallowance and applying the rate of 0. 5% of the same, made an disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee itself in return/computation of income. Finally, he held that the assessee had correctly worked out and offered disallowance u/s. 14A in return of income, that same was strictly as per formula provided in Rule 8D. He deleted the disallowance made by AO. 2. 2. Before us, Departmental Representative (DR)supported the order of the AO. Authorised Representative (AR) argued that provisions of Sec. 14A of the Act r. w. Rule 8D were not appli - cable to the taxable income, that income arising out of various schemes was taxable as per the normal provisions of the Act, that AO had applied the rule 8D without considering the arguments of the assessee properly. 2. 3. We have heard the rival submissions and perused the material before us. We find that the AO had made disallowance u/s. 14A of the Act r. w. Rule 8D(2)(iii). But, he did not consider the fact that out of the investments made by the assessee most of the investments were of the category that would result in earning income where assessee will have to pay taxes. FAA has given a categorical finding of fact that income arising from the investments appearing at serial no. 6 to 13 was taxable or would be taxable. It is a well known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. We find that in the assessment year 2006-07, FAA had deleted the addition made by the AO on identical facts and the department had not agitated the matter before the Tribunal. Thus, the issue has attained finality as the AO had accepted the decision of the FAA. Till new and distinguishing facts are brought on record, order of the FAA has to be treated as final and conclusive. Upholding his order, we decide ground no. 2 against the AO. 4. Next ground deals with addition made by the AO in respect of Mutual Fund expenses of Rs. 3, 72, 75, 643/-. During the assessment proceedings AO found that the assessee had debited certain expenses for managing mutual fund schemes in its books of accounts, that assessee had debited expenses, that were in excess of 6% ceiling provided by the SEBI regulations, in the P & L account. AO was of the opinion that the expenses in excess of 6% ceiling were not appellant company's liability, that expenditure incurred by the assessee under that head was not wholly and exclusively for the business and hence not allowable. 4. 1. Against the order of the AO, assessee preferred an appeal before the FAA. It was argued before him that the assessee, vide let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 52 of the SEBI Regulations we find that the same reads as under: "(5) Any expense other than those specified in sub-regulations (2) and ('4) shall be borne by the asset management company (or trustee or sponsors)" Like the one above, there are other residual provisions in the said section 52 of the said Act that provides and enables the AMC like the present assessee to bear the expenditure in excess of the said 6% limitation. Considering the above enabling provision for debiting the expenses above 6% limitation provided under SEBI Rules, we are of the opinion that the relief granted by Ld. CIT(A) does not call for any interference; In addition and in substance, the decisions which were cited by Ld. Counsel, helps the assessee. In view of the above, Ground No. 1 raised by the revenue is dismissed. " Following the above order of the coordinate bench, we decide Ground no. 3 in favour of the assessee and against the AO. 5. Ground no. 4 is about disallowance of foreign travel expenses at Rs. 19, 39, 698/- on the ground that the same were not incurred in relation to business activities of the assessee, that the assessee was engaged in asset management business in India an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting evidence, who submitted details vide letter dtd. 16. 11. 2010. From the details filed by it, the AO found that expenses comprised of annual maintenance contracts, information service expenses, internet and data communication charges, internet charges, etc. Vide letter dtd. 16. 11. 2010 the assessee further informed to the AO that in todays time the technology changes rapidly and that no benefit of enduring nature could be acquired on purchase of computer software or right to use the same, that the software expenses incurred by it should be treated as revenue expenditure. Alternatively, it was pleaded that depreciation @ 60% on the expenditure should be allowed. AO held that the expenses included computer and software related expenses, computer maintenance and facility management, information service expenses and internet/data communication charges, that the exact nature of the expenses was not explained by the assessee, that the expenses was on purchase of computer equipments hence same was in the nature of capital expenditure. 6. 1. During appellate proceedings, the assessee explained that information technology expenses debited to P&L account were on account of following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel brought to our attention para 14 to 17 and read out the following lines: "Respectfully following the above decision of the Special Bench of the Tribunal we set aside the order passed by the revenue authorities on this account and send back the matter to file of the Assessing Officer who shall decide the issue afresh in the light of the directions of the Tribunal (supra), and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purposes. " 6. 1. From the above contents of the para 17 it is evident that the Tribunal set aside the issue for fresh decision in the light of the order in the case of Amway India Enterprise, 111 lTD 112 (Del)(SB). To the extent such expenditure is claimed in this year also, accordingly, the same are set aside with identical directions. a. Referring to the contents of para 6. 3 of the impugned order the Ld. Counsel mentioned that there are other expenditure such as IT infrastructure support expenses and the same needs to be allowed in favour of the assessee considering the decision of the AO in the assessment year 2008-09 in assessee's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the holding company, that the payment made to OTPL was in the nature of expenses covered by sec. 194C/ 194J of the Act, that the assessee should have deducted tax on sum paid to OTPL towards the license fee. Finally, a sum of Rs. 26, 63, 899/- was disallowed by AO u/s. 40(a)(ia) of the Act. 7. 1. During appellate proceedings, the assessee filed its written submissions reiterating the arguments that the amount paid to OTPL was reimbursement of expenses for occupying part of the premises on leave and license basis, that no tax was required to be deducted. After considering the submissions of the assessee, FAA held that in the appeal for the A. Y. 2007-08, he had upheld the AO'saction, that the assessee was required to deduct TDS on such reimbursement of office license fees paid to OTPL. Without prejudice to above finding, the AO was directed to verify the appellant's claim that it had deducted TDS on payment made to OTPL amounting to Rs. 11, 79, 327/-. If appellant's claim is found to be correct, disallowance of payment amounting to Rs. 11, 79, 327/- should be treated as deleted. In view of the above and subject to verification by AO, he partly allowed the appeal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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