9911796707
TMI Blog2015 (6) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... e STPI was set up in a portion of the premises of the assessee in which the assessee was already carrying on its business and the assessee had not acquired any land and building during the previous year but had used its existing infrastructure. Thus, as per the AO, it was formed only by splitting up the existing business. Further as per the AO, assessee was engaged in the research and analysis and did not fall in the category of Information Technology services notified by the CBDT vide Notification No.SO 890 (E), dt.26.09.2000. Claim of deduction u/s.10A of the Act, was denied. Assessee moved in appeal before CIT (A) for all the above years. As per the assessee, AO had followed his own orders for A. Ys. 2003-04 to 2004-05 for denying the deduction claimed u/s.10A of the Act. Assessee pointed out to the CIT (A) that for these years when the matter was carried in appeal, the same authority had allowed the claim. It was also brought to the notice of the CIT (A) that further appeals of the Revenue for these years were unsuccessful on this issue and reliance was placed on the order dt.10.11.10 in ITA.Nos.616 to 618/Bang/2008, for A. Ys. 2002-03 to 2004-05. CIT (A) noted that the issue s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the assessee, since the claim of the assessee was on the same unit. Grounds 2 and 3 of the Revenue stand dismissed. 06. In its grounds 4 to 6 Revenue is aggrieved that CIT (A) allowed the claim of software expenses of Rs. 2,50,42,971/-, Rs. 2,61,17,817/- and Rs. 2,02,59,256/- for the impugned assessment years relying on the Hon'ble Delhi High decision in the case of CIT v, Asahi India Safety Glass Ltd [(2011) 346 ITR 329] and Hon'ble Bombay High Court decision in CIT v. Raychem RPG Ltd. [(2012) 346 ITR 138]. 07. Facts apropos are that assessee had claimed the above amounts as software licence fees for impugned assessment years. AO disallowed it on the ground that software was one of the items mentioned in Appendix-1 as item no.5 in Part - III of the Rules, as eligible for 60% depreciation. In its appeal before CIT (A) argument of the assessee was that the type of software expenditure claimed by it as revenue expenditure were in the nature of annual licence fees, maintenance and upgradation service charge, lease and rental charge of software and Anti virus software having short shelf-life. These were, as per the assessee revenue outgoes. CIT (A) was appreciative of these co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that CIT (A) was justified in relying on the decisions of Hon'ble Delhi and Bombay High Courts in the case of Asahi India Safety Glass Ltd (supra) and Raychem RPG Ltd. (supra) respectively. We do not find any reason to interfere with the order of CIT (A). Grounds 4 to 6 of the Revenue stand dismissed. 11. Vide its ground 7, Revenue is aggrieved that CIT (A) had deleted the disallowance made by the AO u/s.14A r.w.rule 8D(2)(ii). 12. Facts apropos are that assessee had made investments in tax-free securities which resulted in exempted income. Investments made by the assessee were in mutual fund units. AO invoked Section 14A of the Act, along with Rule 8D of the Rules on the interest charged by the assessee in its profit and loss account applying sub-rule (2)(ii) of Rule 8D. He also made a disallowance under clause (iii) of Rule 8D(2) for indirect expenditure at the rate of 0.5% of the average of investments. In its appeal before CIT (A), argument of the assessee was that the interest cost charged by it in its profit and loss account were entirely on account of term loan and overdraft. As per the assessee, term-loan was taken from UCO Bank Ltd, for acquisition of fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. We have perused the materials on record and heard the rival contentions. There is no dispute that the interest charged by the assessee to its P & L account which was the basis for the disallowance under Rule 8D(2)(ii) made by the AO, were entirely on account of term loan and overdraft. Assessee has also shown that the term loan was used in an earlier year when there were no investments in non-tax bearing instruments. In so far as OD raised by the assessee is concerned, nothing has been shown by the Revenue to show that any part of such overdraft amount was used for financing the investments. Once assessee state that no expenditure what so ever was incurred by it for earning tax-free income, AO has to demonstrate why the claim could not be accepted with cogent reasons. We are therefore of the opinion that the disallowance was rightly deleted by the CIT (A). Ground 7 of the Revenue stands dismissed. 16. Ground 8 of the Revenue is relevant only for A. Ys. 2009-10 and 2010- 11. Grievance raised by the Revenue in this ground is that adjustment of Rs. 40,19,030/- for leave encashment provision and Rs. 2,00,681/- for bonus provision not allowed by the AO while computing the book pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y same issue. 22. Facts relating to this issue has already been discussed by us against ground no.__ in Revenue's appeal for these years. 23. Ld. Counsel for assessee submitted that a specific claim was made by the assessee that no expenditure whatsoever was incurred for earning the tax-free income. As per the Ld. AR, the investments made were all in units of UTI and did not require any human interference during the relevant previous year. According to him, without specifically stating why assessee's claim for having incurred no expenditure was incorrect, a disallowance under Rule 8D(2)(iii) could not be made. Reliance was placed on the decision of the coordinate bench in the case of M/s. Subramanya Constructions & Development Co. Ltd, [ITA.404/Bang/2013 & CO.89/Bang/2013, dt.20.02.2015]. According to the ld.AR it was clearly held in the above order that if assessee's takes a stand on not incurring any expenditure, without any reasons being recorded the claim could not be brushed aside. 24. Per contra Ld. DR supported the order of the lower authorities. 25. We have perused the materials on record and heard the rival contentions. Revenue has not disputed the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogent reasons before invoking Section 14A. Doctrine of satisfaction no doubt, does not mean that an AO should presume what was in the mind of the assessee and express his approval or disapproval thereon. However, once assessee say that it had incurred no expense covered by section 14A of the Act for its investment portpolio, AO has to make a verification. Especially so, when incremental investments is negligible. In these circumstances, we are of the opinion that CIT(A) while he was justified in deleting the disallowances made under Rule 8D(2)(ii) and ought not have sustained the disallowance made under Rule 8D(2)(iii). Order of the learned CIT(A) is set aside to the extent. Disallowance under rule 8D(iii) is also deleted." We are therefore of the opinion that disallowance under Rule.8D(2)(iii) was not warranted. Such disallowance in all the years stand deleted. 26. Grounds 2 and 3 in A. Y. 2008-09 and grounds 3, 4 and 5 in A. Ys. 2009- 10 and 2010-11 are allowed. 27. Vide its grounds 5 and 6 for A. Y. 2008-09 and grounds 6 and 7 for A. Ys. 2009-10 and 2010-00 assessee assails disallowance of debit notes raised by its parent company for defraying the ESOP charges of empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esting period. However, he was of the opinion that the scheme of ESOP was between the employees of holding company and M/s. L & T Ltd. CIT (A) noted that the debit notes issued by the holding company did not have the names of the employees. There was no written agreement between the assessee and its holding company with regard to the contractual obligation assessee had in relation to those employees who were deputed by the holding company to the assessee. As per the CIT (A), though the liability under ESOP scheme would be deductible in the hands of the holding company in accordance with the decision of the Special Bench in the case of Biocon Ltd, v. DCIT [(2013) 144 ITD 21], this would not entitle a person who was not a direct employer to claim such benefit. He thus upheld the disallowance. 31. Now before us, Ld. AR submitted that the payments effected by the assessee to L & T Ltd, its holding company were based on debit notes placed at paper book pages 111 to 123. As per the Ld. AR assessee was obliged to reimburse the claims made by L & T since the employees debuted by L & T were working for the assessee. Assessee was supposed to reimburse the holding company on cost to cost bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. It is an undisputed fact that assessee was not able to produce before the lower authorities any contract it had entered with L & T Ltd, its holding company for reimbursement of employee cost. However, it is also not disputed that the employees were deputed to the assessee and they worked for the assessee. Reimbursement for this to M/s. L & T Ltd, claimed by the assessee were all allowed by the Revenue, but for the ESOP. No doubt necessity of incurring an expenditure cannot be questioned by the Revenue, for it is in the domain of a businessman. However, production of evidence to show that the expenditure was incurred for the purpose of business is the onus of the assessee. What the assessee had produced before the lower authorities is only certain debit notes with narrations which did not give any details. No doubt before the CIT (A), it had produced a letter dt 13.12.2012 from L & T Ltd, which stated as under : "To whomsoever It may Concern This is to confirm that Larsen & Toubro Limited has deputed its employees to L & T - Valdel Engineering Limited on cost- recovery basis. The amortized ESOP costs of such employees are being recovered on a quarterly basis. For the Financia ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
