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TMI Blog2015 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... share in the profit of the firm and the interest on capital account then the said interest cannot be treated as an expenditure to be attributable for earning the dividend income. Accordingly, in the facts and circumstances of the case, we delete the addition to the extent of disallowance u/s 14A on account of interest expenditure which is not on the borrowed fund but on the capital contributed by the partners - Decided partly in favour of assessee Disallowance on account of foreign commission payment u/s 40(a)(i) for want of TDS - Held that:- The income from the offshore supplies is not taxable in the hands of the assessee under the regular provisions of Income tax Act, 1961. In such a situation there is no need to examine the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure under Rule 8D(2)(ii) as well as on account of administrative expenses under Rule 8D(2)(iii). 3. The assessee challenged the action of Assessing Officer before CIT(A) and submitted that the assessee has not borrowed any fund and, therefore, the disallowance of interest expenditure u/s 14A is not warranted. The interest shown in the P L account is only the interest payable to the partners on the capital attributed by the partners and, therefore, the said expenditure cannot be contributed to the earning of dividend income. The CIT(A) has not accepted the contention of the assessee and confirmed the disallowance made by Assessing Officer. 4. Before us, the Ld,. Authorized Representative of the assessee has submitted that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed u/s 14A. 7. We have considered the rival submissions as well as relevant material on record. It is pertinent to note that the profit of the partnership firm is distributed among the partners in the ratio of their profit sharing. The interest payment to the partners on their capital balance is not revenue neutral as the same is taxable in the hands of the partners. In a case where no interest is provided on the capital account of partners, the corresponding profit/income of the partnership firm is assessed to tax and the share of the partner is exempt in their hands. Therefore when there is a direct relation between the share in the profit of the firm and the interest on capital account then the said interest cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 6.15 of the assessment order has also stated that the Board's Circular NO.786 dated 7.02.2000 has been withdrawn by the Board w.e.f. 22.10.2009. By withdrawing the circular the Board made it clear that the TDS provisions are applicable to commission payment to non residents. In this regard the learned AR has mentioned that the previous year in the case of the appellant is from 1.4.2008 to 31.03.2008 and during this period the circular was very much in existence. The circular has not been withdrawn retrospectively. Therefore, the case of the appellant is covered by the aforesaid circular of the Board. However, the AO has mentioned in the assessment order that under delegated legislative powers conferred by the Parliament, the CBDT is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of this Tribunal in the case of DDIT (International Taxation), Mumbai Vs. Siemens Aktiengesellschaft dated 7.12.2009 in ITA No. 6133/Mum/2002. WE find that the issue is covered by the various decision as relied upon by the Ld. Authorized Representative as under:- i) DDIT (International Taxation), Mumbai Vs. Siemens Aktiengesellschaft. ITA No. 6133/Mum/2002. ii) CIT Vs. Angelique International Ltd. (2013) 86 CCH 075 (Delhi HC) iii) Dy. CIT V. Rediff.com India Ltd. ITA No. 6133/Mum/2002 (Mumbai L Bench) 11. In case of DDIT (International Taxation), Mumbai Vs. Siemens Aktiengesellschaft (Supra), the Tribunal while considering an identical issue has held in para 5 to 7 as under:- 5. It is further noted that the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Full Bench judgment of the Hon'ble Kerala High Court in CIT Vs. B.M.Edwards. India Seafood [(1979) 119 ITR 334 (Ker.) (FB)}. In that case there was some Circular in operation from 1944 allowing the loss suffered by a spouse to be set off against the income of the other spouse. The circular was withdrawn on April 6, 1972, that is, after the expiry of the assessment year 1971-72 in dispute. Though the assessment was completed after the withdrawal of the Circular, the Tribunal took the view that since the Circular was in operation at the time of the commencement of the assessment year the same was binding upon the authorities deciding upon the same. Upholding the view of the Tribunal the Hon'ble High Court held that the Circular regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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