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TMI Blog2016 (8) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... d report qua the said documents nor entertained the said documents on the basis of some request for additional evidence. However, it is admitted fact that the royalty payment made by the assessee company qua the AY 2008-09 and AY 2010-11 has already been allowed as revenue expenditure by the revenue authorities. In these circumstances, we find it expedient to restore the matter to the AO to decide afresh. AO to allow the royalty payment to the tune of 70,18,413/- after due verifications of the documents relied upon by the assessee. So, the ground no.2 is determined in favour of the revenue. Addition u/s 14A - Held that:- Assessee’s own case in its favour by restoring the matter back to the file of the AO for de novo consideration in the light of observations made therein, AO passed fresh order dated 31.01.2014 (copy available on the file) and accepted the contention of the assessee that expenditure of 1,32,520/- was made for earning of exempt income, the file is required to be restored back to AO to determine the issue afresh in the light of his earlier year order as well as in view of the mandate of section 14A(2) by considering the assessee’s claim by providing opportunity of bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the total income of the assessee. 3. Assessee also claimed a royalty of ₹ 70,18,413/- in the profit & loss account reflected under the head related party disclosures of books of account. AO noticed that royalty given for the previous year was ₹ 15,12,580/-. Assessee reported to have not furnished the details of documents to substantiate this royalty payment and also failed to explain if the payment is capital in nature or revenue in nature and as to whether TDS was made on such payment or not and consequently, the AO disallowed the amount of ₹ 70,18,413/- and added back the same to the total income of the assessee. 4. Assessee, during the year under consideration, also shown dividend income of ₹ 1,94,17,695/- in the profit & loss account. AO by invoking the provisions contained u/s 14A of the Act read with Rule 8D of the Income-tax Rules (for short 'the Rules') worked out the disallowance to the tune of ₹ 8,67,240/- and added the same back to the income of the assessee. 5. Assessee carried the matter before the ld. CIT (A) who has allowed the appeal. Feeling aggrieved, the revenue has come up before the Tribunal by way of filing the present appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultancy expenses, in favour of the assessee. 11. Ld. CIT (A) overturned the findings made by the AO by making following observations :- "Before me the appellant has submitted all the documents to show that payments were made to the following group companies for work done by them for the appellant. 1) M/s Siegwerk Benelux N.V. for providing technical services, 2) M/s Siegwerk (Asia Pacific) Pvt Ltd for providing technical services also which differed from the services provided by MIs Siegwerk Benelux N.V., 3) M/s Siegwerk Druckfarben provided management in support services. It is apparent from the above, that the appellant has incurred expenditure in the course of his business. The AO has nowhere disputed the fact that this amount was not spent or that the expenditure was not incurred. It is evident from the documents produced by the appellant that the expenditure was incurred and the same amount has also been shown as income by the three companies. Certificate from the auditors ENY show that the amounts have been invoiced by the three entities and shown as income. It is thus evident that the amounts in question are not loans or advances, but payment for services rendered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to M/s Siegwerk Benelux N.V., M/s Siegwerk (Asia Pacific) Pvt Ltd & M/s Siegwerk Druckfarben is payment for work done. It is not in the nature of loan or advance. It is not a case where the monies advanced would be returned back. In view therefore it is clear that the amount of ₹ 6,21,95,582/- is not an advance or loan and therefore Sec. 2(22)(e) cannot be invoked in the matter. The addition of ₹ 6,21,95,582/- is therefore deleted. The ground of appeal is ruled in favour of the appellant." 12. Bare perusal of the findings returned by the AO goes to prove that he has merely followed the assessment order of the earlier year AY 2008-09 and has not applied his mind whereas CIT (A) has examined the issue threadbare. It is proved on record inter alia that the payment made by the assessee to three group concerns is not a dividend nor the payment made by the company was by way of advance of loan rather the payment was made by the assessee to M/s. Siegwerk Benelux N.V., M/s. Siegwerk (Asia Pacific) Pvt. Ltd. & M/s. Siegwerk Druckfarben for work done. So, we find that no case is made out to interfere into the findings returned by the CIT (A), hence ground no.1 is det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed the disallowance to the tune of ₹ 8,67,240/-, disallowed the same and added back to the income of the assessee. However, on the other hand, the ld. CIT (A) ordered the deletion of ₹ 8,67,240/- by returning the following findings :- "Thus whenever the issue of 14A arises the AO should ascertain the correctness of the claim of the appellant in respect of expenditure incurred or not incurred in relation to income which does not form part of the total income under the Act. In case the AO is satisfied with the claim of the appellant, the AO should accept the claim of the appellant so far as the quantum of disallowance is concerned. In case the AO after giving the appellant an opportunity of being heard, is not satisfied with the correctness of the claim of the appellant, he should reject the claim after giving reasons. The AO is to then determine the amount of expenditure incurred in relation to income which does not form part of the total income. The language of sub section 14A(1) is abundantly clear that relation has to be seen between the exempt income and expenditure incurred in relation to it. The AO has nowhere shown why the claim of the appellant was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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