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TMI Blog2016 (10) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax on the payment made. The assessee company has also been earning income and incurring expense which would establish that the expenses have been laid out and expended in the course of carrying on of the business. - Decided in favour of assessee Disallowance u/s 14A r.w.r. 8D - Held that:- It is a fact that assessee has not earned any exempt income during the year. These investments have been exclusively in the shares of foreign companies as evidenced by Schedule 5 of the audited Balance Sheet produced. Thus e investments are made in foreign companies, we hold that section 14A r.w.r. 8D has no applicability to the facts of this case. See Kariali Steels and Alloys (P) Ltd. vs. JCIT [2016 (2) TMI 79 - ITAT COCHIN] - Decided in favour of assessee - I.TA No. 91/Coch/2015 - - - Dated:- 26-9-2016 - S/SHRI B. P. JAIN, AM GEORGE GEORGE K., JM Assessee By Shri R. Sreenivasan, FCA Revenue By Shri A. Dhanaraj, Sr. DR ORDER PER B.P. JAIN, AM: This appeal of the assessee arises from the order of the Ld. CIT(A)-II, Kochi dated 15/11/2014 for the AY 2011-12. 2. The assessee has raised the following grounds of appeal:- 1. The officers below are not j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as asked to furnish copy of written agreement. The assessee explained that there was no written agreement for these services. So the assessee was asked to furnish copy of bill raised by Muthoot Global (photocopy enclosed at page 22 of paper book 1) According to the Assessing Officer, it is apparent that for a bill of 78000 pounds (i.e., ₹ 57,51,603), there is merely single phase cryptic entry (Branding/Business Promotion Expenses). The bill does not carry any registration no. of the Muthoot Global. It is merely in the format of a letter in letterhead. Therefore, the authenticity of the expenditure is under question. 6. Further the assessee also furnished the basis of the billing as follows: Note on branding expenses paid by M/s. Muthoot Global Transfers Pvt. Ltd., U.K. The assessee is engaged in the business of purchase and sale of foreign currencies and also inward and outward money transfer business. During the FY the Company has earned an income of ₹ 3.71 crores from money transfer services itself. As a large number of Indians are living in United Kingdom, the Company has engaged M/s. Muthoot Global Transfers Pvt. Ltd., UK for the wide publicity for Muth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee mentioned that it had no employee/agent/independent monitoring agency to monitor the performance of Muthoot Global before paying the rebranding expenses. 10. The assessee was asked to furnish country wise remittance of income and currency exchange income figures for F.Y. 2009-10, FY. 2010-11 and FY 2011-12. The intention being if there is a definitive positive revenue impact attributable to these brand promotion expenses, the authenticity of the expenditure may be considered. But the assessee expressed inability stating that its remittance business in India is primarily as an agent for major remitters like Western Union etc. and no such data is available in its custody. The assessee had identified that UK is a prospective market for its inward remittance business and apparently spent 78000 pounds for brand promotion expenses. It is but natural for any business to attempt at correlating its revenue from a region vis-avis the money spent on business promotion activities. The assessee appears to have not undertaken such an exercise. Besides it has not been able to furnish the necessary information despite repeated requests and granting sufficient time period. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A by name Royal Exchange Inc (USA) the total investment in shares at ₹ 6,81,00,672/-. According to him, M/s. Muthoot Global money transfer located at UK is the assessee company s service provider through Exchange Branch for both inward and outward remittance, foreign exchange services, payment of educational expenses/fee from India to UK. The targeted customers are NRIs residing in the United Kingdom Immigrant Indian workers in the UK Foreigners and Indians travelling to India and UK. 14. He further submitted that the entire service of M/s. Muthoot Global Transfers is centred in UK and it is only for these services, actual expenses are reimbursed. The assessment of company is in UK and they have no Permanent establishment in India. According to the representation, the amount paid to the overseas company is not taxable under the laws of Indian Income Tax, so much so there is no liability to deduct tax on that principle. He further submitted that the Ld. CIT(A) misconstructed that there are shareholders of the overseas company in India. 15. He also drew our attention to para 23 to 30 of paper book No. 1 filed which contains the application of declara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g transaction. Accordingly, she concluded that the provisions of Sec. 14A are attracted. 19. On behalf of the assessee, reliance was placed on the judgment of Hon ble High Court of Punjab and Haryana in CIT vs. Lakhani Marketing Company to the effect that disallowance u/s. 14A cannot be made if there is no exempted income earned during the year. Reference was also made to the decision of same Court in CIT vs. Winsome Textiles Ltd. reported in 319 ITR 204 (copy filed P5 to P14 of paper book No. 1). Reliance was also made on the decision of Hon ble ITAT Cochin Bench dated 20.11. 2015 in the case of Kairali Steels and Alloys vs. JCIT(OSD) Cir.1(2) Kochi in I.T.A. No. 254/Coch/2015 copy of the decision was also filed. Specific reference was made to P20 wherein conclusion of Hon ble Bench is given. 20. We have heard the rival submissions and perused the records. The first issue is with regard to allowabiltiy of Branding Expense incurred outside India. The learned representative finally concluded to draw our attention to an article issued by the IT department on tax treatment of dividend from foreign company which has been annexed on P1 and P2 of paper book No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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