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TMI Blog2017 (8) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of freight and forwarding & clearing charges - allowable business expenditure - Japanese food stuffs imported for the expat employees - assessee submitted that to develop a congenial business relations and create new business opportunities so as to expend the client base of the bank, it had to serve customary foodstuffs to entertain such Japanese customers visiting various branches of the bank - Held that:- In view of the identical issue adjudicated by the Tribunal in the case of the assessee itself, respectfully following the same, we consider the expenditure in dispute as allowable business expenditure - Decided in the favour of the assessee. Transfer pricing adjustment on account of marketing and support services - ECBs issued by Head Office and foreign branches - violation of principle of natural Justice - Held that:- We have observed that the Ld. TPO has made adjustment without providing any opportunity of hearing or issuing any show cause to the assessee for proposing the adjustment. The action of the TPO is definitely in violation of the principles of the natural Justice. We are also equally aware of the fact that the Ld. CIT-(A) was not empowered to restore the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expatriate salary' not debited to P L account but claimed in the return of income and ₹ 10652699/- on account of ECB transaction. 4. The appellant craves to add, amend, modify, or alter any grounds of appeal at the time or before the hearing of the appeal. 2. The facts in brief of the case as culled out from the order of the lower authorities are that during the year under consideration Bank of Tokyo Mitsubishi Ltd. Japan (BOTM- group) operated in India through its branches at New Delhi, Mumbai, Kolkata and Chennai, which constituted the permanent establishment (PE) of BOTM group in India as per article 5 of India- Japan Double Taxation Avoidance Agreement (DTAA). This permanent establishment is the assessee in the case. The assessee i.e. BOTM-India, was engaged in wholesale banking operation, catering mainly to Japan-based corporate and individuals. The retail banking activities of the assessee were confined to deposits, remittance and other activities like credit card operations, consumer loans/finance leasing, portfolio management, forex broking etc. 2.1 The assessee filed its return of income on 20/10/2002 showing nil income after setting of the losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of bank issues the guarantee. According to the Assessing Officer, the income gets accrued to the assessee; the moment right to receive has arisen. Accordingly, he added the sum of ₹ 1,75,34,052/- to the income of the assessee. 3.2 The Ld. CIT-(A), following the order of the Hon ble Calcutta High Court in the case of the assessee for assessment year 1981-82, adjudicated the issue in the favour of the assessee. 3.3 Before us, the Ld. CIT(DR) supported the order of the Assessing Officer and submitted that guarantee commission accrued to the assessee, the moment it issued guarantee and thus the entire guarantee commission was liable to be assessed in the year under consideration. Without prejudice to above, he also submitted that from the facts of the case it was not clear whether the assessee declared any income for guarantee commission in respect of the guarantees granted in earlier years, but continued during the year under consideration. 3.4 On the other hand, the Ld. counsel of the assessee submitted that issue in dispute was covered by the decision of the Hon ble Calcutta High Court in the case of the assessee for assessment year 81-82. He further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Accordingly, this Court declines to frame any question on this issue. 4.7 On perusal of page 11 12 the statement of facts filed before the Ld. CIT-(A), it is evident that assessee has followed consistent method of accounting of crediting income over the period of life of the bank guarantee, following the decision of the Hon ble Calcutta High Court (supra) in its own case for assessment year 1981-82. The Ld. CIT-(A) has allowed relief to the assessee following the above decision of the Hon ble Calcutta High Court. In view of above, we do not find any error in the finding of the Ld. CIT-(A) on the issue in dispute, accordingly, we uphold the same and the ground No. 1 of the appeal is dismissed. 5. The ground No. 2 relates to disallowance of ₹ 2,76,749/- on account of freight and forwarding clearing charges in respect of Japanese food stuffs imported for the expat employees. The assessee submitted that to develop a congenial business relations and create new business opportunities so as to expend the client base of the bank, it had to serve customary foodstuffs to entertain such Japanese customers visiting various branches of the bank and for the expat offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the company. As prudent business organization, the assessee found it expedient to pay for the freight and clearing charges on import of food stuff for employees. The AO, however, did not find it incidental to the running of the business and disallowed the same. The CIT(A) also did not find any justification in the expenditure incurred by the assessee while confirming the disallowance. 19. After considering the rival submissions in this Regard, we find that the assessee-company, as a business organization, had to be careful about the health of its officers for the interest of the business and, therefore, we do not find anything wrong in the assesseecompany paying for the freight and clearing charges of the import of food exclusively for the officials of the company who, otherwise, could not have performed to the level it was desired of them. We consider this to be genuine business expenditure and in reversing the order of the authorities below, we allow this ground of the assessee. 5.4 In view of the identical issue adjudicated by the Tribunal in the case of the assessee itself, respectfully following the same, we consider the expenditure in dispute as allowable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of Customer Amount of ECB Loan Interest @0,5% per annum Exchange Rate as on 31-3-02 Amount at Arm's Length 1 Maruti Udyoq US$30 Million US$150000 48.80 7,320,000 2 Asahi India Glass JPY 163.7 Million JPY 818500 0.36807 301,265 3 Asahi India Glass JPY 328 Million JPY 1640000 0.36807 603,634 4 Air India Ltd US$7.5 Million US$37500 48.80 1,830,000 5 Chemtex Enqq Ltd US$2.45 Million US$12250 48.80 597,800 10,652,699 Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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