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TMI Blog2018 (6) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... red an appeal before the CIT(A). 4. As regards adjustment of Rs. 7,00,457/- u/s 92CA(3), the CIT(A) upheld the action of the AO. As regards the disallowance of an amount of Rs. 1,77,15,937/- on account of lease premium, the CIT(A) deleted the disallowance following the decision of his predecessor in assessee's own case for AY 2010-11 as well as the decision of the ITAT in assessee's own case in AY 2010-11 wherein the coordinate bench dismissed the appeal of the revenue upholding the decision of CIT(A). 5. Aggrieved by the order of the CIT(A), the revenue is in appeal before us raising the following grounds of appeal: "1. The Ld. CIT (A) erred both on facts and in law in holding that the lease rent paid of Rs. 1,77,15,937/- is allowable as Revenue expenditure. 2. The Ld. CIT (A) erred in law in ignoring the decision of the Hon'ble Supreme Court in the case of M/ s. Panbari Tea Ltd. 057 ITR 0422 (1965) wherein the Hon'ble Supreme Court held that the lease rent paid is Capital Expenditure. 3. The Ld. CIT (A) erred in law in ignoring the decision of Hon'ble Supreme Court in the case of Durga Das Khanna 072 ITR 0796 (1969) wherein the Hon'ble Apex Court had spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be capital expenditure. In the above case, the assessee has received premium to the extent of Rs. 2,75,000/-. The same was payable at the time of execution of the deed Rs. 45,000/- and balance of Rs. 1,80,000/- was payable in 16 half yearly instalments. The question was whether such instalments towards premium was a revenue or capital receipts. It was held, on those facts, that it was capital receipts. The Hon'ble Court observed that the real test of a salami or premium is whether the amount paid, in lumpsum or in instalments, is the consideration paid by the tenant for being let into possession. When the interest of the lessor is parted with for price, the price paid is premium. From the above, it is clear that the receipt of premium whether in lumpsum or instalments is immaterial, it is the intention of the party and the price paid for parting of the possession. In the given case, the assessee has paid the one time premium. Hence, this case is materially distinguishable from the present case, hence, cannot be applied. 6.2 Further, revenue has raised in Ground No. 3 that ld. CIT(A) has ignored another decision of Apex Court in the case of Durga Das Khanna (supra) in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent of Rs. 367.83. Ld. AO assessed the same as capital gain. The same was upheld by the Hon'ble High Court that on the facts and circumstances, construing the sub-lease agreement and holding the deposit of Rs. 4,30,000/- received by the assessee was a consideration for granting sub-lease of the assessee's rights and not a payment of monthly rent in advance and as such was liable to tax as short term capital gains. In the present case, assessee had made the payment as premium and not received to consider the G. Seetha Kamraj's case as they are not similar. Hence, we cannot consider G. Seetha Kamraj's case in the present case as the same is not similar. However, the AR had relied on the various decisions which are presented before the CIT(A). These cases are similar to the present case in particular, the case of DCIT Vs. Sun Pharmaceuticals India Ltd. (329 ITR 479 (Guj.) are similar to the assessee's case. It was held by the Hon'ble Gujarat High Court, dismissing the revenue appeal, that the tribunal had found that the land in question was not acquired by the assessee. Merely, because the deed was registered, the transaction in question would not assume a different character. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider each of the above grounds of cross-objection without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of cross-objection." 9. Briefly the facts are that it was mentioned in the TP document that during the year Dr. Srini Srinivasan, employee of USP LLC was transferred to the rolls of USP India in June 2010 as a Whole Time Director. Dr. Srini had oversight responsibility for scientific business and infrastructure operations of certain USP affiliates (USP China and USP Brazil) while he was employed in USP LLC., Dr. Srini continued oversight responsibility of these affiliates from USP India. His responsibilities include overseeing the construction process, involvement in staff recruitment, capital procurement, oversight of budgeting, establishing and maintaining relations with key stakeholders etc. USP India recharged the apportioned salary and other direct expenses of Dr. Srini incurred by USP India to respective USP affiliates on a cost to cost basis. 9.1 When the AO/TPO asked the assessee as to why a mark-up of 10% be not charged on the services rendered in the nature of reimbursement, the assessee replied that Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough books of account. I agree with the TPO that no independent party would render such services without any mark up. The recovery of expenses always forms part of the case of independent comparable companies. In the present case, the payments are direct and not in the nature of third party payments. Thus, these expenses incurred by the taxpayer and subsequently reimbursed by AEs are to be added to the operating revenue as well as the operating costs for the purpose of aggregation of transactions and determining arm's length price under TNMM. The taxpayer has made payments towards the operations and on the employees as also are operational in nature and therefore cannot be excluded. The margin of the taxpayer is quantified at 12.98%. Thus. mark-up of 10% made by the TPO/AO is reasonable. Thus, there is shortfall of Rs. 7,00,457 as the arm's length price of reimbursements received is Rs. 77,05,025/- as determined by the TPO. Thus I hold that of addition of Rs. 7,00,457/- is justified." 12. Considered the rival submissions and perused the material on record. Similar issue came up for consideration before the coordinate bench of this Tribunal in assessee's own case for 2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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