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TMI Blog2019 (2) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. In view of the decision of Hon’ble Bombay High Court, we are of the view that the interest expenses disallowed by AO/ TPO/ DRP is without any basis and in view of presumption held by Hon’ble Bombay High court in HDFC Bank Ltd (supra), we delete the disallowance. In view of the decision of Special Bench of ITAT Delhi in the case of Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI], we direct the AO to consider those investments only for computing the disallowance which related to exempt income during the year. We direct the AO accordingly. This issue of assessee’s appeal is set aside and allowed for statistical purposes. Disallowance in respect of difference in tour sales as per Annual Information Report (AIR) Reconciliation submitted by assessee - Held that:- The assessee before us could not filed any reconciliation qua the difference of ₹ 25,86,068/- except making verbal submissions. At last, the assessee contended that the addition should be restricted to the profit margin of sales at the rate of 11.47% on un accounted sales of ₹ 25,86,068/-. We are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961(hereinafter the Act ). 2. The first issue in this appeal of assessee is against the orders of TPO/DRP/AO with regard to adjustment made in respect of international taxation of provisions of corporate guarantee loan taken by AE s. For this assessee has raised the following ground No.1: - Adjustment made with respect to the international transaction of provision of corporate guarantee for loans taken by AEs 2. erred in making a notional adjustment on account of provision of corporate guarantee by the Appellant to its AEs. without appreciating the fact that such transactions do not qualify as international transactions within the meaning of Section 92B of the Act; 3. erred in making a notional adjustment of guarantee commission of ₹ 7,14,67,809 by determining the Arm's Length Price ('ALP') on the corporate guarantee provided by the Appellant to its subsidiaries, over and above the voluntary adjustment in respect of guarantee commission made in the return of income, aggregating to ₹ 4,71,28,451. 4. erred in not appreciating the fact that the guarantee commission of ₹ 7,14,67,809 does not accrue or deemed to accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tralia) 32000000 2997741 @1.22% 73,14,488 43,16,747 3. Promethon Holdings UK Limited 396000000 4,08,55,401 @1.22% 99687178 58831777 4,71,28,452 11,85,96,260 7,14,67,809 4. At the outset, the learned Counsel for the assessee stated that the Tribunal has accepted in assessee s own case for AY 2009-10 and 2010-11 in ITA No 1354 and 7770/Mum/2014 order dated 04.11.2015, wherein the Tribunal following Hon ble Bombay High Court decision in the case of CIT vs Everest Kanto Cylinder Limited [2015] (378 ITR 57) (Bom), wherein the jurisdictional High Court directed the AO to restrict the adjustment at 0.5%. The Tribunal observed as under: - Considering the above stated facts, we direct the AO to restrict the adjustments to 0.5% as upheld by the Hon ble High Court in the case of Everest Kanto Cylinders (supra). Accordingly, the relevant ground nos. 6 to 9 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure attributable to earn exempt income under section 14A of the Act. The AO made disallowance of interest expenses under Rule 8D(2)(iii) at ₹ 2,55,87,778/- and under Rule 8D(2)(iii) being administrative expenses of ₹ 45,69,434/-. The DRP also confirmed the action of the Assessing Officer. Aggrieved, now assessee is in appeal before Tribunal 8. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee has earned dividend income of ₹ 5,35,51,111/- on the investment made in mutual fund, which were invested in earlier years. The assessee before us claimed that these investments were made out of earlier year funds i.e. IPO proceeds of the assessee and the said mutual fund were sold during the year. The assessee in its return of income has made suo moto disallowance for an amount of ₹ 43,96,340/- considering the overall investment amounting to ₹ 12,24,16,786/-. The AO was of the view that the disallowance under section 14A of the Act read with Rule 8D of the Rules be computed considering the growth oriented mutual funds in the average investment and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted before the lower authorities as under: - Particulars Balance on 31 March 2011 (₹ In Lacs) Total funds raised through IPO in FY 2009-10 50,985 Less: Utilized for business purpose 27,831.93 Balance IPO proceeds (Unutilized Funds) 23,153.07 Balance proceeds temporarily invested in FY 2010-11 (AY 2011-12) Mutual fund 16,810.93 Fixed Deposits 6,342.14 Total 23,153.07 When these facts were confronted to the learned CIT Departmental Representative, he could not controvert that the evidences and details of these were not filed. 10. In view of the above, we are of the view that the assessee has interest free funds available, which are sufficient to meet its investment and at the same time, the assessee has interest bearing funds, in the absence of nexus proved by the AO, it can safely be presumed that investment were made from interest free funds in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appreciating that the onus is on the AO to establish the specific defects in the tour sales recorded by the Appellant in its books of account 16. erred in not appreciating the fact that the total tour sales recorded in the books of account of the Appellant are more than that as per AIR statement and accordingly, there is not under- recording of tour sales by the Appellant; 17, erred in making an addition based on the AIR statement filed by the third parties without providing an opportunity of cross verification of unreconciled amount with the third parties to the Appellant; 18. erred in making the above disallowance without appreciating the decision of Hon ble ITAT in Appellants own case for AY 2009-10 and AY 2010-11; 19. without prejudice to the above, erred in making an addition of ₹ 25.86,068 being entire amount of unreconciled tour sales, without appreciating the fact that the addition, if any, should be restricted to the extent of profit embedded into the amount (i.e. 11.47% on the sales of ₹ 25,86,068, which is ₹ 2,96,622) and not the entire unreconciled amount of tour sales of ₹ 25,86,068/-. 14. Briefly stated facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by assessee as Revenue in the return of income. For this assessee has raised the following ground: - Disallowance of travel booking engine expenses considered as Capita! Work in Progress / ('CWIP) in the books of account and claimed as revenue in the return of income of the captioned AY 20. erred in disallowing the expenditure incurred on development of travel booking engine and SAP software of ₹ 1,20,24,914 incurred by the Appellant by holding that the said expenditure is capital in nature and not allowable under Section 37(1) of the Act: 21. erred in not appreciating the fact that out of the total expenditure of travel booking engine and SAP software incurred, the Appellant has only claimed expenses related to salaries paid to staff, which are items of revenue nature and the same are deductible as per provisions of Section 37(1) the Act; 22. erred in holding that expenditure incurred on travel booking engine as capital in nature basis the fact that the same has been considered as CWIP in the books of account without appreciating the legal position that accounting treatment in the books of account cannot be a decisive factor to determine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees who were working on various projects of the assessee, which inter alia including the development of the travel booking portal and SAP software as the said expenditure has not been specifically incurred only for the purpose of development of said portal, whether the same can be considered as normal Revenue expenditure and is eligible for deduction under section 37(1) of the Act. The learned Counsel for the assessee relied on the decision of Mumbai, ITAT in the case of Reliance Footprint Limited v. ACIT (2014) (41 Taxmann 553), wherein it is held as under: - 6.1 From the submissions made by the assessee before the AO it is also clear that opening of stores at various places was one composite business of the assessee and in that course the assessee had started operation of its stores at Bangalore and Hyderabad. It was the contention of the assessee that operations of these stores at various locations is one composite business and once business had been started then the expenditure can not be linked only to the stores which became operational during the year under consideration. Such submission of the assessee has not been controverted by the AO. All these details were submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been deducted. For example job description is described as sourcing product design and development; sourcing and procurement; category management; marketing communication, marketing consumer behaviors; distribution and logistic; sourcing and procuring; talent acquisition buyer etc. etc. In the note which has been filed along with the details it is clearly mentioned that the assessee has employed these persons for carrying out market research work such as to contact various manufacturers and suppliers of the footwear and other accessories; getting base price and delivery schedules as well as comparing the products of various manufacturers of unbranded products with the price and quality of branded products, preparing various reports for this purpose, planning, distribution and logistic, sourcing, designing products, inventory planning discussing consumer preferences for various product range etc. The submissions made by the assessee before Ld. CIT(A) matches with the job description of all the employees. Therefore, it cannot be said that assessee did not provide the necessary details. By furnishing these details, the assessee had placed on record prima facie material to substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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