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TMI Blog2016 (4) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... the head software and project development expenses - payments are made by the assessee to the foreign parties - HELD THAT:- The liability of the assessee in deduction of tax at source cannot arises unless the AO holds that income in the hands of the payee is chargeable to tax in India, especially in view of judgment of GE India Technology Centre P. Ltd V/s. CIT and Another [ 2010 (9) TMI 7 - SUPREME COURT] Further, even if the liability of the payee is determined on the basis of retrospective amendments made by Finance Act, 2010 or Finance Act, 2012, even then, the obligation to deduct TDS cannot be created through retrospective legislation in view of detailed judgment of Hon ble Delhi High Court in the case of New Skies Satellite BV [ 2016 (2) TMI 415 - DELHI HIGH COURT] and CIT vs. Siemens Aktiongesellschaft [ 2008 (11) TMI 74 - BOMBAY HIGH COURT] and various other judgments directly on this issue. In those cases where the expenditure has been capitalized, the claim of depreciation if otherwise allowable under the law cannot be disallowed merely on the basis of application of section 40(a)(i) for failure to deduct tax at source. In support of his proposition, Ld. Counsel ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed. - ITA NOs.4661,4662,4663/Mum/2013, 5438,5439, 4223/Mum/2013, 42/Mum/2014 - - - Dated:- 13-4-2016 - Shri C.N. Prasad and Shri Ashwani Taneja, JJ. Assessee by Shri Jitendra Jain (AR) Revenue by Shri Jasbir Chauhan, (DR) ORDER Per Bench: These cross appeals have been filed against separate orders of Ld. Commissioner of Income Tax (Appeals), Mumbai13 {(in short CIT(A) }, for different years pertaining to same assessee. Since identical issues are involved, these were heard together and being disposed by this common order for the sake of convenience. 2. During the course of hearing, arguments were made by Shri Jitendra Jain, Authorised Representative (AR) on behalf of the Assessee and by Shri Jasbir Chauhan, Departmental Representative (DR) on behalf of the Revenue. First we take up Revenue s Appeal in ITA No. 4661/Mum/2013 for A.Y. 2007-08 3. The revenue has filed appeal against the order of Ld. Commissioner of Income Tax (Appeals), Mumbai-13 {(in short CIT(A) }, order dated 25.03.2013 passed against assessment order u/s. 143(3) of the Act, dated 30.12.2013 for the Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) wherein it was inter-alia submitted that Rule 8D was not applicable in the year under concern. It was further submitted that no expenditure was incurred on the exempt income. It was also submitted that the investment considered by the AO for the purpose of computing the amount of disallowance, also includes investment in the shares of its wholly owned subsidiary company of the assessee located in the USA and any income earned by the assessee from foreign investment would be chargeable to tax in India. After considering the submissions of the assessee Ld. CIT(A) reduced the disallowance to a sum of ₹ 5,00,000/- with following observations: 3.3. I have carefully considered the facts of the case. The appellant was having investment in shares of company. The AO has worked out the disallowance u/s 14A as per formula provided in Rule 8D of the IT Rules. However, as per Bombay High Court decision in the case of Godrej Boyce Mfg. Co. 234 CTR 1, the provisions of Rule 8D were applicable from A.Y. 2008-09 on words and not for A.Y. under consideration. Therefore, though the provision of 14A(1) were applicable during the year, but the disallowance was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has been also received. He relied upon the judgment of Hon ble Delhi High court in the case of Cheminvest Ltd. vs. CIT dt 2.9.2015 in ITA No749/2014 for the proposition that in absence of actual receipt of exempt income, there could not have been any disallowance u/s 14A. 4.4. We have gone through the order of the Ld. CIT(A), we find that Ld. CIT(A) has recorded the finding correctly as per law and facts. The facts brought before us were that no dividend income or any other exempt income has been received by the assessee during the year under concern. This factual position has not been disputed by the Ld. DR. Under these circumstances, position of law is now very clear that no disallowance u/s 14A can be made in absence of actual receipt of any exempt income. We derive support for our view from the judgment of Hon ble Delhi High Court in the case of Cheminvest Ltd. (supra) it is further noted by us that in any case Ld. CIT(A) had sustained disallowance of ₹ 5,00,000/- against which the assessee has not filed any appeal. Thus, the order of Ld. CIT(A) is in accordance with law and facts, and no interference is called for therein and therefore, same is upheld. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th September, 2011 reported in 141 TTJ 679 wherein the Tribunal sent the issue back to the file of the AO for determination of taxability of payments in the hands of the recipients, on merits. He therefore, requested that this year also the issue should be sent back to the file of the AO for de novo examination in the light of fresh decision to be taken by the lower authorities for A.Y. 2005-06. It is submitted that it is very essential to avoid any kind of any inconsistency in the orders of two years. 5.4. On the other hand, Ld. Counsel submitted that complete details and evidences were given to the lower authorities and detailed discussion have been made by them in their orders, and therefore, these issues can be decided here itself. He further submitted that now there is lot of legal development from various courts of the country wherein it has been held that obligation to deduct TDS tax at source cannot be created on the basis of retrospective legislation. Reliance was placed on recent judgment of Hon ble Delhi High Court in the case of DIT v. New Skies Satellite BV order dated 08.02.2016 in ITA No.473/2012. It was further submitted by him that in some of these expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, even then, the obligation to deduct TDS cannot be created through retrospective legislation in view of detailed judgment of Hon ble Delhi High Court in the case of New Skies Satellite BV (supra) and judgment of Hon ble Bombay High court in the case of CIT vs. Siemens Aktiongesellschaft (310 ITR 320) (Bom) and various other judgments directly on this issue. (2) In those cases where the expenditure has been capitalized, the claim of depreciation if otherwise allowable under the law cannot be disallowed merely on the basis of application of section 40(a)(i) for failure to deduct tax at source. In support of his proposition, Ld. Counsel has relied upon the decision of Mumbai Bench of the Tribunal in the case of SKOL Breweries Ltd. (supra). The Ld. Counsel has also argued that there have been duplicate disallowances/additions by the officers. One item has been disallowed at more than one place. It is directed that the AO shall take into considerations these submissions and shall not make duplicate double disallowance/ additions of one item. In addition to the above, we further clarify that assessee is free to take all the factual and legal issues before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatistical purposes. 11. Ground No.4: This ground deals with the grievance of the revenue for the action of Ld. CIT(A) in deleting disallowance of ₹ 6,32,79,350/- in respect of provisions of expenses, made by the AO u/s 40(a)(ia) of the Act. 11.1. The brief facts are that during the course of assessment proceedings it was found by the AO that though the assessee has made a provision of various expenses for the aforesaid amount but failed to deduct tax at source. In response, it was submitted that these were pure estimate and since no bills were received, the accounts of parties were not credited and therefore, it was not possible to deduct tax at source. But the AO did not accept submissions and made disallowance of the entire amount of the provisions. 11.2. Being aggrieved, the assessee filed appeal before the Ld. CIT(A) wherein detailed submissions were made. The Ld. CIT(A) agreed with the submissions by the assessee and held that TDS was not liable to be deducted on the amount of mere provisions, in absence of the amount payable having been quantified and payee identified. He, therefore, deleted the disallowance made by the AO. 11.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of actual invoices, the provision was required to be made on estimate basis only, but such estimation was based on past practice/ experience consistently followed by the appellant in earlier and subsequent years. Thus, the provisions were not on adhoc basis. The details of such expenses were already filed with the AO. The appellant has received bills for such provision for expenses in subsequent year, the deduction of which has not been claimed by the appellant in the subsequent year. In view of above discussion, in my considered view the appellant's claim for provision of expenses was allowable as deduction since the provision was pertaining to the liability crystalised during the year. The AO has also made disallowance of provision of expenses holding that the appellant had not deducted TDS on such provisions. Since, the provision was made in respect of expenses pertaining to the year under consideration, the bills of which were not received during the year, therefore, the amount of such provisions could not have been debited to account of a particular party. Therefore, there was no requirement of deduction of tax at source on such provision since neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 439/Mum/2013 for A.Y. 2003-04 15. Ground Nos. 1 2: In these grounds the Revenue has raised the issue of disallowance u/s 40(a)(i). It is noted that Ld. CIT(A) has followed his own order for A.Y. 2007-08. It is further noted by us that we have sent this issue back to the file of the AO in A.Y. 2007-08. Thus, following our order, we send these issues also back to the file of the AO with our similar directions. Thus, these grounds may be treated as partly allowed for statistical purposes. 16. Ground Nos. 3 4: These grounds are general, therefore, dismissed. We shall take Revenue s appeal in ITA No.42/Mum/2014 for A.Y. 2006-07 17. Ground Nos. 1 2: In these grounds the revenue has raised issue of disallowance u/s 40(a)(i) on various foreign remittances: The Ld. CIT(A) has followed his own orders for A.Ys. 2007-08, 2008-09 2009-10. In these years we have sent these issues back to the file of the AO with certain directions. Thus, in this year also, we find it appropriate to send these issues back to the file of the AO with the similar directions. Thus, these grounds may be treated as partly allowed for statistical purposes. 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon ble Jharkhand High Court in the case of CIT vs. Tata Robins Fraser Ltd 78 DTR 22 held that the said these expenses cannot be allowed to the assessee. Relevant para of his observations is reproduced below: 10.3. I have carefully considered the facts of the case. It was an admitted fact that the expenditure was pertaining to abandoned projects. Such projects were to be capital assets in the hands of the appellant. Recently the Jharkhand High Court in the case of CIT vs. Tata Robins Fraser Ltd. (2012) 78 DTR 22 held that the expenditure on abandoned project cannot be allowed as revenue expenditure. In view of the discussion made in the assessment order, I am in agreement with the AO that the expenditure was capital in nature and therefore could not be allowed as revenue expenditure. The disallowance made by the AO is therefore upheld. 20.3. During the course of hearing before us, Ld. Counsel has submitted that Ld. CIT(A) has gone wrong in applying the decision of Tata Robins Fraser Ltd. (supra). He submitted that in fact, in this decision, such expenses have been held to be allowable. But Ld. CIT(A) appears to have wrongly read the said decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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