9911796707
TMI Blog2015 (12) TMI 1806X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas office maintenance, sales promotion, sales office expenses, aircraft maintenance expenses and others - HELD THAT:- major expenditure has been incurred in respect of cost of spare parts for maintenance of aircrafts, import of articles such as mineral water, raw meat, liquor etc., expenditure incurred for obtaining fitness certificate after every hours of flying as per international aviation rules, import of spare parts from abroad, promotion and marketing expenses abroad, charges, sales promotion expenses towards redemption of points under Oberoi Top programme, participation fee of IN ASIA MILES programme, expenses for media coverage of the programme, cost of space and stand for ITB Berlin in Germany, charges for stand and space booked for Arabia Travel Market in Dubai, charges for stand decoration for IBTM Exhibition at Geneva, cost of space and stand for WTM in London, entire expenses incurred in foreign sales offices in London, New York, Sydney, Singapore and Dammam on various dates throughout the year etc. From the details furnished, we also see that the entire foreign sales office receipts and expenses and statement of assets and liabilities were duly subjected to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t those advances were made only out of own funds of the assessee - from the aforesaid facts available on record, the assessee had advanced monies to various concerns during the course of its business to further strengthen its business interests with the said parties and as a measure of commercial expediency. In applying the test of commercial expediency whether the expenditure was excessively laid down for the purpose of business, reasonableness of the expenditure is to be judged from the point of view of a businessman and not that of the Revenue. Disallowance of depreciation on addition to fixed assets - HELD THAT:- Entire additions together with the income-tax depreciation figures were duly subjected to certification by the tax auditor in the tax audit report and the AO had indeed granted income-tax depreciation for other assets except ₹ 7,84,550 being depreciation on buildings and computers. We find that this action of the learned AO is not appreciated and it is also stated in the grounds that the assessee had submitted the bills before the learned AO. No hesitation to delete this addition made in the sum of ₹ 7,84,550 towards depreciation on buildings and compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee is allowed for statistical purposes. Disallowance u/s14A towards proportionate management expenses - HELD THAT:- It is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence, disallowance is definitely warranted in terms of s. 14A which is brought in the statute book with retrospective effect from 1st April, 1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. We direct the learned AO to disallow 1 per cent of exempt income under this issue Disallowance on account of specific general charges - HELD THAT:- We direct the learned AO to restrict the disallowance as not relatable to the business of the assessee. Hence, the ground raised by the assessee is partly allowed. - ITA Nos. 2182/Kol/2006, 1876/Kol/2007 and 196/Kol/2010 - - - Dated:- 9-12-2015 - Mahavir Singh and M. Balaganesh, JJ. For AppellantPlaintiff: Rajat Subhra Biswas For Respondents: R.N. Bajoria and A.K. Gupta ORDER M. Balaganesh, 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under s. 195 and the assessee had failed to deduct such tax. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not considering that legal fees and other professional fees rendered from outside India is not taxable in India even under s. 9(1)(vii) of the Act. 2.2 The learned Authorised Representative stated that in respect of some professional charges, the actual services were rendered outside India by the non-resident consultants and none of them have any PE in India and as such it resulted in no income accruing and arising in India and accordingly, not taxable in India. The learned Authorised Representative took us to the relevant pages of the paper book filed by the assessee to explain the contentions of the assessee and also stated that these details were also duly filed before the lower authorities. He argued that the assessee cannot be expected to foresee an amendment in the statute with regard to TDS obligations and any retrospective amendment in the law could only disturb the computation mechanism of determination of income. Accordingly, he argued that by virtue of a retrospective amendment, the income of an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee totally claimed a sum of ₹ 2,72,93,733 and out of this, a sum of ₹ 22,94,278 being payment made to Hooloomann Project Services Ltd., Mauritius to services utilized in India which was duly subjected to deduction of tax at source and accordingly, the learned AO granted deduction for this portion. We find that the payments made to the various parties in Bangkok and Mauritius for services rendered outside India and no part of these services have been utilized in India and hence, the same does not become chargeable to tax in India in the hands of the payee and hence, there is no obligation on the part of the assessee to deduct tax at source in terms of s. 195 of the Act. 2.3.3 Amounts remitted on behalf of Head office by The Oberoi Grand, Kolkata-₹ 4,51,65,514 The assessee had made payments to Creative Kitchen Planers Asia Pacific Ltd. Hongkong towards consultancy services rendered abroad; Atanaskovic Hartnell, Australia towards Lawyers Professional fees for services rendered abroad; P Interior Associates Co. Ltd., Bangkok towards design and drawing services rendered abroad and to Tino-kwan Lighting Consultants, Hongkong towards professional se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. For the sake of convenience, the said Explanation is reproduced herein below: Explanation--For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under cl. (v) or cl. (vi) or cl. (vii) of sub-s. (1) and shall be included in the total income of the non-resident, whether or not,-- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. 2.5.1 We find that this issue has been elaborately dealt with by the Coordinate bench decision of this Tribunal in the case of Asst CIT v. Subhotosh Majumder in ITA Nos. 1629/Kol/2012 for asstt. yr. 2009-10; ITA No. 366/Kol/2012 for asst. yr. 2008-09 and ITA No. 2058/Kol/2009 for asst. yr. 2006-07 Dt. 27th Nov., 2015 [reported at (2016) 176 TTJ (Kol) 600--Ed.] wherein, it was held that: From the above facts and circumstances of the case and also precedents cited above, we are of the view that till amendment in Explanation to sub-s. (2) of the Act, the prevailing legal position was that unless the technical se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round on which disallowance was made is that the said payments were not subjected to deduction of tax at source and thereby provisions of s. 40(a)(i) of the Act would get attracted. But we find that in all these cases, the services were rendered outside India and had not been utilized in India and hence, no income accrued or arose in India and accordingly, they are not chargeable to tax in India. Hence, there is no obligation on the part of the assessee to deduct tax at source in terms of s. 195 of the Act 2.7 In view of the aforesaid findings and judicial precedents relied upon including the Co-ordinate Bench decision of this Tribunal, we hold as under: (a) The payments made towards professional charges, consultancy charges and amounts paid on behalf of other units in respect of services rendered only outside India and were not utilized in India, are not chargeable to tax in India in terms of s. 195(1) of the Act and hence, there is no obligation that could be cast on the assessee to deduct tax at source. (b) Even otherwise, the payments are governed by the provisions of art. 14 of DTAA which would prevail over the other provisions of the Act, wherein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd CA certificates were duly submitted before the lower authorities and hence, the genuinity of the expenditures cannot be doubted with. Moreover, all these expenses are incurred for rendering of services outside India and there is no obligation for the assessee to deduct tax at source as the same are not chargeable to tax in the hands of the payee. He stated that no disallowance on this account was made by the learned AO in the earlier years and also in subsequent years. He argued that the same are incurred wholly and exclusively for the purpose of business of the assessee and accordingly, pleaded for deletion of the additions. In response to this, the learned Departmental Representative vehemently supported the orders of the lower authorities. 3.3 we have heard the rival submission and perused the materials available on record including the detailed paper book filed by the assessee. The relevant pages of the paper book on the impugned issue is from pages 256-279 in respect of each of the aforesaid expenditures. We find from the said details that the major expenditure has been incurred in respect of cost of spare parts for maintenance of aircrafts, import of articles such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign exchange. Since it has been held in asst. yr. 1998-99 by this Tribunal that assessee is not entitled for deduction under s. 80HHC of the Act in respect of this transaction, the learned AO denied deduction under s. 80HHC of the Act which was also upheld by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following ground: 5. That on the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the assessee for ₹ 7,31,507 under s. 80HHC of the Act on export of food and beverages to outbound flights of foreign airlines, the payments for which were received in convertible foreign exchange. 4.1 The learned Authorised Representative argued that this issue is directly covered by the order of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 316/Kol/2006, Dt. 11th Sept., 2015. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 4.2 We have heard the rival submissions and find that this issue is squarely covered by the decision of the EIH Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of deduction under s. 80HHC, if a transaction takes place by way of sale or otherwise in a shop or establishment situate in India involving clearance at any customs station as defined in the Customs Act and at the same time, the Reserve Bank of India treats such transaction in lieu of Indian currency as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, the transaction should be treated as export out of India for the purpose of s. 80HHC of the Act by virtue of the added Explns. (a) and (aa) quoted above. 15. In this connection, we may profitably refer to the decision of the Supreme Court in the case of CIT v. Silver and Arts Palace (2003) 180 CTR (SC) 309 : (2003) 259 ITR 684 (SC) where the said Court has approved the decision of the Allahabad High Court in the case of Ram Babu Sons v. Union of India, (1997) 141 CTR (All) 310 : (1996) 222 ITR 606 (All) laying down the proposition of law that if both the conditions mentioned in Explns. (a) and (aa) are complied with in a given situation, the transaction should be treated to be an export out of India for the purpose of s. 80HHC of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any out of repatriable funds would also apply under the FEMA Regulations. In the absence of any evidence disputing the said assertion of the officer concerned, we hold that the appellant has also complied with the condition mentioned in Expln. (a) added to s. 80HHC of the Act. 25. We, thus, find that the appellant has successfully established before this Court by uncontroverted additional evidence that the transaction in question satisfies the conditions indicated in both the Explns. (a) and (aa) of s. 80HHC of the Act in respect of the disputed items at the Chhatrapati Shivaji International Airport, Mumbai, and thus, it is a fit case where the orders passed by the authorities below should be set aside and the AO should be directed to consider the claim of deductions under s. 80HHC of the Act on merit as the appellant has proved that the transaction in question from the said airport amounts to export out of India. 27. We, therefore, allow this appeal by setting aside the orders of the authorities below and by answering all the three formulated questions indicated above in the affirmative and against the Revenue . Respectfully following the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfactory explanation has been forwarded by the assessee which leaves ample scope for belief that there has been non-business use of the aircrafts by the directors or their relatives or family members. He further stated that in the assessment orders of earlier years it has been noticed that the AOs had found that 4-seater aircrafts owned by the assessee was mostly used by the Oberois and their close relatives for personal trips. In the current year also there do not appear any reason to deviate from the earlier observation of the Department in this respect. Accordingly, he disallowed 50 per cent of total expenses of ₹ 1,04,10,435 and added a sum of ₹ 52,05,217 to the total income of the assessee. This action of the learned AO was upheld by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following grounds: 6. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of ₹ 52,05,217 being 50 per cent of aggregate expenditure incurred on running and maintenance of aircraft ignoring that the aircrafts were exclusively used for the purpose of business. 7. That the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT (2002) 172 CTR (Guj) 339 : (2002) 253 ITR 749 (Guj) is well placed and supports the case of the assessee. We also find lot of force in the arguments of the learned Authorised Representative that if at all there is any personal element involved in the aforesaid expenditure, the same have to be taxed as perquisite in the hands of the directors and it is only for the TDS officer to look into the violations, if any, on the same and hence, on that ground also, no disallowance of expenditure could be appreciated. We find that the learned AO had made the entire addition based on surmises and conjectures and made on ad hoc basis. It is well-founded proposition that what is apparent is real and the allegation to prove the contrary is on the person making such allegation. The following decisions support our view in this regard : CIT v. Daulat Ram Rawatmull (1972) 1972 CTR (SC) : (1973) 87 ITR 349 (SC); Sukhdayal Rambilas v. CIT (1982) 28 CTR (Bom) 232 : (1982) 136 ITR (Bom) 414; Madura Knitting Co. v. CIT (1956) 30 ITR 764 (Mad). In view of the aforesaid facts and circumstances and respectfully following the judicial precedents thereon, we have no hesitation in deleting the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. This was paid as loan and interest is charged on the same by the assessee. Amounts paid to Oberoi Kerala Hotels Resort Ltd. - ₹ 40,00,000 The same is also a joint venture company and according to the agreement the company is required to advance on equity shares participation. During the course of assessment proceedings, the assessee mentioned the purpose of advancing monies to aforesaid parties and pleaded that the same were advanced during the course of their business and to pursue further business interests of the assessee and also pleaded that own funds were very much available with the assessee and no borrowed funds were used for advancing the monies to aforesaid parties and hence, no interest disallowance should be invoked on the assessee. 6.2 The learned AO disallowed interest paid on borrowed funds @ 12 per cent per annum to the extent of the aforesaid monies advanced to various parties by concluding that the same were advanced for non-business purposes. Aggrieved, the assessee challenged this issue before the learned CIT(A) who upheld the disallowance of interest made by the learned AO except in respect of amounts adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier years and accordingly, the same is to be made for this assessment year also brushing aside all the submissions of the assessee. In the instant case, the assessee had in fact made borrowings and utilised the same for the purpose of its business. The borrowed funds and the own funds in the form of share capital, reserves and surplus, cash profits derived during the year, etc., were inextricably mixed in the same bank account and hence, presumption could be drawn that interest-free advances were made out of own funds provided the own funds are more than the amounts advanced interest-free to parties. The own funds available with the assessee company is worked out as below: 6.4.1 Moreover, it is well settled proposition that it is not for the IT Department to suggest how the businessman should conduct his business and have his affairs. The businessman knows his interest best. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Dhanrqj Girji Raja Narasingherji 1973 CTR (SC) 445 : (1973) 91 ITR 544 (SC). Further reliance is also placed on the decision of the Hon'ble apex Court in the case of CIT v. Walchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjal Sales Corporation v. CIT Anr. (2008) 3 DTR (SC) 217 : (2008) 215 CTR (SC) 105 : (2008) 298 ITR 298 (SC) (h) CIT v. Reliance Utilities and Power Ltd. (2009) 221 CTR (Bom) 435 : (2009) 18 DTR (Bom) 1 : (2009) 313 ITR 340 (Bom) (i) Recent decision of the Hon'ble apex Court in the case of Hero Cycles (P) Ltd. v. CIT (2015) 281 CTR (SC) 481 : (2015) 128 DTR (SC) 1 : (2015) 63 taxmann.com 308 (SC) Dt. 5th Nov., 2015. The operative portion of the aforesaid judgments are not reproduced herein for the sake of brevity. However, the principles laid down by the various Courts including the apex Court is considered in our final decision rendered herein. 6.4.4 We also find that this issue is squarely covered by the decision of the coordinate bench of this Tribunal in assessee's own case in favour of the assessee for asst. yr. 2002-03 in ITA No. 316/Kol/2006 Dt. 11th Sept., 2015 in para 6 of the said order. 6.4.5 In view of the aforesaid facts and circumstances and the judicial precedents on the impugned issue, we hold as under: --that the interest-free advances were made by the assessee to various parties during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Aggrieved, the assessee is in appeal before us on the following ground: 10. That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in confirming the disallowance of depreciation of ₹ 7,48,550 on addition to fixed assets despite the fact that all such additions were duly certified by the Chartered Accountant and invoice copies were produced at the time of assessment proceedings 7.1 The learned Authorised Representative reiterated what has been stated before the lower authorities and referred to in the relevant pages of the paper book of the assessee numbering from pp. 307 to 362 in respect of the impugned issue containing the various details of all the fixed assets of the assessee date-wise and prayed for deletion of this addition. In response to this, the learned Departmental Representative vehemently supported the orders of the lower authorities. 7.2 We have heard the rival submissions and perused the materials available on record. We find that the assessee had filed the details of entire fixed assets which is part of the paper book in pp. 307 to 362 and we find that the entire additions together with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his assessment order. This silent action was also confirmed by the learned CIT(A). Aggrieved, the assessee is in appeal before us on the following ground: 11. That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in rejecting the appellant's plea that notional gain on foreign currency swap amounting to ₹ 4,15,36,381 having been taxed in asst. yr. 2002-03, the notional loss of ₹ 7,87,63,270 on account of currency swap incurred during the year should have been allowed as business expenditure. 8.4 The learned Authorised Representative argued that this issue is directly covered by the order of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 316/Kol/2006. Dt. 11th Sept., 2015. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 8.5 We have heard the rival submissions and perused the materials available on record. We find that the assessee on 13th Aug., 2001 had availed foreign currency loan of JPY 2603.99 Million (equivalent to ₹ 100 crores) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HHD--Exclusion of payments received in Indian Rupees from foreign Airlines and Embassies--₹ 12,90,46,618 The brief facts of the case are that the assessee claimed deduction under s. 80HHD of the Act in respect of profit derived from the services provided to the foreign tourists in accordance with the provisions of s. 80HHD of the Act. The assessee company claimed total foreign exchange receipts of ₹ 194,45,11,547 for the purpose of computing deduction under s. 80HHD of the Act. Out of this, the learned AO observed that a sum of ₹ 12,90,46,618 made by the Foreign Embassies received in Indian Rupees and accordingly, held that the same should not be considered for deduction under s. 80HHD of the Act as the same was not received in foreign currency. Aggrieved, the assessee preferred an appeal before the learned CIT(A) who deleted the disallowance of the learned AO. Aggrieved, the Revenue preferred further appeal before us on the following ground: 1. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the exclusion of the amount of receipts at ₹ 12,90,46,618 in Indian Rupee for foreign airlines and embassies i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any rules made thereunder. From the above meaning, it is very clear that once the RBI accepts a particular receipt to have been received in convertible foreign exchange, the deduction under ss. 80HHC and 80HHD should be granted to the assessee. In the instant case, admittedly, the assessee had received monies in accordance with the scheme approved by RBI and hence, the assessee is entitled for deduction under s. 80HHD of the Act in respect of amounts received in Indian Rupees from Foreign Airlines and Foreign Embassies. It is pertinent to note that the learned AG had granted deduction under s. 80HHD of the Act in the set aside assessment proceedings for the asst. yr. 1999-2000 on the same issue to the same assessee. Hence, in view of the aforesaid facts and circumstances and provisions of the Act, we direct the learned AO to grant deduction under s. 80HHD of the Act to the assessee. Hence, ground No. 1 raised by the assessee is allowed. 10.3 Respectfully following the co-ordinate bench decision of this Tribunal for the asst. yr. 2002-03 as stated supra, we find no infirmity in the order of the learned CIT(A) in this regard and accordingly, the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s squarely covered by the decision of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 426/Kol/2006 (Revenue's appeal), Dt. 11th Sept., 2015, wherein in para 9, it has been held as under: 9.3. We have heard the rival submissions and we find that this issue is now squarely covered by the decision of the apex Court in the case of CIT v. Lakshmi Machine Works Ltd. (2007) 210 CTR (SC) 1 : (2007) 290 ITR 667 (SC) wherein it was held that 'Sec. 80HHC(3) is a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business, the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under the Excess Profits Tax Act and it existed in the Business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to exports and yet it cannot form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, we find no infirmity in the order of the learned CIT(A) in this regard and accordingly, the ground No. 2 raised by the Revenue is dismissed. 12. Disallowance of preopening expenses as capital in nature relating to new hotel The Oberoi Udayvilas--₹ 1,66,62,614 The brief facts of this issue are that the assessee had incurred a sum of ₹ 1,66,62,614 pertaining to new hotel The Oberoi Udayvilas and it relates to the period prior to the date of commencement of commercial production of the said hotels but after the setting up of the said hotels. The learned AO observed that in the books of accounts, these expenses were written off over a period of 5 years treating the same as deferred revenue expenses and for the purpose of income-tax had claimed the full amount as expenditure on the pretext that the same are only pre-commencement business expenditure incurred on training of employees, advertisement expenditure, etc., to make them fit for taking up the job on commencement of the activities for which the assessee also relied on certain decisions in its support. But the learned AO sought to disallow the sum of ₹ 1,66,62,614 in the assessment by trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of setting up of business till the date of commencement of business could be charged off as Revenue expenditure or not. We find that this issue has been elaborately dealt with in the following cases: (a) CIT v. Kanoria General Dealers (P) Ltd. (1986) 53 CTR (Cal) 165 : (1986) 159 ITR 524 (Cal) (b) CIT v. Ramaraju Surgical Cotton Mills Ltd. (1967) 63 ITR 478 (SC) (c) CIT v. Hughes Escorts Communications Ltd. (2007) 213 CTR (Del) 45 : (2009) 311 ITR 253 (Del) (d) CIT v. Relaxo Footwears Ltd. (2007) 293 ITR 231 (Del) - SLP by revenue against this order dismissed. The special leave petition filed by the Revenue against this order is dismissed by the Supreme Court in CC 12361/2007 Dt. 3rd Jan., 2008. (e) Delhi Tribunal Hotel Hans (P) Ltd. v. Asstt. CIT (2007) 15 SOT 348 (Del) (f) Kesoram Industries and Cotton Mills Ltd. v. CIT (1992) 196 ITR 845 (Cal). We hold that the expenditure were incurred for expansion of the same business and not for setting up of the new business. Instead these expenditures were incurred by the assessee after the business is set up. It is ultimately only a new unit of the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2006 (Revenues appeal) Dt. 11th Sept., 2015 had held this issue in favour of the assessee. In response to this, the learned Departmental Representative fairly conceded to the point that this issue is covered in favour of the assessee by the order of this Tribunal. 13.3 We have heard the rival submissions and perused the detailed paper book of the assessee and perused the materials available on record. We find that this issue is squarely covered by the decision of this Tribunal in assessee's own case for the asst. yr. 2002-03 in ITA No. 426/Kol/2006 (Revenue's appeal), Dt. 11th Sept., 2015, wherein in para 13, it has been held as under: 13.4. We have heard the rival submissions and perused the materials available on record and we find lot of force in the arguments of the learned Authorised Representative that the income on account of technical services in respect of managed hotels are initially booked on provisional basis by the assessee for want of finalization of accounts of those managed hotels, and later based on Chartered Accountant's certificate the correct income is booked arid provision already made is adjusted accordingly. It may either be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in deleting the disallowance of advance written off during the financial year relevant to the asst. yr. 2003-04 to the extent of ₹ 6,41,636 on account of sales-tax demand deposited for financial years 1972-73 and 1973-74 in earlier years against the demand finalized by Delhi Sales-tax Authority on 26th Feb., 1990 and 30th June, 1987. 14.1 The learned Authorised Representative vehemently supported the order of the learned CIT(A). In response to this, the learned Departmental Representative vehemently supported the order of the learned AO. 14.2 We have heard the rival submissions and perused the materials available on record including the relevant pages of the paper book filed by the assessee. We find that the sales-tax payments made for the financial years 1972-73 and 1973-74 by Oberoi Delhi which had been kept in 'advance payment account' has been written off during the financial year 2002-03 treating the same as irrecoverable. The same is also supported by the sales-tax assessment orders passed by the Delhi sales-tax Department. No doubt that any legitimate sales-tax paid by an assessee is entitled for reimbursement from the customers through s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on account of staff welfare expenses - ₹ 50,00,000 The brief facts of this issue are that the assessee company is in the habit of providing free/subsidized meals to its employees on duty. The learned AO proceeded to disallow a sum of ₹ 50,00,000 on account of staff welfare expenses on an ad hoc basis based on the disallowances made in the earlier years i.e. asst. y₹ 2001-02 and 2002-03. On first appeal, the learned CIT(A) on the basis of earlier year's order of his predecessor deleted the addition made towards staff welfare expenses on an ad hoc basis with a finding that it is quite usual and standard practice in hotel business to provide meals to its employees and there was no dispute on the facts that expenditure on such meal was allowable business expenditure. Aggrieved, the Revenue is in appeal before us on the following ground: 7. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of ₹ 50,00,000 out of staff welfare expenses as against ₹ 10,62,83,448 debited under the head. 16.1 The learned Authorised Representative further argued that similar addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following expenses in its P L a/c: The learned AO observed from the assessment orders of earlier assessment years, the genuineness and allowability of the aforesaid expenditure is not free from doubt and accordingly, as in earlier years proceeded to disallow 2 per cent of the aforesaid expenditure. On first appeal, the learned CIT(A) deleted the disallowance. Aggrieved, the Revenue is in appeal before us on the following ground: 8. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of ₹ 1,08,30,147 @ 2 per cent of the total expenses incurred under the head Repairs, Renewal, Replacement, Advertisement, Passage and Travelling though the assessee failed to produce details of such expenses and prove the genuineness of the allowability of the business expenditure before the AO during the assessment proceedings for the year. 17.1 The learned Authorised Representative further argued that similar addition made in asst. yr. 2002-03 by the learned AO in assessee's own case came up before this Tribunal and the same in ITA No. 426/Kol/2006 (Revenue's appeal) Dt. 11th Sept., 2015 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... membership fees and annual subscription for various Stock Exchanges. Based on these submissions, the learned CIT(A) deleted the addition. Aggrieved, the Revenue is in appeal before us on the following ground: 9. On the facts and in the circumstances of the case learned CIT(A) has erred in deleting the disallowance of ₹ 1,01,42,417 being 25 per cent of the total expenses incurred under the head 'General Charges' by accepting assessee's explanation and other details which were not produced and not verified before the AO during the assessment proceedings. 18.1 The learned Departmental Representative vehemently supported the order of the learned AO and in response to this, the learned Authorised Representative referred to the relevant page of the paper book which contained the details of the entire general charges. He further argued that no disallowance was made by the learned AO in the asst. yr. 2002-03 (earlier year) and asst. yr. 2005-06 (subsequent year) on this account and vehemently supported the order of the learned CIT(A). 18.2 We have heard the rival submissions and perused the materials available on record including the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said expenses related to the financial year relevant to the asst. yr. 2004-05 as per Tax Audit Report not debited to the P L a/c for the asst. yr. 2003-04. 19.1 The learned Departmental Representative vehemently supported the order of the learned AO and in response to this, the learned Authorised Representative vehemently supported the order of the learned CIT(A). 19.2 We have heard the rival submissions and perused the materials available on record including the relevant page of the paper book filed by the assessee. We find from the paper book that the assessee had genuinely made this claim before the learned AO based on the tax auditor reflecting a figure of ₹ 1,00,000 under prior period expenses in the tax audit report for asst. yr. 2004-05. It is not the case of the Revenue that the said expenditure is not incurred wholly and exclusively for the purpose of business of the assessee. The assessee in line with the mercantile system of accounting regularly employed by it, had sought to rectify its genuine omission and claimed the same in the assessment proceedings by way of a letter Dt. 27th Jan., 2006. We are aware at this juncture that any claim could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 195. (5) That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of ₹ 167,134,707 claimed by the appellant as overseas office maintenance, sales promotion, sales office expenses, aircraft maintenance and other matters for which remittances were made in foreign exchange and spent wholly and exclusively for the business purpose. (6) That on the facts and in the circumstances of the case, the learned CIT(A) erred in alleging non-compliance of detailed records/evidences of payments along with justification ignoring the fact that each and every item of details had been furnished before the AO which was communicated in the written submission before the learned CIT(A). (7) That on the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the appellant for ₹ 4,001,630 under s. 80HHC of the Act on export of food and beverages to outbound flights of foreign airlines, payments for which were received in convertible foreign exchange. (8) That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add, amend, modify, rescind, supplement or alter any of the grounds stated hereinabove either before or at the time of hearing of the appeal. 21. We find that most of the grounds raised by the assessee hereinabove are covered by the decisions rendered by us for the asst. yr. 2003-04 in ITA No. 57/Kol/2007. 22. The ground Nos. 1 to 4 raised by the assessee are similar to the ground Nos. 1 to 3 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except with certain changes in the names of the parties, change in place of those parties and change in amounts paid to those parties. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 22.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 66, 70, 71, 72, 97, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed in pp. 54, 61, 99, 108 and 109 of paper book 1 and pp. 291 to 294 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 5 in para 5 would apply with equal force for the ground No. 7 for the asst. yr. 2004-05. Hence, the ground No. 7 raised by the assessee is allowed. 25. The ground Nos. 8 and 9 raised by the assessee are similar to the ground Nos. 6 and 7 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except change in amounts and percentage of amounts disallowed. He argued that in asst. yr. 2004-05, 20 per cent of the impugned expenditure was disallowed by the learned AO as against 50 per cent disallowed in asst. yr. 2003-04. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 25.1 We have heard the rival submissions and perused the materials available on record including the detailed paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons and amounts paid. However, he observed that the necessity of incurring these expenses vis-`-vis the business of the assessee was not proved with any evidences. Accordingly, he resorted to make an ad hoc disallowance of ₹ 25,00,000 out of the same. This addition was upheld by the learned CIT(A) as he observed that the assessee did not bother to file any evidences even before him. Aggrieved, the assessee is in appeal before us on the following ground: (13) That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in confirming the disallowance of ₹ 25,00,000 on account of legal expenses ignoring the fact that such disallowance was made purely on surmise and conjecture. 27.1 The learned Authorised Representative took us to the relevant pages of the paper book filed by the assessee and vehemently argued that the entire expenses were incurred only for handling the legal disputes arising out of the business of the assessee. In response to this, the learned Departmental Representative vehemently supported the orders of the lower authorities. 27.2 We have heard the rival submissions and perused the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end income. (16) That without prejudice to the ground as stated above, the addition of ₹ 2,50,000 made under s. 14A of the Act is highly excessive. 29.1 The learned Authorised Representative argued that the provisions of r. 8D of the IT Rules could be made applicable only from asst. yr. 2008-09 as has been held by the Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing (2010) 234 CTR (Bom) 1 : (2010) 43 DTR (Bom) 177 : (2010) 328 ITR 81 (Bom) and fairly pleaded that since provisions of s. 14A of the Act has got retrospective application in the statute, disallowance thereon could be restricted to 1 per cent of exempt income as has been held by the Jurisdictional High Court in the case of CIT v. R.R. Sen Brothers (P) Ltd. in G.A. No. 3019 of 2012 in IT Appeal No. 243 of 2012, Dt. 4th Jan., 2013. In response to this, the learned Departmental Representative fairly conceded to the submission of the learned Authorised Representative. 29.2 We have heard the rival submissions. The relevant assessment year under appeal is 2004-05 at which point of time, the provisions of r. 8D were not in force and the same were made applicable only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter VI-A have independent code of computation of relief available under relevant provisions and that there was no scope of importing any issue unless it was in the said sections and in doing so learned CIT(A) failed to appreciate the action of the AO that was based on the judgment of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau v. CIT 973 CTR (SC) 44 : (1973) 87 ITR 542 (SC) 3. That on the facts and in the circumstances of the case, learned CIT(A) erred in deleting the addition of ₹ 36,03,743 relating to excess provision made towards Technical Assistance Fees by relying on hon'ble Tribunal's decision Dt. 29th June, 2005 in the assessee's own case for asst. yr. 1999-2000 in ITA Nos. 891 801/Kol/2006 and not appreciating the AO's observation made in the relevant assessment order for arriving at the operational profit of the hotels under consideration. The assessee calculated its receipts @ 12.5 per cent of operational profit of several group hotels who in turn claimed provision for repairs as well as bad and doubtful debts. 4. That on the facts and in the circumstances of the case, learned CIT(A) erred in restricting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m foreign airlines and embassies for the purpose of computation of allowable deduction under s. 80HHD of the Act. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 32.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 335 to 345 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 1 in para 11 would apply with equal force for the ground No. 1 for the asst. yr. 2004-05. Hence, the ground No. 1 raised by the Revenue is dismissed. 33. The ground No. 2 raised by the Revenue is similar to the ground No. 2 raised by the Revenue for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issue except change in amounts in respect of exclusion of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely no change in the issue except change in figures and change in parties with regard to the earlier year. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. 35.1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 314 and 315 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 6 in para 16 and for the ground Nos. 10 to 12 in para 27 for the asst. yr. 2004-05 would apply with equal force for the ground No. 4 for the asst. yr. 2004-05. Hence, the ground No. 4 raised by the Revenue is dismissed. 36. Disallowance on account of staff welfare expenses--₹ 58,29,681. The ground No. 5 raised by the Revenue is similar to the ground No. 7 raised by the Revenue for asst. yr. 2003-04. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange in figures. In response to this, the learned Departmental Representative also conceded that the facts are similar to asst. yr. 2003-04 and decision rendered in asst. yr. 2003-04 on these issues could be followed for asst. yr. 2004-05 also. A-1 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 421 and 422 of paper book 2. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground No. 9 in para 19 would apply with equal force for the ground No. 7 for the asst. yr. 2004-05. Hence, the ground No. 7 raised by the Revenue is dismissed. In the result, the appeal of the Revenue in ITA No. 1876/Kol/2007 for asst. yr. 2004-05 is dismissed. ITA No. 299/Kol/2010--Asst yr. 2005-06--Assessee's Appeal 38. The assessee has raised the following grounds before us: 1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days during financial year 2004-05. 9. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating that payments for purchase of drawings are not taxable under India-Thailand tax treaty. 10. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO under s. 40(a)(i) of the Act of ₹ 1,50,10,962 paid to foreign company towards sales promotion services rendered outside India due to alleged non deduction of tax under s. 195 from such payment. 11. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating that ₹ 1,50,10,962 paid on account of sales promotion expenses is not taxable in India neither under the domestic law nor under the applicable tax treaty 12. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO of ₹ 67,62,092 being 10 per cent of total expenditure of ₹ 6,76,20,915 on account of aircraft maintenance and running expenses on an ad-hoc basis, based on mere surmise and conjecture; ignoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the submissions filed by the assessee before the learned AO/learned CIT(A) are enclosed in pp. 1 to 4, 22, 29, 30, 35 to 37, 39 to 135, 244 to 356, 374 to 425 of paper book. We hold that the findings given, case laws relied upon therein and the decision rendered by us for the asst. yr. 2003-04 for the ground Nos. 1 to 3 in para 3 and ground No. 4 in para 4 with regard to sales promotion expenses would apply with equal force for the grounds 1 to 11 for the asst. yr. 2005-06. Hence, the ground Nos. 1 to 11 raised by the assessee are allowed. 41. Disallowance towards repairs, running and maintenance of aircrafts-- ₹ 67,62,092 The ground No. 12 raised by the assessee is similar to the ground Nos. 6 and 7 raised by the assessee for asst. yr. 2003-04. The learned Authorised Representative argued that there is absolutely no change in the issues except change in amounts and percentage of amounts disallowed. He argued that in asst. yr. 2005-06, 10 per cent of the impugned expenditure was disallowed by the learned AO as against 50 per cent disallowed in asst. yr. 2003-04. In response to this, the learned Departmental Representative also conceded that the facts are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance on account of specific general charges--₹ 7,00,000 The brief facts of this issue are that the learned AO during the course of assessment proceedings found that expenses to the tune of ₹ 14,99,285 out of total general charges of ₹ 3,29,66,709 are not relatable to the business of the assessee. He had listed out the same in the assessment order. Accordingly, the learned AO disallowed a sum of ₹ 14,99,285 in the assessment. On first appeal, the learned CIT(A) restricted the said disallowance to ₹ 7,00,000 after holding that some expenses listed by the learned AO cannot be related to the business of the assessee. Aggrieved, the assessee is in appeal before us on the following ground: 16. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the AO under the head 'General Charges' to the extent of ₹ 7,00,000 as not being related to the business of the appellant. 43.1 The learned Authorised Representative argued that the disallowance confirmed by learned CIT(A) for ₹ 7,00,000 mainly represents gifts given to employees on various occasions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us on the following ground: 18. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the arbitrary disallowance made by the AO of ₹ 20,08,159 under s. 14A of the Act as being proportionate management expenses incurred for earning exempt income. 46.1 The learned Authorised Representative argued that the provisions of r. 8D of the IT Rules could be made applicable only from asst. yr. 2008-09 as has been held by the Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing (supra) and fairly pleaded that since provisions of s. 14A of the Act has got retrospective application in the statute, disallowance thereon could be restricted to 1 per cent of exempt income as has been held by the jurisdictional High Court in the case of CIT v. R.R. Sen Brothers (P) Ltd. (supra). In response to this, the learned Departmental Representative fairly conceded to the submission of the lower authorities. 47.2 We have heard the rival submissions. The relevant assessment year under appeal is 2005-06 at which point of time, the provisions of r. 8D were not in force and the same were made applicable only f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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