9911796707
TMI Blog2018 (7) TMI 2052X X X X Extracts X X X X X X X X Extracts X X X X ..... opies of debit notes issued by DHS, Mumbai mentioning the amount debited as being your share of DTT Operational Budget (Subscription Fee) Tech, Subscription Fees paid to Deloitte Touch Tohmatsu, New York which have not been questioned by the AO. The assessee has also furnished evidence to prove that the assessee is a member of the global network of DTT, enjoys certain advantages as a result of the membership and has paid its contribution of the subscription to the membership of the global network. We note that Hon ble High Court of Bombay in the case of CIT vs. Zee Entertainment Enterprises Ltd. [ 2018 (3) TMI 317 - BOMBAY HIGH COURT] held that reimbursement of expenses is not taxable Addition on account of rent paid by assessee on hire computers without deducting TDS u/s 194J r.w.s. 40(a)(ia) - HELD THAT:- The details on record including the details of apportionment of rent on the basis of number of employees of the participating user entities goes to show that the essence of the transaction was obtaining on lease of laptops by DTTIPL for use by employees of various concerns forming part of the network in India and the rent was paid by DTTIPL to Rent Works India (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinafter referred to as the Act ). 2. Since, these two appeals filed by the Revenue relate to same assessee for different Assessment Years, common and identical issues are involved, therefore, these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The Revenue s appeal in ITA No.587/Kol/2016, for Assessment Year 2010-11, is taken as the lead case. 3.The grievances raised by the Revenue (in lead case, in ITA No.587/Kol/2016) are as follows: 1. The ld. CIT(A) has erred on facts in law in giving relief of ₹ 48,95,212/- being subscription fees paid by assessee without deducting any tax at sources violating the provision of sec. 194J of I.T. Act read with sec. 40(a)(ia) of the Act. 2. The Ld. CIT(A) has erred on facts in law in giving relief of ₹ 40,72,247/- being rent paid by assessee on hire computers without deducting any tax at sources violating the provision of sec.194I of I.T. Act read with sec. 40(a)(ia) of the Act. 3. The ld. CIT(A) has erred on facts and in law in giving relief of ₹ 8,64,239/- being indemnity insurance expense, not incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s withheld the due tax before the payment of subscription fees. The assessee has paid the share of subscription fees without deduction of tax to DHS Mumbai as this was only the reimbursement of the expenses and does not attract the liability to deduct the tax. Thesubscription fee is a recurring expenditure incurred wholly and exclusively for the purposes of assessee's business. It is in the nature of fees of trade association. 6. The assessee was also asked to disclose the basis / method of calculation of total subscription by DTT and DHS Mumbai and whether tax has been deducted. In response, the assessee, vide letter dated 18.02.2013, submitted that that withinthe global network, there was a local network of firms in India having affiliation with the global network of DTT. The gross subscription fees for India member firms and companies are paid by DHS Mumbai. The DHS Mumbai has deducted the tax on gross fees. The assessee has contributed its share to DHS Mumbai. The contribution for subscription fees has been made onthe basis of proportion of revenue earned by the respective member firm to the total revenue of Deloitte firms/companies in India. The contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a local network within the global network therefore, the payment was made to DHS Mumbai without deduction of tax atsource. For the sake of business purposes assessee is a member of local firm. But for taxation purposes it is a separate and distinct entity. The AO further noted that the assessee has denied that the DHS Mumbai or DTT are related parties under the Income tax Act. If they are not the related parties under the Act then how the assessee can claim that the payment was reimbursement to the DHS Mumbai. Assessee is free to make a transaction as and when required. At the same time application of the provisions of the Act cannot be ignored on the pretext of association. Assessee has no right to say that it was reimbursement to DHS Mumbai. It is for DHS Mumbai to decide whether the receipt from the assessee is income or expenses or reimbursement. For assessee, the payment was an expenditurewhich was debited in the profit and loss accounts. Hence the provisions of Chapter XVII of theIncome tax are applicable. From the Account of DHS Mumbai, which was submitted during thecourse of assessment proceedings, it is revealed that the receipt from the assessee was credited in the subsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee s contribution/share of ₹ 48,95,212/- comprised it share of ₹ 31,86,534/- for the relevant previous year and differential share of ₹ 17,08,679/- paid for the earlier years being the difference between the contribution payable on the basis of the revenue and contribution already paid earlier for those years and was claimed in line with the cash system of accounting followed by the assessee. The assessee produced debit notes issued by DHS, Mumbai as supporting evidence. The assessee has to pay subscription fees through Delloite, Haskins and Sells, Mumbai (DHS, Mumbai) for this purpose to DTT. However, as DHS, Mumbai makes the payment after deducting TDS and the assessee only reimburses its share of expenses, tax was not required to be deducted again in respect of its reimbursement of share of expenses of ₹ 48,95,212/- to DHS, Mumbai. We note that it is not the case of the AO that the expenses were not genuine. It is also not the case of the AO that the expenses were not incurred wholly and exclusively for the purposes of business or profession. The assessee has claimed the expenses in accordance with its cash system of accounting and the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormity and mutual compatibility. Accordingly, arrangement was arrived at for such services to be developed in a pool by the said two concerns to which the member firms would have access to it and reimbursing their respective shares of cost incurred therefor. Such reimbursement was agreed on the basis of respective turnover of the member firms. These facts are not denied by the revenue and these are reimbursement of expenses. Once these are reimbursement of expenses, the assessee is not liable to deduct TDS u/s 195. Accordingly, the order of the Commissioner (Appeals) is to be confirmed. Therefore, we note that the said amount of ₹ 48,95,212/- was towards the reimbursement of the expenses, which was in fact incurred on behalf of the assessee and there was no profit element. That being so, we decline to interfere with the order of Id. C.I T.(A) deleting the aforesaid addition. His order on this addition is, therefore, upheld and the ground No.1 raised by the Revenue in ITA No.587/Kol/2016 and ground No.2 raised by Revenue in ITA No.588/Kol/2016, are dismissed. 12. Ground No.2 raised by Revenue in ITA No.587/Kol/2016 and ground No.1 raised by Revenue in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. On appeal by the assessee, the ld. CIT(A) deleted the addition made by the Assessing Officer.Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 15. The ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in ourearlier para and is not being repeated for the sake of brevity. However, the Ld. Counsel for the assessee has defended the order passed by the ld. CIT(A). 16. We have given a careful consideration to the rival submissions and perused the material available on record, we note that the assessee has furnished copy of the rent agreement, to the assessing officer to show that laptops were taken on rent by DTTIPL. There is no material on record to show that the assessee had taken the laptops on rent directly. That the payment has been made by the assessee to DTTIPL is also not disputed by the assessee. The details on record including the details of apportionment of rent on the basis of number of employees of the participating user entities goes to show that the essence of the transaction was obtaining on lease of laptops by DTTIPL for use by employees of various conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We note that there is no change in facts of the assessee under consideration and this ratio is squarely applicable to the facts of the assessee's case. That being so, we decline to interfere with the order of Id. CIT(A) deleting the aforesaid addition. His order on this addition is, therefore, upheld and the ground No.2 raised by the Revenue in ITA No.587/Kol/2016 and ground No.1 raised by Revenue in ITA No.588/Kol/2016, are dismissed. 17. Ground No.3 raised by the Revenue in ITA No.587/Kol/2016 and ground No.3 raised by Revenue in ITA No.588/kol/2016, relate to addition of indemnity insurance expenses incurred for the purpose of business. 18. The brief facts qua the issue are that the assessee has debited a sum of ₹ 8,64,239/- as insurance professional indemnity. During the assessment proceedings, the assessee was asked to explain the nature of expenses and how it is an allowable expenditure under the Act. In response, vide letter dated 29.01.2013, the assessee submitted that professional indemnity insurance(PII) has been taken from IFFCO-Tokio Insurance Company to protect their firm from loss arisingfrom any claim made against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself against loss arising out of damages etc. claimed from it in consequence of wrongful act in connection with professional business. Therefore, the assessee is not insured for unlawful acts or acts opposed to public policy or law. The fact that the policy has to be renewed every year by paying renewal premium precludes any enduring benefits resulting from the policy and the payment of the premium is clearly to cover losses to the business. Thus, the expenditure on professional indemnity insurance has been incurred wholly and exclusively for the purpose of business and is an admissible deduction. For that we also rely on the judgment of the Coordinate Bench of Mumbai Tribunal, in the case of M/s. A.F. Ferguson Associates vs. ACIT in ITA No.6962/M/2012, wherein it was held as follows: 5. Ground No.2 relates to the disallowance on account of premium paid for professional indemnity insurance. The AO disallowed the insurance premium expenditure of ₹ 2,10,000/- observing that the said expenditure was made on the life insurance of the partners of the firm. Since the above payments were made on the personal insurance of the partners and the expenses were not related t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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