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TMI Blog2019 (10) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... rates and, therefore, there was no loss of revenue. We are in full agreement with these observations and findings of the Ld. first appellate authority in this regard. DR could not point out if there was any perversity in these factual findings recorded by the Ld. first appellate authority - disallowance has been rightly deleted by the Ld. first appellate authority - Decided against revenue. Disallowance pertaining to subscription payments @ 25% - reason for AO for making the disallowance was that the same were excessive and not wholly and exclusively incurred for the purpose of the professional activities of the assessee - HELD THAT:- FAA while deleting the disallowance, has noted that the assessee firm contributes by way of subscription fees to Deloitte Global Services Holding Ltd and Deloitte Shared Services India (Pvt.) Ltd which is a global network of International Association of firms and companies rendering professional services. CIT (Appeals) had accepted the assessee s contention that the assessee s firm being a member of this global network and having Deloitte in its name brings in professional work in the form of reference by other member firms. CIT (Appeals) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee approached the Ld. first appellate authority against the said disallowances. The Ld. Commissioner of Income Tax (Appeals) gave relief to the assessee in respect of all the three disallowances and deleted the additions. Now, the Department is before the Tribunal and has challenged the action of the Ld. first appellate authority in deleting the disallowances made by the assessing officer. 2.2 In assessment year 2014 15, the return of income was filed declaring an income of ₹ 6,60,19,600/-. The assessee s return was initially processed under section 143 (1) of the Act and the case was subsequently selected for scrutiny under the CASS guidelines. The assessment was completed at an income of ₹ 10,96,56,092/- after, inter alia, making the following disallowances (i) Disallowance of interest expenses ₹ 2,27,87,141/- (Identical to assessment year 2013-14) (ii) Disallowance out of subscription payments - ₹ 80,22,170/- (Identical to assessment year 2013-14) (iii) Addition in respect of payments made to retired partners deducted from professional receipts ₹ 1,28,27,181/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that the transaction with DTTIPL was in the nature of a business transaction. It was also submitted that the assessee would not establish the commercial expediency in giving interest free loans to its associated concern. 3.1 With respect to the second issue in dispute before us which is regarding the deletion of disallowance out of subscription expenses, the Ld. senior departmental representative submitted that the assessee could not give any specific details regarding the services received from the parties to whom the subscription fee had been paid. It was submitted that in absence of clear description of the services received, the assessing officer had no option but to make a disallowance. It was submitted that it could not be established that these expenses had been incurred wholly and exclusively for the purposes of business. It was submitted that 25% disallowance out of subscription expenses in both the assessment years was a reasonable disallowance given the facts and circumstances of the case. 3.2 With respect to the third issue in dispute in assessment year 2013 14 being disallowance of interest on service tax, the Ld. senior d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy has to be judged from the view point of the businessman. It was further emphasised that no similar disallowance had been made in earlier assessment years. It was submitted that the Ld. first appellate authority had rightly deleted the disallowance in both the assessment years. 4.1 With respect to the second issue in dispute, i.e. the disallowance pertaining to subscription payments, it was submitted by the Ld. authorised representative that evidently this disallowance was in the nature of an ad hoc disallowance. The Ld. authorised representative submitted that the ITAT benches of Kolkata and Delhi have deleted similar disallowances in assessee s group concerns. It was further submitted that in assessment year 2010 11 also a similar disallowance had been made which had been deleted by the Ld. first appellate authority and the Department had not preferred further appeal against this deletion by the Ld. CIT (Appeals) and, thus, it was apparent that the Department had accepted this position. 4.2 With respect to the issue regarding interest on delayed payment of service tax it was admitted that the nature of interest was compensatory in nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etwork was to ensure cooperation amongst members and thereby enhance their respective capability to carry on professional practice. It has been noted by the Ld. first appellate authority that the assessee has demonstrated that subsequently DTTIPL has raised debit notes on the assessee for services rendered and, thus, it has been amply demonstrated that DTTIPL and has provided services of its resources against which the advances made by the assessee were adjusted. It has also been observed by the Ld. first appellate authority that there was commercial expediency in giving advance to DTTIPL as both the assessee firm and DTTIPL were in the same line of profession. The Ld. first appellate authority has reached a conclusion that there was a business relationship between the assessee and DTTIPL and, therefore, the advances given by the assessee firm could not be said to be not having any link with the assessee business and, therefore, proportionate disallowance of interest was not warranted. Further the Ld. first appellate authority has also noted that it cannot be said that the assessee does not have a continuous business relationship with DTTIPL. The Ld. CIT (Appeals), while deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices India (Pvt.) Ltd which is a global network of International Association of firms and companies rendering professional services. The Ld. CIT (Appeals) had accepted the assessee s contention that the assessee s firm being a member of this global network and having Deloitte in its name brings in professional work in the form of reference by other member firms. The Ld. CIT (Appeals) has also noted that a similar disallowance had been made in assessment year 2010 11 which had been deleted by the Ld. first appellate authority. We also note that the Department did not file any further appeal against this deletion made by the Ld. CIT (Appeals) in assessment year 2010 11. We also note that an identical issue had come up before ITAT Delhi bench in assessment year 2009 10 and vide order dated 23/10/2018 in the case of assessee s related concern, ITAT Delhi bench, in the case of Deloitte Haskin Sells vs. ACIT in ITA No. 2927/Del/2013 had deleted an identical disallowance after duly considering similar favourable decision of Kolkata bench in assessee s related concern in the case of Deloitte Haskins Sells in ITA Nos. 587 588/Kol/2016 for AY 2010-11 and 2011-12 vide order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure. We find that an identical issue had come up before ITAT Chennai bench in the case of a related concern of the assessee in assessment year 2011 12 and the ITAT Chennai bench in ITA No. 2077/MDS/2016, vide order dated 25/11/2018, after relying on an order of ITAT Mumbai Bench in the case of CC Chokshi Co. for assessment years 2000 01 and 2001 02 had held the issue in favour of the assessee. The Hon ble High Court of Bombay in the case of DCIT versus Wadia Ghandy Company, vide judgement dated 12/02/2019, also upheld an identical order of ITAT Mumbai and noted that payment to the partner would amount to diversion of income at source by overriding title. The court went on to observe that it was not necessary to refer to long line of decisions where a similar view in similar circumstances had been taken. The undisputed facts are that the partnership firm envisaged payment to a outgoing partner on the basis that the partner would have rendered service during his tenure as a partner of the firm but could not enjoy the fruits thereof on account of the fact that the work having remained incomplete, the concerned client had not been b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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