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TMI Blog2021 (2) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... rther the CIT(A) erred in confirming the same disallowance on an altogether new basis . 3) That the Id. CIT(A) has erred in law as well as facts of the case by confirming the disallowance of Rs. 86,41,053/- being reimbursement of expenses by the appellant to its wholly owned subsidiary in United states for development of its business in United States of America :- i) on the basis that the said expenses have not been incurred wholly and exclusively for the purpose of the business. ii) on the basis that these expenses have been made by its Subsidiary company which is a separate legal entity for tax purposes in the United States. iii) without properly considering the evidence produced and material placed and made available on record in respect of expenses incurred and claimed by the appellant. 4) The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing. ITA No. 5964/Del/2016, A.Y. 2011-12 1) That the Id. CIT(A) has erred in law and on facts in confirming the disallowance of expense made by Assessing officer amounting to Rs. 44,57,472/-. 2) That the Id. CIT(A) has erred on the facts and in law by n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... United States. 5) The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing." (A.1) In the course of appellate proceedings in Income Tax Appellate Tribunal three paper books were filed by the assessee, containing the following particulars : S. No. Particulars 1. Submissions before the Hon'ble ITAT 2. Assessment order u/s 143(3) of the I. Tax Act. 3. Form No. 35 along with Grounds and Statement of facts 4. Revised Grounds of Appeal vide letter dated 17.02.2015 5. First submission before CIT(A) 6. Additional Submission before CIT(A) 7. Letter to AO dated 20.07.2012 along with Balance Sheet & ITR of Energy Infratech Inc. 8. Note on business Development activities filed with AO 9. Complete set of Balance Sheet of Energy Infratech Pvt. Ltd. 10. Reply to CIT(A) vide letter dated 12.03.2014 11. Reply to CIT(A) vide letter dated 20.03.2014 12. Reply to CIT(A) vide letter dated 20.06.2014 13. Reply to CIT(A) vide letter dated 10.05.2016 14. Order passed by CIT(A) dated 08.06.2016 15. Assessment order u/s 143(3) of the I. Tax Act 16. Form No. 35 along with Grounds and Statement of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company decided to explore the business opportunities in USA and other markets abroad. It is a trend in USA that they preferred USA based entities for availing servicing rather than the importing the services. Keeping these local requirements of USA clients, the assessee company has set up wholly owned subsidiary in USA instead of opening the branch of the company for marketing operations. The functional of the subsidiary companies is to procure consultancy assignment to the parent company for marketing commission or for reimbursement of actual expenses incurred by it. In case of failure to procure business for reasons beyond its control. In the process Energy InfratechInc. incurred expenses under various heads such as rent, salaries, telephone, travel and conveyance etc. and claimed reimburse submitting all necessary bills and documentary proof and claimed reimbursement from the^company^vhich were paid on quarterly basis". The submission of the assessee onThis point was considered but not acceptable because it is very clear that the foreign subsidiary in its return of income is already taking the allowances of expenses incurred by it in its return of income. So the reimburseme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income from any source in India. Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of april, 1976, and approved by the Central government. Explanation 1- for the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976 shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2 - for the purposes of this clause, " fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries". In this case, the services provided by the non-resident company i.e. Energy Infratech Inc. are being utilized in India and clearly taxable u/s 9(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id disallowance, holding as under :- "2.1. Having gone through the submissions of the appellant, the order of assessment passed by the Assessing Officer and the material facts placed on the record, it emerges from the facts that a subsidiary by the name "Energy Infratech Inc." in USA who is a separate tax entity and assessed to tax in the United States of America expended the amount of Rs. 86,41,053/- which has been claimed as expenditure incurred by the assessee in connection with exploration of business in the United States of America. The Assessing Officer noted during the assessment proceedings that the assessee has debited expenditure of Rs. 86,41,053/- in its books of accounts which pertain to the subsidiary expended in the United States. It is claimed that the company was exploring the business avenues in the United States and the expenditure has been made wholly and exclusively for the business conducted by the company. It is a matter of record that the appellant was unable to bring on record any details of the business conducted in the United States. The counsel of the appellant was directed by this office on numerous occasions as evident from the order sheet to adduce e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adduced to show that the EII made concerted effects to locate any business arrangements in USA. The Ld. Counsel submitted that this reasoning for disallowance was not adopted by the Assessing Officer and the Ld. CIT(A) departed from the reasoning of the Assessing Officer for making the disallowance. He drew our attention to the assessment order to show that disallowance was made by the Assessing Officer on the ground that the amount claimed by the assessee was a double deduction; and further that claim was hit by Section 40(a) of Income Tax Act. He further drew our attention to the fact that the validity of these grounds for making the disallowance was not adjudicated by the Ld. CIT(A); and instead the Ld. CIT(A) followed a entirely different reasoning, as aforesaid, for confirming the disallowance. The Ld. Counsel submitted that the assessee had got no opportunity to make submissions before the Assessing Officer in respect of the reasoning adopted by the Ld. CIT(A). He submitted that the issue may be restored to the file of the Assessing Officer so that the assessee is able to produce the relevant details and to file necessary submissions before the Assessing Officer in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4801/Del/2016, A.Y. 2010-11 is thus partly allowed for statistical purposes. (G) In assessment year 2011-12 similar disallowance of Rs. 44,57,472/- was made by the Assessing Officer, which was likewise confirmed by Ld. CIT(A) in the impugned appellate order for assessment year 2011-12. Present appeal vide ITA No. 5964/Del.2016 has been filed by the assessee against the impugned order of Ld. CIT(A), for assessment year 2011-12. Also, for assessment year 2012-13, similar disallowance of Rs. 15,68,254/- was made by the Assessing Officer, which was likewise confirmed by the Ld. CIT(A) in impugned appellate order for assessment year 2012-13. Present appeal vide ITA No. 5410/Del/2018 has been filed by the assessee against the impugned appellate order of the Ld. CIT(A) for A.Y. 2012-13. The reasoning followed by the assessing officer for making the aforesaid disallowances in assessment year 2011-12 and in assessment year 2012-13 is the same as the reasoning followed by him in assessment year 2010-11. Moreover, the reasoning followed by the Ld. CIT(A) for confirming the aforesaid disallowances in assessment year 2011-12 and 2012-13 are also the same as the reasoning followed by him for as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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