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TMI Blog2021 (3) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee . AO has failed to record any satisfaction with regard to the correctness of the claim of the assessee that it has not incurred any expenditure. The learned assessing officer did not cite any of the expenditure in the profit and loss account of the assessee, which is incurred by the assessee for earning of the exempt income. There is not even a whisper of examination of books of account of the assessee to verify the correctness of the claim of the assessee that no expenditure was incurred for earning exempt income. Therefore, in absence of any satisfaction recorded by the learned AO with respect to the examination of the books of account of the assessee to verify the correctness of the claim of the assessee, the disallowance u/s 14A cannot be sustained. Since we have already deleted the disallowance u/s 14A of the Act in normal computation of total income, we direct the Assessing Officer to delete the above addition while calculating the book profit u/s 115JB of the Act. This common grievance in all the appeals is allowed. Levy of interest u/s 234C - HELD THAT:- In so far as levy of interest u/s 234C is concerned, we direct the Assessing Officer to levy interest on the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal in ITA No. 5435 and 5436/DEL/2012 claiming that this is not the bench to consider these appeals and should be heard by the regular bench assigned to hear such appeals. 3. We do not find any merit in this objection of the ld. DR. The Tribunal, while granting stay in appeal in ITA No. 8452/DEL/2019 in SA No. 1001/DEL/2019 order dated 01.11.2019 had made it very clear that other appeals of the assessee on similar issue have been fixed before the bench on the same date. 4. Since common grounds are involved in the captioned appeals, they were heard together and are being disposed off by this common order for the sake of convenience and brevity. 5. Ground No. 1 in all the appeals is of general in nature and needs no adjudication. 6. Common Ground Nos. 2 to 2.6 in all the appeals relate to the disallowance of depreciation on goodwill. 7. Briefly stated, the facts of this quarrel are that during the A.Y. 2010-11, the appellant entered into an Asset Purchase Agreement [APA] on 04.11.2009 and subsequent amendment thereto on 01.03.2010 with American Express India Pvt Ltd to acquire Global Travel Service Centre as a going concern for a lumpsum consideration on slump sale basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failure of the assessee to establish the existence of goodwill and the price / valuation of the same. The assessment order on the Page 19/20 mentions that the purchase price of the undertakings was approximately INR 1350 million out of which the goodwill was recognized at 769 million INR. The purchase consideration included 476 million INR in respect of the customer relationships, which had been sold to M/s Exl Services holdings Inc, the parent company. Though, the AO has referred to the findings in the assessment order of the A.Y. 2010-11 and has also mentioned the pendency of the appeal of the Revenue before the ITAT as one of the reasons for the disallowance, the main reason for disallowance was that the appellant actually did not have any goodwill and the valuation of the goodwill, if any, as claimed by the appellant was not correct. 8.2 It was in this background that the matter was further investigated and it was learnt that the facts before Hon'ble ITAT / DRP in A.Y. 2010-11, which formed the basis of the decision of DRP/ITAT in A.Y. 2010-11 were slightly different from the actual facts in A.Y. 2011-12 and 2012-13. The DRP's in its order for A.Y. 2011-12 has simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sement by associated enterprises to the company could be regarded as the arm's price. 8. In the various attachments of this report, the total amount paid/received or payable/receivable as per books of the company is the total amount for each class of transactions for assessment year 2011-12, listed for each associated enterprises. 9. In determining the operating margin for each class of international transactions, the indirect costs have been allocated based on appropriate assumptions as determined by the management. 10. The company has certified that there are no transactions, other than those disclosed in attachments II and III that have been made with associated enterprises or persons specified in attachment I." 10.2 In the order u/s 92CA(3) for A.Y. 2011-12 there is no discussion of this transaction except reproduction of its description, apparently on the presumption that it is reimbursement of cost of customer relationship benefit to the company without any mark up 10.3 As is evident from the above discussion and record of appellate proceedings (supra) the appellant did not explain in explicit terms the working of the goodwill in the assessment / appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 302/DEL/2015. It is the say of the ld. counsel for the assessee that the ld. CIT(A) failed to give credence to the fact that the business was acquired on slump sale basis for ₹ 1334.15 million and out of the said total consideration, ₹ 476 million was to be received by the assessee from its parent company. 14. The ld. counsel for the assessee drew our attention to the relevant part of the financial statements of the assessee and pointed out that under Schedule IX of the financial statement for the year ending on 31.03.2010, an amount of ₹ 476 million has been shown under "Other Current Assets" to be read alongwith Note 4 to Schedule 18 to the financial statement. The ld. counsel for the assessee stated that this amount has been received by the assessee in the next F.Y. 15. Per contra, the ld. DR strongly supported the findings of the ld. CIT(A) and read the relevant observations of the first appellate authority. 16. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we have to state that this is not the initial year of claim of depreciation. In our considered opinion, unless the claim is disturbed in the initial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, which should be owned by the assessee. He submitted that it is merely an accounting entry which does not result into an asset automatically. He relied upon the order of the learned assessing officer. 40. The learned authorised representative submitted that the issue squarely covered in favour of the assessee by the decision of the coordinate bench for assessment year 2000 - 11 in ITA number 302/del/2015 at para number 74 of the order. 41. We have carefully considered the rival contention and perused the orders of the lower authorities. As stated by us earlier that this issue is not a new as the claim of the depreciation on the goodwill has already been allowed to the assessee in assessment year 2010 - 11 by the coordinate bench vide para" 18. It can be seen from the findings of the co-ordinate bench that it has respectfully followed the findings given in A.Y 2010-11. In A.Y 2010-11, in ITA Nos. 302/DEL/2015 and 615/DEL/2015, this issue was considered by the co-ordinate bench at para 65 and onwards of its order and the relevant findings of the Tribunal read as under: "71. We have considered the submissions of both the parties and perused the material available on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find any merit in the disallowance made by the Assessing Officer and upheld by the ld. CIT(A). We, accordingly, direct the Assessing Officer to delete the disallowance in the captioned A.Ys. The common grievance is allowed in the captioned appeals. 21. Second common grievance relates to disallowance made u/s 14A r.w.r 8D of the Rules. 22. We are taking the facts for A.Y 2012-13 in which year the assessee earned dividend income of ₹ 3,70,22,149/- from investments held in mutual funds which was claimed to be exempt u/s 19(34) of the Act. The investments are in mutual funds namely, ICICI Prudential Plan, Birla Sunlife Cash Plus Institutional Plans and HDFC Mutual Fund and earned dividend on daily basis on such investment. 23. The Assessing Officer straightaway applied Rule 8D of the Rules invoking provisions of section 14A of the Act mechanically and made the impugned disallowance. 24. The ld. CIT(A) upheld the findings of the Assessing Officer following the order of the DRP for A.Y 2010-11. 25. Before us, the ld. counsel for the assessee stated that such disallowances were deleted by the Tribunal in earlier A.Ys. It is the say of the ld. counsel for the assessee that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned transfer-pricing officer. 16. We have carefully considered the rival contention and perused the orders of the lower authorities. As in the present case the assessee has been granted the working capital adjustment while computing the arm's-length price of the international transaction of the sale of services, according to us no separate benchmarking should be done of the outstanding receivable as outstanding receivable are part of the working capital of the assessee. Further the issue is squarely covered in favour of assessee by the decision of the honourable Delhi High Court in case of Principal Commissioner Of Income Tax Versus Kusum Healthcare Private Limited (supra). Therefore ground number two of the appeal of the assessee is allowed and learned transfer pricing officer/learned assessing officer are directed to delete the addition of ₹ 3 55509/- in relation to the delay in receipt of receivable from associated enterprise. 17. Ground number 4 to 8 of the appeal are not pressed and therefore those grounds are dismissed. 18. Ground number 9 of the appeal is with respect to the disallowance of depreciation claimed by the appellant at the rate of 60% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is against the disallowance of 1,252,630 u/s 14A read with rule 8D of the income tax rules. The fact shows that during the year the appellant has earned a dividend income of ₹ 1 86,74,678 from investment held in mutual funds which was exempt u/s 10 (34) or (35) of the income tax act. The details of the above dividend income show that assessee has earned such dividend income on mutual funds of liquid plan, cash plus plan and other mutual funds. The learned assessing officer noted that it is unbelievable that no expenditure was incurred by the appellant in earning such income and made disallowance of 1,252,630 being 0.5% of the average value of investment related to the tax free income in terms of Section 14 A of the act by invoking the provisions of rule 8D (iii) Of the income tax rules. The learned dispute resolution panel on objection before it followed its own order for assessment year 2010 - 11 and upheld the findings of the learned assessing officer. 23. The learned authorised representative challenged the above addition on the fact that no satisfaction was recorded by the assessing officer having regard to the accounts of the assessee, which is mandatory. He r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. On the basis of this the learned assessing officer straightway asked the assessee to explain as to why the disallowance u/s 14 A read with rule 8D should not be made. The assessee submitted its reply on 6th January 2015 stating that the assessee has not incurred any expenditure in relation to the earning of such exempt income. The learned assessing officer in para number 7.2 held that it is unbelievable that for earning an income of 1.86 crores no expenditure was made by the assessee. He noted that it is pertinent that the assessee has not provided the details of such expenses as are directly attributable to and which are necessarily required for making / maintaining investment in shares and mutual funds and earning there from. Therefore, he held that he is not satisfied with the correctness of the claim of the assessee that no expenditure has been incurred in respect of such expenditure in relation to income, which does not form part of the total income under this act. Thereafter he proceeded to compute the disallowance applying the provisions of rule 8D and computed such disallowance at 1,252,630. On careful consideration of the reasons given by the learned assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Chambal Fertilizers and Chemicals Limited in ITA No. 52/2018 order dated 31.07.2018 has held that education cess is an allowable deduction while computing the income under the head "Profits and gains from profession or business". 35. Even the CBDT, in its Circular No. 91/58/66-ITJ(19) dated 18.05.1967 has clarified that the word "Cess" has been omitted from clause and effect of omission of the word "Cess" is that only taxes paid are to be disallowed in the assessments for the years 1961-63 onwards. 36. In light of the decision of the Hon'ble Rajasthan High Court [supra] we direct the Assessing Officer to allow claim of deductibility of cess from the income in the captioned A.Ys. Additional ground in all the appeals is allowed. 37. In ITA No. 8452/DEL/19 the solitary issue which needs to be adjudicated relates to the enhancement of income of the assessee by ₹ 19,87,075/- holding that the international transaction pertaining to the provision of corporate guaranteed to the bank on behalf of the AE does not satisfy the Arm's length principle. 38. Briefly stated, the facts of this quarrel are that ExsService.INC, AE of the assessee was having tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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