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TMI Blog2021 (7) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and added the same to the total income of the assessee which was, in turn, deleted by the Ld. CIT(A) - HELD THAT:- Except numerical differences in the absence of any changed circumstances we do not find any reason in interfering with the order passed by the Ld. CIT(A) in deciding the issue in favour of the assessee by holding the assessee is not in default under Section 201(1) of the Act and further that the provision of Section 40(a)(ia) of the Act will not be applicable in respect of the freight charges in the present facts and circumstances of the case. As passed in the case of DCIT Bharuch vs. Hasmukh J. Patel,[ 2011 (3) TMI 353 - ITAT, AHMEDABAD] wherein the identical facts, where the parties acted as agent of non-resident shipping companies and such payment in foreign currency to such non-resident shipping company duly permitted by RBI guide line in view of the special provision as provided under Section 172 of the Act we hold that in that case TDS deduction is not required under Section 194C of the Act and, thus, provision of Section 40(a)(ia) is not applicable to the facts and circumstances of the case in hand. Claim of depreciation on car, insurance on car and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on facts in deleting the addition made u/s. 2(22)(e) of the Act. (2) The ld. CIT(A) has erred n law and on facts in deleting the addition of ₹ 1,13,91,826/- made u/s. 40(a)(ia) of the Act, especially when the assessee has failed to bring any evidence of record that the payments made are covered under Circular No. 723 of 1995 and that the non-residents ship owners/charters had filed returns u/s 172 of the Act. (3) The ld. CIT(A) has erred in law and on facts in holding that the provisions of section 40(a)(ia) are not attracted in case where tax has been deducted improperly/inadequately. (4) The ld. CIT(A) has erred in law and on facts in deleting the disallowance made on interest and insurance expenses claimed on vehicle. (5) The ld. CIT(A) has erred in law and on facts in partly deleting the disallowances made of depreciation and incidental expenses claimed on vehicle. (6) The ld. CIT(A) has erred in law and on facts in deleting the addition made of ₹ 34,04,016/- on account of under invoicing of sales made to sister concern. 2. Ground No.1:- The deletion of addition of ₹ 1,01,59,839/- made under Section 2(22)(e) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from that the lender company namely Bajaj Foods Ltd. is a public limited company i.e. company in which public is substantially interested. It is a settled principle of law that Section 2(22)(e) can only be invoked when the lender company is not a company in which public is substantially interested and, thus, on this score the impugned addition is not justified as also the case made out by the assessee. While dealing with the issue in favour of the assessee the Ld. CIT(A) observed as follows:- ...it is undisputed that appellant was in receipt of loan of ₹ 11510516/- from M/s. Bajaj Food Ltd. and three of the directors of appellant Having equal share holding aggregating to 29.30% of share holding in appellant company while 29.94% in M/s. Bajaj Food Ltd.. The A.O. after observing the accumulated profit of ₹ 10159839/- as on 13/03/2009 in M/s. Bajaj Food ltd. invoked the provision of section 2(22)(e) of the Act relying on ratio of Hon'ble ITAT order in the case of Skyline Corn Pvt. Ltd. The appellant in appeal submitted that M/s. M/s. Bajaj Food Ltd. is not closely held company, as per the share holding pattern of both appellant as well as M/s. M/s. Bajaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of C.I.T.-1 vs Daisy Packeres P. Ltd. in tax appeal 212 of 2010 order dt. 18/03/2012 where in Hon'ble high court considered following facts and held. This tax appeal has been filed by Revenue challenging the order of the Tribunal and this Court had admitted the appeal on the following question of law. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in reversing the order of CIT(A) and thereby deleting the addition made on account of deemed dividend u/s.2(22)(e) of the Act on inter-corporate deposits? 2.0 The brief facts are that the assessee filed return of income for the Assessment Year 2000- 01 declaring a loss of ₹ 4,22,792/-. The return was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short 'the Act') and income of the assessee was declared under Section 115JA of the Act. Thereafter the case was reopened under Section 147 of the Act which was served on the assessee of the case of the department was that the Amigo Brushes Pvt. Ltd. had a total surplus of ₹ 70 lacs as on 31st March 1999 and it has advanced a loan to the assessee to the tune of ₹ 25 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share holder of the lending company, held in favour of assessee, Hon'ble Bombay High-Court following Supreme Court judgement in the case of CIT vs. Vatika Township 2015 (1)SCC 1 held that Thus on strict interpretation of section 2(22)(e) of the Act, unless the Respondent Assessee is the share holder of the company lending him money, no occasion to apply it can arise. The appellant also relied on Hon'ble Karnataka high court in the case of Sarva Equity P. Ltd. (2014) 214 taxmann.com 28(Karnataka) wherein on this issue, ratio of Hon'ble Delhi high court in the case of National Travels Services (supra) was considered but held in favor of assessee. It is therefore, the question of legal binding of ratio of Hon'ble Jurisdictional high court comes into picture. Other Hon'ble high court also held in favors of assessee on the issue that provisions of section 2(22)(e) of the Act is applicable to loan advance transaction between a company and registered shareholder and not beneficial share holder. Though, as discussed above, the basic objective as per Board circular No. 495 dt. 22/09/2008 as considered and interpreted by Hon'ble Delhi high court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred by the Revenue is found to be devoid of any merit and hence, dismissed. 8. Ground Nos. 2 3:- These grounds relate to disallowance of ₹ 1,13,91,826/- made under Section 40(a)(ia) of the Act. 9. The Ld. AO considered payment of impugned amount made to five parties in respect of freight and forwarding expenses rejecting the appellant s contention that TDS is not applicable for the freight expenses to non-resident shipping agencies agent and added the same to the total income of the assessee which was, in turn, deleted by the Ld. CIT(A) with the following observation:- From the verification of such bills it has been gathered that bills are raised to appellant with composite amount reflecting freight expenses in foreign currency i.e. US dollar converted into rupees of that date with other charges like terminal handling, documentation etc. in Indian rupees. The appellant's contention that payment in foreign currency by these parties to the non resident shipping company is on account of they are being agent and permitted by RBI guide line found to be justified in view of board circular no. 723 dt. 19/09/1995 and ratio of various case laws relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia) of the Act. The Learned AO discussed payment of such amount to eight parties in respect of expenses on account of deduction of TDS upon rejecting the appellant s contention that TDS was deducted as per the provisions on the basis of evidences being photocopies of the invoices raised by these parties. However, the Learned CIT(A) while dealing with this ground observed as follows:- (B) Ground no. 2 is against the disallowance of freight expenses of ₹ 34,14,124/- u/s. 40(a)(ia) of the Act. The A.O. in the impugned order considered payment of ₹ 34,14,124/- to eight parties in respect of freight and forwarding expenses (already discussed para 4A above) and rejected appellant s explanation that due TDS was deducted as per the provision s as evidenced by photo copies of invoices raised by these parties (submitted by appellant and verified by A.O.) on the amounts attributable to servicing and handling charges and not reimbursement. The A.O. also rejected appellant s contention about non application of TDS for the freight expenses to non resident shipping agencies agent. The appellant in appeal reiterated its contention with copies of such invoices and emphasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. I am inclined with appellant that out of the total composite bill if TDS is deducted from terminal handling charges, documentation charges, container repo charges etc. as per prescribed rate u/s. 194C of the Act, then the issue becomes about inadequacy/improper deduction of TDS for total amount of composite bill. In this situation the appellant cannot be held in default u/s. 201(1) of the Act and provisions of section 40(a)(ia) of the Act will not be applicable. It is, therefore, considering the facts and judicial preposition, the A.O. is directed to allow such expenses and delete the addition so made of ₹ 3414124/-. The appellant gets relief accordingly. This ground is allowed. Heard the parties, perused the relevant materials available on record. 10. It is the case of the assessee that while exporting its goods, it books the container of various foreign shipping companies through their offices in India/clearing and forwarding agents (C F) who deal with the office of such shipping companies. In fact upon receipt of bills for freight and other related charges of shipping companies the assessee pays to clearing and forwarding agents, who in turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch vs. Hasmukh J. Patel, reported in (2011) 10 taxmann.com 229 (Ahd) wherein the identical facts, where the parties acted as agent of non-resident shipping companies and such payment in foreign currency to such non-resident shipping company duly permitted by RBI guide line in view of the special provision as provided under Section 172 of the Act we hold that in that case TDS deduction is not required under Section 194C of the Act and, thus, provision of Section 40(a)(ia) is not applicable to the facts and circumstances of the case in hand. Thus, the ground preferred by the Revenue is found to be devoid of any merit and hence, dismissed. 12. Ground Nos. 4 5:- These grounds are interlinked in respect of the claim of ₹ 64,568/- being depreciation on car, ₹ 26,569/- of insurance on car and interest of ₹ 44,409/- for the loan taken for purchase of the car, petrol expenses of ₹ 28,715/- and repairing expenses of ₹ 29,457/- related to the car. 13. We have heard the respective parties, and we have also perused the relevant materials available on record. The Ld. AO observed that the car was purchased in the name of the Director Shri Sanjay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There cannot be any presumption regarding incurring of loss by the assessee since as per the settled legal proposition, the onus is on the assessee to prove that conditions for claiming the deduction are fulfilled or that an expenditure or loss has been incurred by him. Though the A.O. has disallowed entire depreciation and incidental expenses but the provisions of section 38(2) of the Act specifically provided to handle such situation i.e. appellant can claim depreciation for the asset even if the same is partly used to the extent of proportion of its use. In the absence of any detail provided by appellant, I treat that the vehicle so purchased and registered in the name of director is partly used by appellant company for business purpose to the extent of 75% while balance 25% is used for either personal purpose of director or not wholly and exclusively for the purpose of appellant's company business. It is therefore the depreciation claim and other incidental expenses related to use of this vehicle is allowable to the extent of 75%. In respect of disallowances of interest and insurance, since it has been held that motor car was purchased from loan fund and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settled principle of law that though cars are brought by a company the name of its director, the company is eligible for claiming depreciation on the same. In this regard, the assessee relied upon the judgement passed in the matter of CIT vs. Aravalli Finlease reported in 341 ITR 282(Guj) which we have carefully perused. 16. As we find that the Learned CIT(A) deleted additions made in respect of Interest ₹ 82,121/- and Insurance ₹ 23,370/- ; However, addition in respect of Depreciation ₹ 1,36,000/- and car expense ₹ 28,995/- has been partly deleted to extent of 75% i.e. 25% which according to us is unambiguous taking into consideration of the assesses books of accounts maintained in regard to the said asset as it appears from the records and thus we uphold the same. Hence, this ground of appeal preferred by the Revenue is dismissed. 15. Thus, taking into consideration the entire aspect of the matter respectfully relying upon the order passed by the Ld. Tribunal in the absence of any changed circumstances, we do not find any reason to interfere with the order passed by the Ld. CIT(A). Thus, the ground preferred by the Revenue is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant s case. The export transaction are subject to determination of arms length price (ALP) for which A.O. neither referred the case to TPO nor he adopted any of such methodology. The comparative chart as submitted by appellant is part of this order which is got verified from the bills and also from the comparative chart enclosed by A.O. with the impugned order. This clearly reflect that A.O. has made comparison on pick and chose basis and has not taken into consideration various other factors as pointed out by appellant which is a primary requirement of doing ALP analysis. I am inclined with appellant that working of average price to find out the difference of these average price and again working out average percentage under invoicing from 3.16% to 366.32% is neither scientific nor on the basis of prescribed method but the same are conjecture and surmises. The working of 49.50% under invoicing is also an estimate with no basis. As per settled legal preposition the A.O. cannot entered in the shoes of any business man and can direct/dictate about how to conduct such business. All the export transaction are genuine and in comparison to such export to other parties of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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