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TMI Blog2019 (1) TMI 1951X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider. Therefore, we consider it appropriate to remit this issue to the AO for verification of financial lease agreement and also assessee shall file tripartite agreement in respect of lease. Reimbursement of salary expenses on employees - Assessee, as per audit accounts for the said accounting year referred at page 528, the managing director has been a signatory and the assessee undertakes to file Form No. 32 and Board Resolution to that effect. Further, after hearing for a long time, the learned DR has brought to the notice of the bench that this issue was referred to Special Bench whereas we, accept the decision of the special Bench in particular to this case - CIT(A) also made observations that the assessee has not substantiated before lower authorities about appointment of managing director with any evidence and further we are of the substantive opinion that the matter was referred to Special Bench, But the facts have not been verified by the AO in respect of managing director. Therefore, both the parties have agreed for the same and there is no loss of revenue to the department, if the matter is restored to the file of the AO for verification and examination and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal in respect of US related transactions on the acceptance of Mutual Agreement Procedure (MAP) with the competent authority of United States and India and the Resolution dated 10/04/2017 from the Deputy Commissioner of Income-tax, Circle 7(1)(1). The assessee filed a letter from CBDT dated 10/04/2017 in respect of MAP proceedings. Whereas the learned DR accepted the MAP proceedings and hence, the learned AR has not pressed grounds as per revised and concise memorandum of appeal ground Nos. 1 to 21 and made endorsement in the grounds of appeal. The effective grounds of appeal are in relation to transactions of AE other than USA and corporate tax grounds which read as under: Corporate Tax matters 22. That the learned CIT(A) erred in confirming the order passed by the learned AO in treating the expenses incurred by the Company towards lease of equipments amounting to ₹ 15,254,982, as capital in nature. [corresponding to ground no. 4] 23. That the learned CIT(A) has erred in confirming the order passed by the learned AO in disallowing the reimbursement of salary expense of its employee amounting to ₹ 29,194,811 on which income tax has been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of salary expenses, Sap implementation charges and determined the taxable income at ₹ 4,99,32,447/- vide order dated 24/01/2012. 4. Aggrieved by the assessment order, the assessee preferred an appeal with the CIT(A). The CIT(A), having considered the submissions and the grounds on various additions made by the AO has partly allowed the appeal. 5. Aggrieved by the order of the CIT(A), the assessee has assailed the appeal before the Tribunal. On the first ground of appeal with respect to applicability of MAP proceedings to non-US submitted that the assessee does not have any objection to apply same percentage as determined in MAP proceedings and also supported the submissions relying on the decision of the ITAT, Mumbai bench in the case of J.P. Morgan Services P. Ltd. Vs. Deputy Commissioner of Income-tax (OSD) in ITA No. 8987/Mum/2010 ITA No. 7822/Mum/2011 dated 30/11/2015 where this particular issue has been discussed and attention was drawn to para. 3.6 at page 5 of the order which is as under: 3.6 We have gone through the arguments made by both the sides and also the material placed before us for our consideration. It is noted that letter dated 9th April 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, learned AR submitted that the AO has made addition on lease rentals towards equipment as capital in nature irrespective of the fact that the assessee has been following the guidelines of ICIA. Learned AR also referred to para. 3.3.1, 4.1 and observations of the CIT(A) at page 8 of the order and prayed that this is revenue expenditure and has to be allowed irrespective of the fact that the assessee has lease transactions. 8. Learned DR referred to the observations of the AO at page 6, para. 7.9 and 7.10 that the assessee has not furnished complete details of tripartite agreement on lease transaction. Therefore, the AO has considered this fact and made addition. 9. The third ground of reimbursement of salary expenses of employees on which TDS has been deducted in India, learned AR submitted that the amount is paid to the employee who was the managing director and the CIT(A) has dealt on this issue in paras. 3.2 and 3.5. learned AR also substantiated that foreign employee was the managing director of the company from 0101/2006 to 01/03/2010 and referred to the financial statement maintained in the paper book whereas the learned DR controverted the argument of the learned AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned AR on this issue for applicability of some margin be applied for remaining 16% of the transactions of the assessee and accordingly this ground of appeal of the assessee is allowed for statistical purposes. We direct the TPO accordingly. 13. In respect of ground regarding lease on equipment being capital in nature, before us, the learned AR could not substantiate with any evidence that the transaction is non-financial lease and on perusal of the agreement as referred to by the assessee, it is in the nature of financial lease and even before us no evidence has been filed to substantiate that it is not a transfer of asset from the beginning to end of the period of lease. We found that the assessee, as per the financial lease agreement, has an option to purchase the asset on completion of term and on this aspect, AO has to consider. Therefore, we consider it appropriate to remit this issue to the AO for verification of financial lease agreement and also assessee shall file tripartite agreement in respect of lease. 14. In respect of third ground of appeal viz., reimbursement of salary expenses on employees, on hearing the submissions we are of the opinion that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is partly allowed for statistical purposes. 18. Now, we shall take up the revenue's appeal in IT(TP)A No. 2/Bang/2014 wherein the grounds raised read as under: 1. The order of the learned CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to exclude the telecommunication expenses, insurance expenses and foreign traveling expenses both from the export turnover as well as from total turnover for the purpose of computation of deduction u/s 10A, without appreciating the fact that the statute allows exclusion of such expenditure only from export turnover by way of specific definition of export turnover as envisaged by Sub-clause (4) of Explanation 2 below Sub-section (8) of Section 10A and the total turnover has not been defined in this Section. 3. On the facts and in the circumstances of the case the learned CIT(A) erred in directing the AO to compute deduction u/s 10A in the above manner by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s Tata Elxsi Ltd., which has not become final since the same has not been accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) finding. 20. Ground Nos. 5 6 are relating to transfer pricing. Since the assessee has adopted MAP therefore, the grounds are not relevant as submitted by the learned DR. 21. Ground No. 7 8 are only supportive grounds and general Contra, whereas learned AR supported the order of the CIT(A). 22. We heard rival submissions and perused material on record. In respect of claim of deduction u/s 10A, we are in concurrence with the order of the CIT(A) in allowing the claim following the judicial precedent and we are not inclined to interfere with the order of the CIT(A) on this ground and dismiss the revenue's ground. 23. In respect of non-deduction of TDS u/s 194J, we found that the CIT(A) has dealt on the disputed issue in para. 3.3.2 which is as under and granted relief: 3.3.2. It is not disputed that, it was submitted before the AO, that there is no specific contract with the service provider. The AO has considered this in the assessment order. Since there is no specific contractual facility that has been obtained from M/s. Tata Indicom, the character of service contract is ruled out. It is evident that the assessee has utilised standard service ordinarily a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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