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TMI Blog2023 (1) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 43(5) of the Act. In that view of the matter, the deduction claimed by the assessee is allowable under Section 36(1)(iii) of the Act. In any case of the matter, even for the sake of argument assuming that the premium paid to BTMU in respect of currency swap contracts cannot be termed as interest covered under Section 36(1)(iii) of the Act, however, there cannot be any dispute that this is an expenditure incurred by the assessee wholly and exclusively for the purpose of its business, as, such expenditure is having a direct nexus with the finance cost on external borrowings. That being the case, it is otherwise allowable as deduction under Section 37(1) of the Act. Accordingly, we delete the disallowance. TDS u/s 195 - Disallowance u/s 40(i)(a) - amount paid towards installation charges - as per AO travelling and hotel expenses, since, are in connection with rendering of technical services, they also have to be regarded as fee for technical services (FTS) - HELD THAT:- From the sample copies of the bills/invoices raised on the assessee, it is observed that in so far as air-tickets and hotel bills are concerned, the payee has raised separate invoices which do not compri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 11-1-2023 - SHRI G. S. PANNU , PRESIDENT AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER For the Assessee : Shri Ved Jain , Adv . For the Respondent : Shri Bhuvnesh Kulshrestha , CIT - DR ORDER PER SAKTIJIT DEY , JUDICIAL MEMBER : Captioned appeal has been filed by the assessee challenging the final assessment order dated 04.10.2017 passed under Section 143(3) read with section 144C of the Income-Tax Act,1961 pertaining to assessment year 2013-14, in pursuance to directions of learned Dispute Resolution Panel (DRP). 2. Ground nos. 1 and 2 are general grounds, hence, do not require specific adjudication. 3. In ground no.3, assessee has challenged disallowance of an amount of Rs.2,63,36,331. 4. Briefly the facts relating to this issue are, the assessee is a resident corporate entity stated to be engaged in the business of assembly of automotive component for supply to automobile manufactures. For the assessment year under dispute, the assessee filed its return of income on 29.11.2013 declaring income of Rs.73,20,89,000. 5. In course of assessment proceedings, the Assessing Officer while examining the audited financial statement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... departmental authorities. Whereas, learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned DRP. 9. We have considered rival submissions and perused material on record. 10. As far as the factual aspect of the issue is concerned, there is no dispute that the assessee had availed two foreign currency loans from a Japanese entity. Such foreign currency loans are in Japanese Currency YEN . 11. Keeping in view the risk involved in fluctuation in rate of exchange, the assessee wanted to safeguard its interest in respect of repayment of loans along with interest to MELCO by entering into two currency swap contracts with BTMU. Thus, there is absolutely no reason for doubt that the underlying transactions for which the assessee entered into hedging contracts are the two foreign currency loans availed from MELCO. It is also evident, the foreign currency loans were in the nature of long term borrowings for a period of three years. As per the currency swap contracts with BTMU, the assessee was required to pay interest at a fixed rate of 7.35% or 7.59% in Indian rupees as the case may be. Whereas, BTMU, in turn, was required to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 13. In any case of the matter, even for the sake of argument assuming that the premium paid to BTMU in respect of currency swap contracts cannot be termed as interest covered under Section 36(1)(iii) of the Act, however, there cannot be any dispute that this is an expenditure incurred by the assessee wholly and exclusively for the purpose of its business, as, such expenditure is having a direct nexus with the finance cost on external borrowings. That being the case, it is otherwise allowable as deduction under Section 37(1) of the Act. Accordingly, we delete the disallowance. 14. In ground no.4, assessee has challenged disallowance of Rs.86,27,286 under Section 40(i)(a) of the Act. 15. Briefly the facts are, in course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee had paid an amount of Rs.2,51,66,612 to Mitsubishi Corporation, Japan towards installation changes. After calling for and examining the necessary details, the Assessing Officer noticed that the assessee had deducted tax at source of an amount of Rs.1,65,39,932, whereas, he has not deducted tax on an amount of Rs.86,27,286. When called upon to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/invoices raised on the assessee, it is observed that in so far as air-tickets and hotel bills are concerned, the payee has raised separate invoices which do not comprise of any amount charged towards installation of equipments. The perusal of invoices clearly indicates that they are towards reimbursement of cost on actual basis without any profit element embedded therein. Therefore, in our view, no part of such expenditure/cost incurred can be apportioned towards technical services. Therefore, in our view, the assessee was not required to withhold tax under Section 195 of the Act on such expenditure. Even otherwise also, the amount in dispute was not claimed as revenue expenditure by the assessee. Rather, the assessee had capitalized the amount in its accounts and has claimed depreciation. In such a scenario, the issue arising for consideration is whether section 40(a)(i) of the Act would be applicable. 22. As we find from the decisions cited before us in this regard by learned counsel appearing for the assessee, the ratio laid down clearly says that section 40(a)(i) of the Act provides for disallowance only in respect of expenditure which are revenue in nature. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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