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TMI Blog2024 (5) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... employees who had been seconded - TPO found that the major beneficiary of the services rendered by the seconded employees was liable to be attributed to the activities of AE - ITAT deleted the addition - HELD THAT:- ITAT has in our considered opinion without assigning sufficient reasons upheld the aforesaid view that had been expressed. We would thus hold that question (iii) as proposed would merit further consideration. Lease Registration charges - ITAT noted that registration charges incurred during the execution of an instrument under the Stamp Act, 1899, should not be amortized over the lease period - HELD THAT:- Dealing with the asserted argument of the appellant that registration charges incurred in the course of execution of an instrument which is presented for registration under the Stamp Act, 1899 and the said charges being liable to be amortized over the entire period of the lease, the ITAT has taken note of the consistent position which appears to have been taken by the High Courts of Bombay, Himachal Pradesh and others and which had held that there would be no justifiable logic for registration charges being amortized to run over the period of lease. We are inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for royalty, by failing to make an independent finding and determination on the double deduction nature of the claim for such purported expenses along with reimbursement of software expenses with near identical details, use, functions and purposes purportedly served? iv. WHETHER the Ld. ITAT has erred in law and on facts in deleting the addition made on account of lease Registration charges by ignoring the fact that balance expenses of lease registration charges belong to other years? v. WHETHER the Ld. ITAT was correct in law in deleting all the additions made by the concerned Ld. Assessing Officer by merely relying on the perverse and erroneous findings of the Ld. CIT(A), contrary to applicable law as mandated by the Income Tax Act 1961 and the ratio of the Hon ble Jurisdictional High Court in the case of CIT vs. Jansampark Advertising Marketing (P) Ltd. (2015) 56 taxmann.com 285 (Delhi)? vi. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 2. Having heard Mr. Chandra, learned counsel who appears in support of the appeals, we find that insofar as proposed questions (i) and (ii) are conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven below: Name of associated enterprise Benetton India AEs Product development Co-ordination only Yes Purchasing activities/ supplier identification Co-ordination only Yes Contracting with suppliers Co-ordination only Yes Quality control Yes No Logistics Yes No On the basis of above it can be seen that the vendor identification is the function performed by the AE. If the Sourcing Head is performing this function, than he is clearly performing this function for the AE and not for the assessee. In such a situation the remuneration of the Expat is to be paid by the AE and not by the assessee. Moreover in the list of functions there is no function assigned to the assessee to train the local employees. In view of these facts and discussions, I am not inclined to agree with the reply of the assessee. I am of the considered opinion that the Expat has performed functions for the AE and not for the assessee. Hence the assessee has paid the remuneration of the Expats for the functions that the Expat has performed for the AE. 4. While dealing with the various functions performed, the TPO found that the major beneficiary of the services rendered by the seconded employees was liable to be att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the argument for the denial of the claim of the appellant with respect to Ettore Cadamore who worked in India for AY 2006-07. It is not clear how TPO came to this conclusion that vendor identification is the function of the AE. Appellant had employed him for sourcing the materials. xxxxx xxxxx xxxxx I have no hesitation to state that the appellant has fully discharged its onus by providing the documentation with regard to the fact that these employees worked in the relevant period m India and also by giving the description of their functions. TDS was deducted at source for their salaries. The case laws cited by the appellant in the earlier paragraph i.e., the case of the Me Cann Friction and Dresser Rand are applicable in this case. It is the expected benefit and not the real benefit which is contemplated in the OECD guidelines. In any case it is not the case of the TPO that these employees did not work for the appellant. Further, it is a move point whether the TPO should have brought any CUP data in such a situation. The fact that various softwares are used by the appellant is not denied by the TPO. In view of this, I hold that the addition made in this regard is not sustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the latter have not been incurred for the subject year. The relevant extract of the AO s order has been reproduced as under: On further examination, it has been noted that these charges related to mainly 9 years rental lease registration charges of retail showrooms and accordingly 1/9th(or as per specific case) of these expenses accrued during the year. 4.3. The appellant has stated that it paid stamp duty for registration of the lease premises taken for the purpose of its business of selling of its products like Garments, Leather products etc. The appellant is also paying regular lease rentals for use of the premises. As the expenditure is incurred for the purpose of its business and is revenue in nature not resulting into creation of any capital assets/benefit of enduring nature, thus, as per the provisions of section 37 of the Act, the expenses relating to lease registration should be allowed in its entirety in the year in which they are incurred. Further, the appellant has contended that there is no concept of deferred revenue expenditure unless otherwise specifically provided under the Act. The Income Tax Act provides for deferred revenue expenditure allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the lease deed was terminated with effect from March 17, 1994. The assessee had spent a sum of Rs. 3,44,251 as stamp duty and registration charges on the lease deed. The Assessing Officer treated this expenditure as capital expenditure by relying upon the judgment of the Karnataka High Court reported, in the case of Hotel Rajmahal v. CIT [1985] 152 ITR 218 . On the other hand, the assessee relying upon the judgments of the Madras, Kerala and Gujarat High Courts reported in Sri Krishna Tiles and Potteries Madras (P.) Ltd. v. CIT [1988] 173 ITR 311, Plantation Corporation of Kerala Ltd. v. Commr. Of Agrl. I. T. [1994] 205 ITR 364 and Gujarat Machinery Mfg. Ltd. v. CIT [1995] 211 ITR 1010 contends that the amount spent as stamp duty and registration charges should be treated as revenue expenditure. The Commissioner of Income-tax (Appeals) and the Tribunal accepted the plea of the assessee. The Revenue has filed the present appeal challenging the order of the learned Tribunal. The Karnataka High Court in Hotel Rajmahal s case [1985] 152 ITR 218 did not really discuss the matter in detail but held that when for the first time the assessee enters into a lease deed securing lease ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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