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TMI Blog2025 (2) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... er and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years. Ground no.1 raised in Revenue's appeal is dismissed. TDS u/s 195 - Disallowance made u/s 40(a)(i) - share services expenses paid to BASC, which is situated in Malaysia - HELD THAT:- We find that while considering a similar issue in assessee's own case for the assessment year 2008-09, the coordinate bench of the Tribunal following the decision of the coordinate bench of the Tribunal in the case of the assessee's sister concern in DCIT v/s BASF Catalyst India Private Limited [2016 (11) TMI 1765 - ITAT CHENNAI] held that the provisions of section 40(a)(i) of the Act are not applicable to the payment made to BASC for rendering Finance and Accounting and Human Resource services. Ground no.2 raised in Revenue's appeal is dismissed. Nature of expenses - Disallowance of expenditure incurred on "Product Registration" - AO following the approach adopted in preceding years disallowed the product registration expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the amount of Rs. 25,55,28,178/- paid to BASF Asia Pacific Service Centre, Malaysia from with no TDS has been deducted u/s 195 of the Act, ignoring the fact that the said expenditure is not allowable u/s 40(a)(i) of the Income-tax Act, 1961. 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) appeal was right in allowing the expenses incurred on "Product Registration", ignoring the fact that the said expenditure is capital in nature and not allowable as revenue expenditure." 4. The issue arising in ground no.1, raised in Revenue's appeal, pertains to the deletion of disallowance of expenditure incurred under the head "Public Relation Expenses". 5. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the business of manufacturing and marketing of expandable polystyrene, tanning agents, leather chemicals and auxiliaries. For the year under consideration, the assessee filed its return of income on 29/11/2014, declaring a total income of INR 198,89,19,750. The return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said expenditures are towards the business of the assessee. The AO also took into consideration the fact that similar additions were made in the earlier assessment years, i.e. assessment years 2007-08 to 2013-14, and the assessee has filed the appeals against the disallowance in all these years. Since in the assessment years 2008-09 and 2011-12, the learned CIT(A) and learned DRP, respectively, have allowed the expenditure incurred on advertisement and employee welfare, which was accepted by the Revenue, the AO allowed the expenditure incurred on advertisement sponsorship. However, the balance amount of INR 25,51,297 incurred on "community development and other public expenses" by the assessee was disallowed under section 37 of the Act. 7. The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue, following the decision of the Tribunal in assessee's own case for the assessment years 2007-08 and 2008-09, after noting that the issue arises out of similar facts which are recurring in nature. Being aggrieved, the Revenue is in appeal before us. 8. We have considered the submissions of both sides and perused the material available on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, CIRCLE 1(1) Bilaspur Vs. Jindal Power Limited, ITAT 99/BLPR/2012 dated 23 June, 2016 Raipur Bench and NMDC Ltd. Vs. Joint Commissioner of Income Tax, Range- 16 Hyderabad (ITAT2015 56 taxmann.com 396 (Hyderabad) Tribunal. On the other hand, the Ld. representative of the department has placed reliance upon the order passed by the CIT(A) in question. With due to regard of the contention raised by the Ld. representative of the parties and perusing the record, we find that the assessee was contributing fees to the education institution and for sponsorship of events and charitable activities. The companies are not confined strictly to the business purpose but are expending for this sponsorship events and for the charitable activities and also contributing in education institution. In the case of Hindustan Petroleum (supra) the Hon'ble ITAT Mumbai Bench has allowed expenses on the fact that the promotion of 20 points program is in the interest of the state and if a company is expending in this regard then the expenses are not liable to be disallowed in the interest of justice. In the other cases such as NMDC Ltd. Vs. Jindal Power (supra) such type of expenses has been allowed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12. The issue arising in ground no.2, raised in Revenue's appeal, pertains to the deletion of disallowance made under section 40(a)(i) of the Act. 13. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, from the perusal of the details filed by the assessee, it was observed that the assessee has paid a sum of INR 25,55,28,178 to BASF Asia Pacific Service Centre, Malaysia ("BASC") from which no tax was deducted under section 195 of the Act. Accordingly, during the assessment proceedings, the assessee was asked to submit a detailed submission on this issue as there were similar disallowances on this issue under section 40(a)(i) of the Act in the earlier years (viz. from the assessment years 2008-09 to 2013-14). In response, the assessee submitted that the assessee has entered into an agreement dated 01/10/2006 with BASC, which is situated in Malaysia, under which BASC provides to the assessee the services in relation to Finance and Accounting, Accounts Payable, Accounts Receivable, General Accounting, Treasury and Financial Reporting, and for Human Resource, Payroll Processing, Salary Payments and General Ledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(i) of the Act. 17. We find that while considering a similar issue in assessee's own case for the assessment year 2008-09, the coordinate bench of the Tribunal vide order dated 18/09/2017 (cited supra), following the decision of the coordinate bench of the Tribunal in the case of the assessee's sister concern in DCIT v/s BASF Catalyst India Private Limited, in ITA No. 650 and 651/Mds/2016, held that the provisions of section 40(a)(i) of the Act are not applicable to the payment made to BASC for rendering Finance and Accounting and Human Resource services. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - "21. Under this issue the assessee has challenged the disallowance of shared service deposit paid to Malaysia u/s 40(ia) of Rs. 4,77,53,296/-. The appellant has paid an amount of Rs. 4,77,53,296/- in respect of shared service to its sister concern(foreign)BASF Asia pacific service centre sdn bhd Malaysia. Since tax was not deducted at source therefore the same was disallowed. There is a master service agreement for finance and accounting and human resources between BASF Asia Pacific Service Centre Sdn Bhd, and BASF India Lid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services and includes the provision of services for technical or other which does not include payment for services mentioned in Artic le 15, 16 of the agreement." "11. The Malaysia Company (BASC) provides services under Article 13 r.w.s. Article 5 and Article 7 of DTAA. The article 5 deal with permanent establishment defined as the fixed place of business through which the business of enterprise is wholly or partly carried on. The facts are not disputed by the Revenue that there is no PE of the Malaysia Company in India and the services are rendered outside the country. Whereas, the Article 7 deals with the profits of establishment taxable through PE of foreign Company having operations. Considering the apparent facts, provisions of law. DTAA and undisputed facts that there is no PE in India and the services are nature of data operating entry of Accounts and Human Resources service duly supported with evidence of samples invoices and journal voucher produced, we found that the services of BASC Malaysia does not fall in the category u/s. 9(1)(vii) of the Act and provisions of section 40 (a)(i) are not applicable, we found Ld. CIT(A) has dealt on this disputed issue exhaustively in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such depreciation was allowed. It was further submitted that similar expenditure has also been disallowed in the subsequent assessment years, i.e. assessment years 2009-10 to 2013-14. The assessee submitted that it has incurred product development and registration expenditure of INR 5,55,30,348, which includes testing charges, travelling expenses of the staff of the assessee incurred in connection with the registration of products, gathering data, etc. The assessee submitted that the facts, in the year under consideration, regarding project registration expenditure are similar to the facts for the earlier years, i.e. assessment years 2008-09 to 2013-14. Accordingly, placing reliance upon the submissions made in the earlier years, the assessee submitted that such expenditure is not capital in nature and no disallowance is warranted. The assessee further submitted that in the assessment year 2008-09, the learned CIT(A) deleted similar disallowance and the Revenue's appeal against the same was dismissed by the Tribunal. 21. The AO, vide assessment order, disagreed with the submissions of the assessee and held that similar disallowance was made in the assessments for assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Mum/2011, Mumbai Bench decided on 20.11.2016. Since, this issue is squarely covered by this order therefore, we are of the view that the CIT(A) has passed the order judiciously and correctly which is not required to be interfere with at this appellate stage. No distinguishable material has been produced before us. Accordingly, this issue is decided in favour of the assessee." 24. During the hearing, the learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment year. Since the learned CIT(A) has followed the decision of the coordinate bench of the Tribunal cited supra, we do not find any infirmity in the findings of the learned CIT(A) on this issue. Accordingly, the same are upheld and ground no.3 raised in Revenue's appeal is dismissed. 25. In the result, the appeal by the Revenue is dismissed. CO No. 24/Mum./2025 Assessee's Cross objection- A.Y. 2014-15 26. In its cross objection, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in Revenue's appeal for the assessment year 2014-15, our findings/conclusions as rendered therein shall apply mutatis mutandis to the present appeal. Accordingly, the impugned order passed by the learned CIT(A) on the issues raised before us is upheld and the grounds raised by the Revenue are dismissed. 31. In the result, the appeal by the Revenue is dismissed. CO No. 25/Mum./2025 Assessee's Cross objection- A.Y. 2015-16 32. In its cross objection, the assessee has raised the following grounds: - "On the facts and in circumstances of the case and in law, given that Dividend Distribution Tax ('DDT') represents tax on dividend income, BIL should be granted the benefit of Article 10 of the India-Swiss Double Taxation Avoidance Agreement and India-Germany Double Taxation Avoidance Agreement. Accordingly, DDT on the dividend declared and paid by BIL to BASF Schweiz AG, Switzerland, BASF Societas Europaea, Germany and BAS Construction Solutions GmbH, Germany being tax on dividend income should be liable at the rate prescribed in the respective India-Swiss Double Taxation Avoidance Agreement and India-Germany Double Taxation Avoidance Agreement. Consequently, excess div ..... X X X X Extracts X X X X X X X X Extracts X X X X
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