DCIT 1(1)(2), MUMBAI vs. M/S GOLDMAN SACHS INDIA FINANCE P.LTD, MUMBAI

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ITA 3695/MUM/2019Status: DisposedITAT Mumbai09 June 2022AY 2015-1610 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the payment of ₹3.06 crores was indeed reimbursement of expenses and no tax was required to be withheld. For the remaining ₹17 lacs, the matter was remanded to the Assessing Officer to examine the TDS already deducted and the nature of reimbursement.

What were the facts?

The assessee company made payments to group entities, claiming them as reimbursement of expenses and thus not requiring TDS. The Assessing Officer disallowed these expenses for non-deduction of TDS. The CIT(A) deleted a significant portion of the disallowance but confirmed disallowance on ₹17 lacs.

What were the issues?

Whether payments to group entities are reimbursement of expenses not requiring TDS, and whether the CIT(A) erred in confirming disallowance without proper examination of evidence.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 40(a)(ia),Section 192,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM

For Appellant: Shri Madhur Agrawal, AR
For Respondent: Shri Hoshang B. Irani, DR
Hearing: 23.03.2022Pronounced: 09.06.2022

Heard together (2 matters)

ITA Nos. 3674/Mum/2019
ITA Nos. 3695/Mum/2019

Read from the judgment's own cause title. This page is filed under one of them.

Assessee by : Shri Madhur Agrawal, AR Revenue by : Shri Hoshang B. Irani, DR Date of hearing: 23.03.2022 Date of pronouncement : 09.06.2022 O R D E R PER PRASHANT MAHARISHI, AM:

1.

These are the cross appeals filed by the parties against the order passed by the Commissioner of Income-tax (Appeals)-2, Mumbai [CIT (A)] for A.Y. 2015-16 on 29th March, 2019.

“Aggrieved by the order passed by the Commissioner of Income Tax (Appeals)-2 [CIT(A)] dated 29 March 2019, under section 250 of the Act. GSIFPL (the Appellant) respectfully submits that the learned CIT(A) has:

1. Erred in disallowing an amount of Rs 1,700,000 under section 40(a)(1) of the Act, being amounts paid to non-resident group entities which are in the nature of reimbursement of certain expenses.

2. Erred in not appreciating that, out of Rs 1,700,000 taxes have already been withheld on an amount of Rs. 925,546 and hence, cannot be disallowed under section 40(a)(i) of the Act.

3.

Erred in not admitting additional evidences in the nature of withholding tax-certificates issued by the Appellant for an amount of Rs 925,546, basis of allocation demonstrating the fact that the payments were in the nature of reimbursement and sample invoices of third party in relation to the same.

4. In dismissing the Appellant's petition for non-levy of penalty under section 271(1)(c) of the Act.

Each of the grounds of appeal referred above is separate, and may kindly be considered independent of each other.

The Appellant craves leave to add, alter, vary, omit, substitute or amend any or all of the above grounds

4.

In Assessing Officer raised following grounds of appeal:-

“On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance, of Rs. 3,06,00,000/-, made on a/c of non- withholding of taxes to non-residents."

2.

On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the fact that the assessee had failed to furnish any evidence to show that the payments are for such transactions on which tax is not required to be withheld at source.”

5.

Brief fact of the case shows that assessee is a Private Company and is a non deposit taking non banking finance company. For AY 2015-16, assessee filed its return of income on 24th November, 2015 at a total income of ₹24,20,74,290/-. The return of income of the assessee was picked up for limited scrutiny. During the course of assessment proceedings, the learned Assessing Officer examined the issue of payment of ₹17,24,877/- paid to M/s Goldman Sachs (India) Capital Markets Pvt. Ltd. (in short GSICMPL). This expenditure was stated to be recharge of employee cost, technology cost and other administrative charges. Assessee stated that this

6.

Further, the learned Assessing Officer noted that assessee has also incurred certain employee related expenses to its various related parties. As per the detailed contained in note no. 3.26 of financial statements assessee noted that out of total amount assessee has deducted tax at source on amount of ₹5,53,82,350/- paid to GSISPL but on the balance sum of ₹2,74,17,650/- no tax is deducted at source. Assessee once again stated that this expenditure are in the nature of reimbursement of expenses paid by group entities on behalf of the assessee comprising of employee related cost and corporate recharges such as telecommunication and administrative expenses. As there is no element of income in the reimbursement of expenses, taxes were not required to be withheld. Assessee submitted various copies of invoices. The learned Assessing Officer rejected the contention of the assessee holding that assessee has failed to prove that these are actual reimbursement. The learned Assessing Officer further found that assessee has paid ₹3,23,00,000-/ as recharge without tax deducted at source to nonresident related parties on which the disallowance is 100% of such expenses. He also found that assessee has paid ₹2,74,17,650/- as recharge without TDS to resident related parties and disallowance for non-deduction would be to the extent of 30% amounting to ₹82,25,295/-. Therefore, the learned Assessing Officer passed an assessment order under Section 143(3) of the Act on

7.

With respect to the payment to the domestic group entities, he held that the issue has already been decided in favour of the assessee by the co-ordinate bench for A.Ys. 09-10 & 11-12 and further, appeal of the Revenue before the Hon'ble High Court is also dismissed vide order dated 26th February, 2019 in of 2016. Therefore, he deleted the disallowance under Section 40(a)(ia) amounting to ₹5,17,463/- and ₹82,25,295/-. With respect to the disallowance of ₹3.23 lacs, he categorically noted that a sum of ₹3.06 crores is merely in the nature of reimbursement without any element of profit and therefore, no tax is required to be withheld. He further held that as the appellant is already making TDS on the sum under Section 192 of the Act, if tax is deducted on this sum, it would be result into double deduction of tax at source. Therefore, he deleted the disallowance of ₹3,06,00,000/- under Section 40a(ia) of the Act.

8.

With respect to the balance sum of ₹17 lacs, assessee submitted before him that it has already deducted tax in respect of payment of ₹9,25,546/- but same could not be brought to the notice of the learned Assessing Officer.

10.

Coming to the appeal of the learned Assessing Officer, the learned Departmental Representative vehemently supported the order of the learned CIT (A) and submitted that assessee has failed to proof the reimbursement of expenditure. The addition has been deleted by the learned CIT (A) incorrectly. The learned Authorized Representative supported the order of the learned CIT (A).

11.

We have carefully considered the rival contentions and find that the learned CIT (A) has correctly deleted the addition of ₹3,06,00,000/- by giving the reason that these are the expenses that employees related to Goldman Sachs Group Inc. USA (GSGI). The above group has stock award plan which are also extended to the employees of its group company. The assessee has granted these stocks to its employees on fulfilling of certain conditions. After

12.

Coming to the appeal of the assessee, both the parties heard.

13.

We find that on the balance payment of ₹17 lacs, the assessee has raised two arguments. The first argument is that on some of the payment, assessee has already deducted tax at source and secondly, part of the expenditure is merely reimbursement of expenditure on

14.

In the result, appeal filed by the learned Assessing Officer is dismissed and appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 09.06.2022.

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