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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G. S. PANNU, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Rajan Vora (AR) Department by: Shri Rajesh Kumar Yadav (DR) Date of Hearing: 03.08.2018 Date of Pronouncement: 29.08.2018 O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the order dated 15.02.2016 passed by the Commissioner of Income Tax (Appeals)-22, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment years2010-11 & 2011-12.
The assessee has raised the following grounds:- “
Based on the facts and circumstances of the case and in law, Linfox Logistics (India) Private Limited (hereinafter referred to as the Appellant craves to prefer an appeal against the order passed by the learned Commissioner of 3949/M/2016 A.Y. 2010-11 2011-12 Income-tax (Appeals) - 22 {CIT(A)1] under section 250 of the Income-tax Act, 1961 (hereinafter referred to as the Act') dared
15. February 2016 (received by the Appellant on 13. April 2016) on the following grounds: Each of the grounds are referred to separately, which may kindly be considered independent of each other. General ground 1.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) and the learned Deputy Commissioner of Income-lax (hereinafter referred to as the GAO') have erred in assessing the total loss of the Appellant at Rs (11,77,80,120) as against the returned loss of Rs (19,55,22,126). Disallowance of loss of Rs 76,71,248 arising on account of foreign exchange fluctuation 2.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the disallowance of loss on foreign exchange fluctuation claimed under section 37 of the Act.
22. On the facts and circumstances of the case and in law, the learned C.IT(A) has erred in not appreciating and considering the explanations and details provided for loss of Its 76,71,248 arising on account of foreign exchange fluctuation. Disallowance of loss of Rs 1,43,01,103 on account of lost stock 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance on account of lost stock of Rs 1,43,01,103 claimed under section 37 of the Act. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in disregarding that lost stock is the realization of a business risk that the Appellant is exposed to Which is an integral part of the business operations of the Appellant and hence must be allowed as business loss under section 28 of the Act. 3.3 Without prejudice to the Grounds 3.1 and 3.2 above, the CIT(A) has failed to appreciate the alternate claim of the Appellant of loss stock as a write-off under section 36(I)(vii) of the Act ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 on account of non-recovery of receipts already recognized as revenue by the Appellant in its books of accounts. 3.4 On the facts and Circumstances of the case and in law, the learned CIT(A) erred in violating principle of judicial hierarchy, in not following the decision of the Hon’ble Tribunal in the Appellant's own case for AY 208-09 based on the same facts, 4 Disallowance of expense of R9 1,97,26,827 on account of management fees under section 40(a)(ia) of the Act 4.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in disallowing management fees of Rs, 1,97,26,827 under section 40(a)(i) of the Act without appreciating the fact that the Appellant has deducted tax at source on such amounts. 4.2 On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding disallowance of management fee paid net of tax deduction, without providing sufficient opportunity to the Appellant to produce details in respect of tax deducted on such payment. Disallowance of expenses of Rs 5,92,643 on account of reimbursements towards consultancy and professional fees paid to group companies under section 40(a)(i) of the Act 5.1 On the Facts and circumstances of the case and in law, the learned C1T(A) erred in upholding disallowance of amounts paid to a group company towards reimbursement of consultancy and professional fees on the ground that appropriate taxes has not been with held under section 195 of the Act. 5.2 On the facts and circumstances of the case and in law, the learned CIT(A) erred in disregarding the fact that. consultancy and professional fees are reimbursed by the Appellant at actuals, without any profit Clement or mark- up and were not liable to deduction of tax at source. Disallowance of expense of Rs. 51,22,831 on account of reimbursements towards of school fees for children of key management personnel under section 37(1) of the Act 6.1 On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding disallowance 3949/M/2016 A.Y. 2010-11 2011-12 of expense towards school fees for children of key management personnel amounting to Rs 51,22,83 1. 6.2 On the facts and circumstances of the case and in law, the learned CIT(A) erred in ignoring the fact that expense towards school fees for children of key management personnel paid as perquisite and forms part of salary which has been subject to tax deduction under section 192 of the Act. 6.3 Without prejudice to Grounds 6.1 and 6.2 above, the learned CIT(A) erred in not adjudicating the issue on disallowance under section 40(a)(i) of the Act as the amounts paid being pure reimbursement without any income element, tax is not required to be deducted under section 195 of the Act.
7. Disallowance of expense of Rs.69,32,167/- on account of reimbursement u/s 37(1) of the Act. 7.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred disallowing an amount of Rs.69,32,167/- u/s 37(1) of the Act being reimbursement to group companies on account of various business expenses incurred by group companies on behalf of the appellant and recovered from the appellant. 7.2 Without prejudice to Ground 7.1 above, the Ld. CIT(A) erred in not adjudicating the issue reimbursement without any income element, tax is not required to be deducted u/s 195 of the Act. The appellant craves, to consider each of the above grounds of appeal
without prejudice to each other and craves to leave or add, alter, delete or modify all or any of the above grounds of appeal at any time before or at the time of hearing of the matter with the Income Tax appellate Tribunal.”
3. The brief facts of the case are that the assessee filed its return of income on 24.09.2010 declaring total income to the tune of Rs.19,55,22,126/-. The return was processed u/s 143(1) of the Act, 1961. The case was selected for scrutiny, therefore, notice u/s 143(2) of the Act dated 13.09.2011 was issued and served upon the assessee. 3949/M/2016 A.Y. 2010-11 2011-12 The notice u/s 142(1) of the Act dated 01.09.2012 alongwith questionnaire was also issued and served upon the assessee. The assessee was engaged in the business of providing transportation and related support services. The assessee claimed the loss of Rs.78,53,543/- on account of Foreign Exchange Fluctuation. The Assessing Officer did not find the same to be allowable in nature. Hence disallowed the same and added to the income of the assessee. The assessee also claimed the loss of Rs.1,43,01,103/- on account of loss of stock but the assessee failed to prove the same therefore the same was added to the income of the assessee. The assessee paid certain sum to the different party without deducting the tax in view of the provision u/s 40(a)(ia) of the Act. Therefore, the said sum i.e., to the tune of Rs.5,55,87,360/- was disallowed u/s 40(a)(ia) of the Act and was added to the income of the assessee. The assessee also paid the management fees to the tune of Rs.1,97,26,827/- without deducting the tax in view of the provision u/s 40(a)(ia) of the Act, therefore, the same was disallowed and added to the income of the assessee. The assessee paid the sum of Rs.51,22,831/- as school fees for children of key management personnel u/s 37(1) of the Act which was declined and added to the income of the assessee. The assessee also claimed expenses to the tune of Rs.69,32,167/- on account of reimbursement to group company on account of business expenses incurred by the group company on behalf of appellant but the appellant did not prove the transaction, hence, the same was 3949/M/2016 A.Y. 2010-11 2011-12 disallowed and added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.11,77,80,120/- and in sum of Rs.-31,24,65,638/- u/s 115JB of the Act. The assessee filed an appeal before the CIT(A) who confirmed the addition, therefore, the assessee filed the present appeal before us. ISSUE NO.1:-
4. Issue no. 1 is general in nature which nowhere required any adjudication. ISSUE NO.2:-
5. Under this issue the assessee has challenged the disallowance of loss of Rs.76,71,248/- arising out on Foreign Exchange fluctuation. The Assessing Officer disallowed the claim of the assessee on the ground of the assessee failed to establish this fact that the loss was of revenue or capital in nature. The CIT(A) also confirmed the same on the ground of that bifurcation of the loss is not on the file whether the same is the capital loss or revenue loss. The assessee filed an application for additional evidence in which he wanted to explain the transaction of revenue loss to the tune of Rs.76,71,248/- and capital loss to the tune of Rs.1,82,295/-. Assessee wanted to produce the statement showing break up of foreign exchange loss into revenue and capital account and copy of ledger account of overseas parties with whom transactions giving rise to forex fluctuations were entered into.
ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 On appraisal of the CIT(A) order, we find that the CIT(A) has decided the matter of controversy on the basis of the finding of the CIT(A) for the A.Y. 2009-10 and disallowed the claim of the assessee. The assessee filed an appeal before the ITAT for the A.Y. 2009-10 in which the Hon’ble ITAT remanded the case before the AO in terms of Supreme Court decision CIT Vs. Woodward Governor (249 DTR 451)(SC) and CIT Vs. V.S. Dempo & Co P Ltd (206 ITR 291) (Bom High Court). The assessee filed the bifurcation of Foreign Fluctuation loss into revenue and capital loss which lies at page no. 178,179 of the paper book and in view of the order passed by the Hon’ble ITAT in the assessee’s own case for the A.Y.2009-10 in and 5643/M/2013 we set aside the finding of the CIT(A) on this issue and remand this issue before the AO to decide the matter afresh in view of the additional evidence and in view of the law relied upon by us in accordance with law. Needless to say that the Assessing Officer would provide a fair opportunity of being heard to the assessee before passing the order in accordance with law. Accordingly, this issue the finding of the CIT(A) on this issue is hereby ordered to be set aside and the matter of restored back to the AO for further adjudication in view of the observation made above. ISSUE NO.3:- 6. Under this issue the assessee has challenged the confirmation of the disallowance of loss stock of Rs.1,43,01,103/-. The assessee has ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 claimed to be the incurred an amount of Rs.1,43,01,103/- being loss on account of mismatch of stock, loss of stock, damage, etc, and claimed as revenue expenses. The Assessing Officer disallowed the same being not documentary evidence was produced. The CIT(A) has also confirmed the said disallowed. The Ld. Representative of the assessee has argued that the assessee’s case has duly been covered by the decision of assessee’s own case decided by the Hon’ble ITAT for the A.Y. 2008-09 in ITA. No. 864/M/2012 dated 30.09.2015 and for the A.Y. 2009-10 and 5704/M/2013 dated 24.01.2017. Therefore, the claim of the assessee is liable to be allowed. However, on the other hand, the Ld. Representative of the department has refuted the said contentions. Before, going further it is necessary to advert the finding of the Hon’ble ITAT in the assessee’s own case in connection with relevant issues in ITA. No. 5704/M/2013 for the A.Y. 2009-10 the relevant finding is hereby reproduced below.:-
“Assessee is aggrieved for disallowance on account of loss of stock. In this connection, the assessee had submitted that the claim on account of deduction made by the customer (i.e. HUL) from the payments to the assessee towards warehousing and transport charges on account of damages, shortage and for delays etc. In this regard, the copies of credit notes issued to HUL along with the corresponding details was submitted before the authorities and is also summarized at page 226 para 3.2.4 of the fact sheet filed before us and is also enclosed at page 111-117 of the revised paper book filed on 2 March 2016. In view of this, it was submitted that looking at the hazards of carrying on business of transportation and warehousing, these losses are incidental and therefore, allowable as a business loss. Without prejudice, the assessee has also filed additional ground of including this as bad 3949/M/2016 A.Y. 2010-11 2011-12 debt under section 36(1)(vii) of the Act. The gross income received from warehousing and transport charges of Rs.82,36,59,877/- has been offered as income and therefore short recovery/deduction by the customer is allowable as loss u/s 28/37 of the Act or as a bad debt u/s 36(1)(vii) of the Act. We found that similar issue has been dealt by Tribunal in assessee’s own case for the A.Y. 2008-09 wherein assessee’s claim for deduction u/s 36(1)(vii) r.w.s. 36 was allowed in favour of the assessee after having the following observation:- “:- 8. The second issue in this appeal relates to a disallowance of Rs.65,40,000/-, which was made by the Assessing Officer on the ground that the same was on account of a mere Provision for doubtful debts. The CIT(A) has since deleted the addition on the ground that in sum and substance the impugned sum of Rs.65,40,000/- was actually a bad debt written-off and not merely a Provision for bad and doubtful debts. As per the CIT(A), the impugned sum was deductible under section 36(1)(vii) r.w.s. 36(2) of the Act. Against such a decision, Revenue is in appeal before us. In the course of assessment proceedings, the Assessing Officer noticed that assessee had debited Provision for bad and doubtful debts of Rs.65,40,000/- to the P&L Account. On being asked to explain, assessee contended that the impugned sum was in the nature of non-recoveries from the customers. It was explained that the ITA 864/MUM/2012 (Assessment Year : 2008-09) nature of the transaction was write off of non-recoverable amounts from the customers and, therefore, it was in the nature of a bad debt written-off, which was allowable under section 36(1)(vii) r.w.s.36(2) of the Act. The Assessing Officer however, disallowed the claim on the ground that it was stated as a Provision for doubtful debts.
We find that before the CIT(A) assessee explained that in the transportation and warehousing business losses occur on account of detention, loss of stock and damage to the stocks. Wherever losses occur to the consignee/consignor of the consignment, they recover the same from the bills of the transporter. The mode of recovery was deduction in the payment to the 3949/M/2016 A.Y. 2010-11 2011-12 transporter. Such like claims stood at Rs.65,40,000/- and assessee explained that there was no likelihood of recovery of such amounts from the customers in any time in future. Therefore, assessee had written-off such amount as non-recoverable. The assessee also explained that there was an error in reflecting the same as a Provision for doubtful debts and not as actual bad debts. The CIT(A) has considered the submissions put forth by the assessee and deleted the addition by making the following discussion: - "5.3 I have considered the facts of the case. In the P&L account the appellant claimed provision for doubtful debts of Rs.65,40,000/-. The Assessing Officer disallowed the same on the ground that firstly the provisions were not allowable as business expenses and secondly the details thereof were not furnished by appellant. On the other hand, the appellant has explained thatthe Assessing Officer had made addition without asking for details of such provision actually not a provision. The appellant has explained that the amount of Rs.65,40,000/- was actually not a provision but represented the actual amounts receivable from the clients which could not be recovered and hence constituted a bad debt. The amount represented short recovery of transportation charges from the clients on account of losses occurred on account of retention, loss of stock and damage to stock whereas the transport invoices were accounted in the books of accounts for the whole amounts reflected in the transportation invoices. In the facts and circumstances, the amount wrongly claimed as provision of Rs.65,40,000/- was actually a bad debt which was already included in the sale turnover of the appellant. In the facts and ITA 864/MUM/2012 (Assessment Year: 2008-09) circumstances the conditions laid down in sec. 36(1)(vii) r.w. 36(2) of the Act were duly complied with. As per Supreme Court decision on this issue there was no requirement of establishing that such receivable have actually become bad. In the facts and circumstances the appellant's claim of Rs.65,00,000/- was allowable as bad debt. The disallowance made by Assessing Officer is deleted. This ground of appeal
is allowed."
10. Before 3949/M/2016 A.Y. 2010-11 2011-12 us, the Ld. Departmental Representative has not advanced any arguments which would negate the factual finding arrived at by the CIT(A). Quite clearly, the assessee company is in the business of transportation and the impugned sum has been found to be "......short recovery of transportation charges from the clients on account of losses occurred on account of retention, loss of stock and damage to stock....." Furthermore, the CIT(A) has also recorded a finding that the invoices raised by the assessee which have been credited in the books of account as income cover the impugned sums also. Therefore, the CIT(A) has found that the conditions laid down in section 36(1)(vii) r.w.s. 36(2) of the Act have been complied with. We hereby affirm the aforesaid finding of the CIT(A) in the absence of any credible material or reasoning brought out by with the Revenue before us. Thus, on this aspect also Revenue fails.”
We have considered rival contentions and carefully gone through the order of the authorities below as well as order of the Tribunal dated 30/09/2015 in assessee’s ownc case, wherein facts and circumstances were similar.
Respectfully following the order of the Tribunal, we do not find any merit for the disallowance of Rs.1,03,86,501/- made on account of loss of stock.
Next grievance of assessee relates to disallowance on account of foreign exchange fluctuation loss. We found that assessee has raised this ground before the CIT(A), however, CIT(A) has not disposed of this ground.
This issue was discussed in great detail in the recent landmark ruling of Supreme Court in the case of CIT Vs. Woodward Governor India P. Ltd (312 ITR 254) where in the SC relied on the earlier judgment in the case of Sutlej Cotton Mills Ltd. Vs. CIT (116 ITR 1) which observed as follows: “The Law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be a ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as port of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature.”
Further in the aforesaid ruling the Apex Court also affirmed the principles laid down in the ruling of CIT Vs. Dempo & Co Pvt. Ltd. (206 ITR 291) 15. In the interest of justice, we restore this ground back to the CIT(A) for decided in terms of decisions of Supreme Court in the case of Wookward Co Pvt. Ltd., 312 ITR 254 and we direct accordingly.”
On appraisal of the above said mentioned order by the Hon’ble ITAT we observed that the case of the assessee has been covered by the said order, therefore, by honoring the order passed by the Hon’ble ITAT in the assessee’s own case for the A.Y. 2009-10 in dated 24.01.2017 we allowed the claim of the assessee. Accordingly, the finding of the CIT(A) is hereby ordered to be set aside. The claim of the assessee is hereby ordered to be allowed.
ISSUE NO.4:- 8. Under this issue the assessee has challenged the disallowance of expenses of Rs.1,97,26,827/- on account of management fees u/s 40(a)(ia) of the Act. The Assessee Officer has disallowed the said claim on account of non deposition of TDS detail. The assessee filed the challan for payment of tax on management fees which lies at page 3949/M/2016 A.Y. 2010-11 2011-12 no. 185 of the paper book. No doubt the said additional evidence was not before the AO as well as before the CIT(A). It is also argued that the issue consequentially covered by the assessee’s own case for the A.Y. 2009-10 in ITA. No. 5704/M/2013 dated 24.01.2017. On appraisal of the said finding, we noticed that in the said case the additional evidence in the Form of Challan for tax payment of TDS, Form no. 15C and 15CB which were already filed with the AO and in support of this admitted. Accordingly, we set aside the finding of the CIT(A) on this issue and direct the AO to decide the issue afresh by considering the order of the Tribunal for the A.Y. 2009-10 and after verifying the record, additional evidence on record and after giving an opportunity of being heard to the assessee in accordance with law. It is also incumbent upon the AO to keep in the mind of earlier decision passed by the Hon’ble ITAT in the assessee’s own case for the A.Y. 2009-10 in ITA. No. 5704/M/2013 dated 24.01.2017. Accordingly, this issue is being decided in favour of the assessee for statistical purpose. ISSUE NO.5:- 9. Under this issue the assessee has challenged the disallowance of expenses of Rs.5,92,643/- on account of reimbursements towards consultancy and professional fees paid to group companies. The CIT(A) confirmed the said disallowance on the ground of that the said payment was liable to be TDS u/s 195 of the Act. The Ld.
ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 Representative of the assessee has argued that the said payment was purely reimbursement in nature and in absence of any profit element or mark-up, the assessee was not liable to deduct the TDS ,therefore, the expenses of Rs.5,92,643/- on account of reimbursement towards consultancy and professional fees paid to group companies is allowable. It is also argued that the matter is also covered by the assessee’s own case for the A.Y, 2009-10 in dated 24.01.2017. However, On the other hand the Ld. Representative of the department has refuted the said contentions. With due regards contention raised by Ld. Representative of the parties and perusing the record carefully, we noticed that such type of claim was allowed by the Hon’ble ITAT in the assessee’s own case for the A.Y. 2009-10 in ITA. No. 5704/M/2013 dated 24.01.2017. However, in the said case the claim of the assessee was allowed on the basis of the evidence produced before AO. In the instant case, the assessee has relied upon the order passed by the TPO in which TPO nowhere suggested any additions. The assessee filed the form 3CEB and TP study report. These documents are to be examined and accordingly, the decision is required to be taken by AO. Therefore, we set aside the finding of the CIT(A) on this issue and direct the AO to re-examine and decide the issue afresh in the light of evidence adduced by the assessee in accordance with law by giving an opportunity of being heard to the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. 3949/M/2016 A.Y. 2010-11 2011-12 ISSUE NO.6:- 10. Under this issue the assessee has challenged the confirmation of disallowance of expenses of Rs.51,22,831/- on account of reimbursement towards school fees of key management personnel. The contention of the Assessee is that the said payment are not liable for withholding under Section 195 of the Act but the same are perquisite and are liable to withholding under section 192 of the Act and TDS has been deducted. The employees were entitled for reimbursement in view of the contract of employment lies at page no. 187 and 196 of the paper book. Subsequently, remand by the CIT(A) has also excluded this expenses in view of Section 195 and Section 40(a)(ia) of the Act as the appellant has deducted taxes thereon u/s 192 of the Act in its order for the A.Y. 2010-11. Hence, the claim is liable to be allowed. However, on the other hand, the Ld. Representative of the department has refuted the said contentions. In view of the argument and advanced by the ld. Representative of the parties and perusing the record, we noticed that the contract between employee and the employer is required to be examined for the purpose of reimbursement and it is also required to the assess whether the TDS has been deducted on the payment in view of the provision u/s 192 of the Act or not. The contention of the appellant in connection with passing the order of the CIT(A) for the A.Y. 2010-11 is also required to be examined. Therefore, in the said circumstances, we set aside the ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 finding of the CIT(A) on this issue and direct the AO to decide the matter of afresh in view of the contract of employment and in view of the deduction u/s 192 of the Act by giving an opportunity of being heard to the assesses in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.7:- 11. Under this issue the assessee has challenged the disallowance of expenses of Rs.69,32,167/- on account of reimbursement u/s 37(1) of the Act. On appraisal of the order passed by the CIT(A), we noticed that the CIT(A) has followed the decision of his predecessor stating therein that these expenses were incurred by Parent company for securing its global business interest. The contention of the assessee is that the TPO nowhere suggested the disallowance of the said expenses, from the TP order, form 3CEB and TP study report. It is also argued that the matter of controversy has been duly been covered by assessee’s own case in dated 24.01.2017. After going through the said decision, we noticed that the Assessing Officer has already been examined the issue and was of the view that the expenses were purely reimbursement and did not attract the provision u/s 195 r.w. 40(a)(ia) of the Act. However, in the instant case, the matter was yet to be examined by AO in the light of evidence adduced by the assessee. No doubt, in the said circumstances and in view of the order passed by the Hon’ble ITAT in the assessee’s ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 own case for the A.Y. 2009-10 dated 24.01.2017 we set aside the finding of the CIT(A) on this issue and direct the AO to decide the matter afresh in view of the evidence adduced by assessee and in view of the finding of the Hon’ble ITAT in the assessee’s own case in ITA. No.5704/M/2013 dated 24.01.2017. Accordingly this issue is being decided in favour of Assessee. :- 12. The assessee has filed the present appeal against the order dated 15.02.2016 passed by the Commissioner of Income Tax (Appeals)-22, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year2011-12.
13. The assessee has raised the following grounds:-
“Based on the facts and circumstances of the case and in law, Linfox Logistics (India) Private Limited (hereinafter referred to as the 'Appellant') craves to prefer an appeal against the order passed by the learned Commissioner of Income-tax (Appeals) - 22 [CIT(A)'} under section 250 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') dated 15 February 2016 (received by the Appellant on 13 April 2016) on the following grounds: Each of the pounds are referred to separately, which may kindly 1.1 On the facts and circumstances of the case and in law, the Learned CIT(A) and the learned Deputy Commissioner of Income- tax (hereinafter referred to as the 'AO') have erred in assessing the total loss of the Appellant at Rs (11,66,70,560) as against the returned loss of Rs (15,89,03,542). Disallowance of loss of Rs 42.,42,853 arising on account of foreign exchange fluctuation 3949/M/2016 A.Y. 2010-11 2011-12 2.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the disallowance of loss on foreign exchange fluctuation claimed wider section 37 of the Act. 2.2 On the facts and circumstances of the case and in Jaw, the Learned C1T(A) has erred in not appreciating and considering the explanations and details provided for loss. of Rs 42,42,853 arising on account of foreign exchange fluctuation. 3 Disallowance of loss of Rs 14,98,795 on account of Just stock 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance on account of lost stock of Rs 1,496,795 claimed under section 37 of the Act. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in disregarding that lost stock is the realization of a business risk that the Appellant is exposed to which is an integral part of the business operations of the Appellant and hence must be allowed as business loss under section 28 of the Act. 3.3 Without prejudice to the Grounds 3.1 and 3.2 above, the CIT(A) has failed to appreciate the alternate claim of the Appellant of loss stock as a write-off under section 36(l)(vii) of the Act on account of non-recover), of receipts already recognized as revenue by the Appellant in its books of accounts. 3,4 On the facts and circumstances of the case and in law, the learned CIT(A) erred in violating principles of judicial hierarchy, in not following the decision of the Hon’ble Tribunal in the Appellant's own case for AY 2008-09 based on the same facts. 4 Disallowance of expense of Rs 5,69,268 on account of reimbursements towards professional fees and service apartment charges paid to group companies under section 40(a)(ia) of the Act 4A on the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding disallowance of amounts paid to a group company towards reimbursement of professional fees and service apartment charge on the ground that appropriate taxes have not been withheld under section 195 of the Act. 4.2 On the facts and circumstances of the case and in law, the learned CIT(A) erred in disregarding the fact that professional fees and service apartment charges are 3949/M/2016 A.Y. 2010-11 2011-12 reimbursed by the Appellant at actual, without any profit element or mark-up and were not liable to deduction of tax at source. 5 Disallowance of expense of Rs.68,47,379 on account of reimbursement under section 7(1) of the Ad 5.1 On the facts and circumstances of the case and in law, the [earned CIT(A) erred disallowing an amount of Rs 6,47,379 under section 37(1) of the Act being reimbursement to group companies on account of various business expenses incurred by group companies on behalf of the Appellant and recovered from the Appellant. 5.2 Without prejudice to Ground 5.1 above, the learned CIT(A) erred in not adjudicating the issue on disallowance under section 40(a)(i) of the Act as the amounts paid being pure reimbursement without any income element, tax is not required to be deducted under section 195 of the Act. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves to leave or add, alter, delete or modify all or any of the above grounds of appeal at any time before or at the time of hearing of the matter with the. Income Tax Appellate Tribunal.” ISSUE NO. 1 :-
14. Issue no. 1 is generally in nature which nowhere required any adjudication.
ISSUE NO.2
This issue is similar in nature as discussed and decided while deciding issue no. 2 in the assessee’s own case for the A.Y. 3948/M/2016. Accordingly, this issue remanded before the AO for further adjudication on similar lines.
ISSUE NO. 3:-
ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 16. This issue is similar in nature as discussed and decided while deciding issue no. 2 in the assessee’s own case for the A.Y. 2010-11 in ITA N. 3948/M/2016. Accordingly, this issue remanded before the AO for further adjudication on similar lines. ISSUE NO.4:- 17. Under this issue the assessee has challenged the disallowance of expenses of Rs.5,69,268/- on account of professional fees u/s 40(a)(ia) of the Act. The Assessee Officer has disallowed the said claim on account of non deposition of TDS detail. The assessee filed the challan for tax of management fees which lies at page no. 185 of the paper book. No doubt the said additional evidence was not before the AO as well as before the CIT(A). It is also argued that the issue has consequentially covered by the assessee’s own case for the A.Y. 2009-10 in dated 24.01.2017. On appraisal of the said finding, we noticed that in the said case the additional evidence is in connection with filing the TDS and copy of Form no. 15C and 15CB had already been verified by the AO whereas in the instant case the same are required to be verified. Accordingly, we set aside the finding of the CIT(A) on this issue and direct the AO to decide the issue afresh by considering the additional evidences on record and after giving an opportunity of being heard to the assessee in accordance with law. It is also incumbent upon the AO to keep in the mind of earlier decision on this issue settled by the Hon’ble ITAT ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 in the assessee’s own case for the A.Y. 2009-10 in dated 24.01.2017. Accordingly, this issue is being decided in favour of the assessee against the revenue. ISSUE NO.5:- 18. Under this issue the assessee has challenged the confirmation of disallowance of expenses of Rs.68,47,379/- on account of reimbursement towards school fees of key management personnel. The contention of the Assessee is that the said payment is not liable to be hold in view of Section 195 of the Act and in view of the contract of employment lies at page no. 187 and 196 of the paper book. Subsequently, remand by the CIT(A) has also excluded this expenses out of the purview of Section 195 of Section 40(a)(ia) of the Act as the appellant has deducted taxes thereon u/s 192 of the Act in its order for the A.Y. 2010-11. Hence, the claim is liable to be allowed. However, on the other hand, the Ld. Representative of the department has refuted the said contentions. In view of the argument advanced by the ld. Representative of the parties and perusing the record. We observed that the contract between employee and the employer is required to be examined and it is also required to be seen that the assessee has deducted the TDS on the payment in view of the provision u/s 192 of the Act or not. The contention of the appellant in connection with passing the order of the CIT(A) for the A.Y. 2010-11 is also required to be examined. Therefore, in the said circumstances, ITA. No. 3948/M/2016 3949/M/2016 A.Y. 2010-11 2011-12 we set aside the finding of the CIT(A) on this issue and direct the AO to decide the matter of afresh and by giving an opportunity of being heard to the assesses in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue.
In the result, all the appeals filed by the assessee are hereby allowed.
Order pronounced in the open court on 29.08.2018.