DEPUTY COMMISSIONER OF INCOME
TAX
CIRCLE-8, KOLKATA
Vs
M/s ERNST & YOUNG PVT LTD
PAN NO:AABCE9188P
Vs
DEPUTY COMMISSIONER OF INCOME
TAX
CIRCLE-8, KOLKATA
Whether payment made by the assessee as
reimbursement to its associates for administrative and management support
services rendered by the group concern is liable to deduction of tax at source
- Whether Rule 8D is applicable for A.Y 2006-07.
A. The assessee
is a member of Ernst & Young group. Ernst & Young Global Services LLP
and Ernst Young UK LLP provide administrative and management support services
to the assessee and other associate concerns of the group that share the costs
The assessee had claimed the payments made to its AEs, Ernst & Young Global
Services LLP and Ernst & Young LLP, UK, towards reimbursement of its share
of costs for providing these administrative and management support services in
connection with technology updates, access to audit methodology updates, online
knowledge updates, assistance in development of common programs and policies,
besides making available professional and people resources to assist the
assessee or its clients in all jurisdictions.
The AO disallowed both these amounts claimed by way of
reimbursement of cost for services utilized in the assessee’s business. The AO
held that the assessee was liable to deduct tax under section 195 on the
payments made but having failed to do so, he disallowed the claim under section
40(a)(ia).
On appeal, the CIT(A) deleted this disallowance by following the
decision of ITAT, Kolkata in assessee’s own case for AY 2003-04. The CIT(A)
noted that the ITAT, Kolkata had held that, “"as per the provisions of
section 195, before a TDS is required to be charged on any sum, it has to be
shown that it is an income as per the provisions of section 195 because the
very wording under section 195 "any other sum chargeable under the
provisions of the Act" means that chargeable as income as per section 4 of
the Income-tax Act. Unless and until it is chargeable, there is no requirement
of withholding tax by any Indian person responsible for paying to any
non-resident, not being a company, or to a foreign company, any sum payable on
any account.
There is no rebuttal from the side of the department that the
expenses are relating to reimbursement of expenses for supply of data as per
the agreement stated to have been made amongst the global firms to which the
assessee company is treated as one of the members. Therefore, both factually as
well as legally the assessee has a case and on this issue the assessee,
therefore. should succeed in our considered opinion as the amount is towards
the reimbursement and with the passage of time, now globalization has been
adopted by different countries for facilitating data and technical skill of
different countries.
Simply because the supply of data pertains to technical
services, the department should not be rigid for application of section 195
without examining the actual factual aspect of the matter that it is a result
of an agreement in between the parties for sharing the data amongst the members
firms in the globalization process."
B. The assessee has
earned dividend income and claimed it as exempt. The assessee claimed that it
had not incurred any expenditure to earn this dividend income. According to the
assessee, it had invested the short term surplus funds available with it in Grindlays
Cash Fund. These funds were not invested out of borrowed funds but out of
surplus funds available with the company for a short period. The assessee filed
complete details relating to the investment, and reinvestment of dividend along
with bank statement.
The AO estimated the proportionate management expenses qua the
exempted income at 10 per cent and, thereby, computed the disallowance.
On appeal, the CIT(A) invoked Rule 8D by noting that the Special
Bench in the case of Daga Capital Management had held that Rule 8D read with
section 14A is retrospectively applicable and, therefore, the assessee was
asked to submit computation in terms of Rule 8D for making the disallowance.
The CIT(A) thus restricted the disallowance at 1 per cent of the exempted income
under section 14A.
C. A sum
of Rs.1,54,71,071/- being the provision made for leave encasement in the
current assessment year on the basis of actuarial valuation was disallowed and
such disallowance was confirmed by the CIT(A).
In the cross appeals before the Tribunal, the Revenue submitted
that the payment claimed as reimbursement of expenses should have been treated
as fees for technical services paid to a non-resident while the assessee
submitted that the issue was squarely covered in favour of the assessee and
against Revenue.As for disallowance of leave encashment, the counsel for the
assessee submitted that although Calcutta High Court in the case of Exide Industries Ltd. Vs. Union of
India had stuck down the provisions of section 43B(f) of the Act as
being arbitrary and ultra vires, the Supreme Court has stayed the judgment of
the High Court and, therefore, he requested the bench to set aside this issue
to the file of the AO with a direction that he will adjudicate the same as per
the final judgment of Supreme Court in the case of Exide Industries Ltd. The
CIT, DR fairly agreed that the issue can be restored back to the file of the
AO.
Having heard the parties, the Tribunal
held that,
Disallowance under section 40(a)(ia)
+ we find the factual position that the
assessee company is a member of the international organization of Ernst &
young and its several associate concerns worldwide. Ernst & Young Global
Services LLP and Ernst Young UK LLP provide administrative and management
support services in connection with technology updates, system and methodology
and upgrades, training through webs etc. to the assessee and to other associate
concerns of the Group. The assessee and its other associate concerns share the
costs. A sum of Rs.6,88,12,554 was reimbursed to Ernst & Young Global
Services LLP and a sum of Rs.23,78,781 to Ernst & Young UK LLP by the
assessee during the current assessment year on account of its share of costs
for such services. The said concerns were set up by member firms of Ernst &
Young for providing resources to obtain best methodologies at a lower cost
which in the present days of globalisation was imperative for any professional
firm. Development of such methods by anyone concern would have been cost
prohibitive apart from lacking uniformity and mutual compatibility.
Accordingly, arrangement was arrived at for such services to be developed in
pool by the said two concerns to which the member firms would have access to it
and reimbursing their respective shares of cost incurred therefore. Such
reimbursement was agreed on the basis of respective turnover of the member
firms. These facts are not denied by revenue even now before us and these are
reimbursement of expenses. Once these are reimbursement of expenses the
assessee is not liable to deduct TDS u/s. 195 of the Act. Accordingly, we
confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed;
Dividend Income
+ we find that the relevant assessment
year involved is AY 2006-07and Bombay High Court in the case of Godrej & Boyce
Mfg. Co. Ltd. vs. DCIT , held that Rule 8D of the Rules as inserted by the I. T
(Fifth Amendment) Rules, 2008 w.e.f. 24.3.2008 is prospective and not
retrospective. The CIT(A) restricted the disallowance at 1% of the exempted
income u/s. 14A of the Act by observing as under:"I find that the decision
of Daga Capital has been reversed by Hon’ble Bombay High Court in their above
mentioned order dtd. 12.08.2010. In this order Hon’ble Court has held that Rule
8D shall be applicable from assessment year 2008-09 onwards. Here, since the
assessment year involved is 2007-08 therefore I hold that Rule 8D will not
apply. However, in certain recent decisions Hon’ble ITAT Kolkata has held that
out of the administrative expenses, expenses to the tune of 1% of the exempt
income can be disallowed u/s. 14A. Following these decisions I hold that an
amount of Rs.7,857/- shall be disallowable u/s. 14A.";
+ we find that the exempted income is to
the extent of Rs.76,34,047/- in AY 2006-07. Rule 8D of the Rules is not applicable
in this assessment year in the assessee’s case as held by Bombay High Court in
the case of Godrej & Boyce Mfg. Co. Ltd. being prospective. We direct the
AO to restrict the disallowance at 1% of the exempted income. This issue of
assessee’s appeals is partly allowed as directed above;
Leave Encashment:
+ we, after hearing both the side find
that the Apex Court in the case of Exide Industries Ltd. has stayed the
operation of the judgment of Calcutta High Court. Once this is the position, we
restore back this issue to the file of AO to adjudicate the same afresh in
terms of the decision of Apex Court in the case of Exide Industries Ltd.
Revenue's appeals dismissed
& Assessee appeals partly allowed
Cases followed:
Decision of ITAT, Kolkata
in assessee’s own case for AY 2003-04 in ITA No. 1750/Kol/2006 vide order dated
16th Nov. 2007
ORDER
Per: Bench:
This first appeal being ITA No.1159/K/2012 by revenue is arising
out of order of CIT(A)-VIII, Kolkata in Appeal No. 50/CIT(A)-VIII/Kol/11-12
dated 17.05.2012.
2. The only issue in this appeal of revenue is against the order
of CIT(A) granting interest u/s. 244A of the Income-tax Act, 1961 (hereinafter
referred to as "the Act"). For this, revenue has raised following
ground no.1:
"1. That on the facts and
circumstances of the case and in law, the Ld. CIT(A) erred in granting interest
u/s. 244A on interest and also holding that while issuing refund interest
amount will take priority before principal amount."
3. We have heard rival submissions and gone through facts and
circumstances of the case. We find that CIT(A) has factually noted errors
committed by AO while computing interest u/s. 244A of the Act and he brought
out the factual details under following eight aspects:
"a) In treating Rs.2,29,85,384/-
refunded on 30.9.05 as refund out of tax paid even though it included
Rs.31,63,564 towards interest u/s. 244A of the Income Tax Act,
b) In granting interest on Rs.1,49,79,822
for the period 1.10.2005 to 31.7.06 instead of granting interest on
Rs.1,81,43,386 and consequently granting short interest;
c) In not granting interest on
Rs.44,78,062 from 28.7.06 to 31.7.06 i.e. for 1 month as per provisions of Rule
119A of the Income Tax Rules;
d) In granting interest on Rs.1,94,57,884
for the period 1.8.06 to 28.2.07 instead of granting interest on Rs.2,26,21,448
and consequently granting short interest;
e) In granting interest on Rs.3,05,88,892
for the period 1.3.07 to 29.3.07 instead of granting interest on Rs.3,44,19,137
and consequently granting short interest;
f) In reducing Rs.6,66,681 being interest
granted in order dt. 29.3.07 passed u/s. 154/251/143(3) of the Act twice. Once
as refund granted on 29.3.07 and again as part of Rs.2,07,91,649 refunded on
30.3.07;
g)In reducing Rs.2,07,91,469 instead of
Rs.2,07,91,649 refunded on 30.3.07 by adjustment against demand of AY 2005-06
h) In granting interest on Rs.97,97,423
for the period 1.4.07 to 31.3.09 instead of granting interest on Rs.1,42,94,169
and consequently granting short interest."
The Ld. CIT, DR stated that the computation of CIT(A) is wrong
but he could not point out which part of CIT(A)’s order is wrong and how. He
could not identify mistake in allowing interest u/s. 244A of the Act. Despite
the entire facts available in the order of CIT(A), the Ld. CIT, DR could not
point out any error, we feel that the directions of CIT(A) are as per law and
we uphold the same. This appeal of revenue’s appeal is dismissed.
4. These cross appeals, being ITA No.1092/K/2009 by revenue and
ITA No. 792/K/2009 by assessee, are arising out of order of CIT(A)-VIII,
Kolkata in appeal no. 102/CIT(A)- VIII/KOL/CIRCLE-8/2008-09 dated 05.03.2009.
Assessment was framed by DCIT, Circle-8, Kolkata u/s. 143(3) of the Income-tax
Act, 1961 (hereinafter referred to as the "Act") for AY 2006-07 vide
his order dated 15.07.2008.
5. The only issue in this appeal of revenue (ITA No.
1092/K/2009) is as regards to the order of CIT(A) deleting the disallowance
made by AO for non-deduction of TDS by invoking the provisions of section
40(a)(ia) of the Act on reimbursement of cost for providing access to system and
management audit methodology updates etc. to EYGS LLP and Ernst & Young
LLP, UK. For this, revenue has raised following sole ground:
"1. That Ld. CIT(A) erred on facts
and in law in deleting the disallowance under section 40(a)(ia) of Income Tax
Act, 1961 of a total sum of Rs.7,11,91,335/- which was made by the Assessing
Officer for non-deduction of tax at source as per provision of Income Tax Act
1961."
6. Briefly stated facts are that the assessee claimed deduction
for Rs.6,88,12,554/- and Rs.23,78,781/- being amount payable to EYGS LLP and
Ernst & Young LLP, UK respectively towards reimbursement of costs for
providing access to system & management audit methodology updates,
knowledge updates through web etc. assistance in development of common programs
and policies, endeavoring to ensure that professional and to other people
resources are available to assist the firm or its clients in all jurisdiction.
But the AO disallowed both these amounts claimed by way of reimbursement of
cost for services utilized in the assessee’s business. According to him
assessee is liable to deduct tax but it has failed to deduct tax under section
195 of the Act. He, accordingly, disallowed a sum of Rs.7,11,91,335/- paid
towards ‘Cost of Reimbursements’ u/s. 40(a)(ia) of the Act. Aggrieved assessee
preferred appeal before CIT(A) , who deleted the disallowance by following the
decision of ITAT, Kolkata in assessee’s own case for AY 2003-04 in ITA No.
1750/Kol/2006 vide order dated 16th Nov. 2007, wherein it has been held as under:
"10. We went through the rival
submissions of both the parties and perused the documents. In our considered
view as per the provisions of section 195, we agree with the view taken by the
Delhi Branch of the Tribunal that before a TDS is required to be charged on any
sum, it has to be shown that it is an income as per the provisions of section
195 because the very wording under section 195 "any other sum chargeable
under the provisions of the Act" means that chargeable as income as per
section 4 of the Income-tax Act. Unless and until it is chargeable, there is no
requirement of withholding tax by any India person responsible for paying to
any non-resident, not being a company, or to a foreign company, any sum payable
on any account. There is no rebuttal from the side of the department that the
expenses are relating to reimbursement of expenses for supply of data as per
the agreement stated to have been made amongst the global firms to which the
assessee company is treated as one of the members. Apart from this factual
aspect it has been observed that in the case law reported in 142 ITR 493 in the
case of Dunlop India Ltd. the facts appear to be identical to that of the
present case in hand. Therefore, both factually as well as legally the assessee
has a case and on this issue the assessee, therefore. should succeed in our
considered opinion as the amount is towards the reimbursement and with the
passage of time, now globalization has been adopted by different countries for
facilitating data and technical skill of different countries. Simply because
thee supply of data pertains to technical services, the department should not
be rigid for application of section 195 without examining the actual factual
aspect of the matter that it is a result of an agreement in between the parties
for sharing the data amongst the members firms in the globalization process.
This aspect, in particular, has not been controverted by the department at any
stage of the proceeding. Hence, we decide this issue in favour of the assessee and
against the Revenue."
Aggrieved revenue came in appeal before us.
7. We have heard rival submissions and gone through facts and
circumstances of the case. Before us, Ld. Counsel for the assessee stated that
the issue is squarely covered in favour of assessee and against revenue. We
find that the Tribunal is consistently deleting this disallowance as reproduced
above one of the Tribunal’s decision in AY 2003-04. We find the factual
position that the assessee company is a member of the international organization
of Ernst & young and its several associate concerns worldwide. Ernst &
Young Global Services LLP and Ernst Young UK LLP provide administrative and
management support services in connection with technology updates, system and
methodology and upgrades, training through webs etc. to the assessee and to
other associate concerns of the Group. The assessee and its other associate
concerns share the costs. A sum of Rs.6,88,12,554 was reimbursed to Ernst &
Young Global Services LLP and a sum of Rs.23,78,781 to Ernst & Young UK LLP
by the assessee during the current assessment year on account of its share of
costs for such services. The said concerns were set up by member firms of Ernst
& Young for providing resources to obtain best methodologies at a lower cost
which in the present days of globalisation was imperative for any professional
firm. Development of such methods by anyone concern would have been cost
prohibitive apart from lacking uniformity and mutual compatibility.
Accordingly, arrangement was arrived at for such services to be developed in
pool by the said two concerns to which the member firms would have access to it
and reimbursing their respective shares of cost incurred therefore. Such
reimbursement was agreed on the basis of respective turnover of the member
firms. These facts are not denied by revenue even now before us and these are
reimbursement of expenses. Once these are reimbursement of expenses the
assessee is not liable to deduct TDS u/s. 195 of the Act. Accordingly, we
confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.
8. Coming to ITA No. 792/K/2009. The first issue in this appeal
of assessee is against the order of CIT(A) in upholding the disallowance made
by AO by invoking the provisions of section 14A of the Act read with Rule 8D of
the I. T. Rules, 1962 (hereinafter referred to as the "Rules").
9. Briefly stated facts are that the assessee has earned
dividend income at Rs.76,34,047/- and claimed the same as exempt. The assessee
claimed that it had not incurred any expenditure to earn this dividend income.
During the course of assessment proceedings the assessee explained before AO
that it has invested short term surplus fund available with it in Grindlays
Cash Fund. The assessee also filed complete details i.e. the date of
investment, dividend reinvested, refund receipts and closing balance as on
31.03.2003. Completed copy of statement including bank statement was submitted.
The assessee explained that these funds were not invested out of borrowed fund
but were invested out of surplus funds available with the company for short
period. The AO estimated the proportionate management expenses qua the exempted
income at 10% and, therefore, computed the proportionate management expenses at
Rs.35,23,840/-. Aggrieved, assessee preferred appeal before CIT(A), who invoked
Rule 8D of the Rules by noting that the Special Bench in the case of ITO Vs. Daga Capital Management Pvt.
Ltd. (2008) 119 TTJ 209 (Mum) (SB) = 2008-TIOL-509-ITAT-MUM-SB has
held that Rule 8D read with section 14A of the Act is retrospectively
applicable and, therefore, he asked the assessee to submit computation in term
of Rule 8D for making the disallowance. Accordingly, he restricted the
disallowance at Rs.14,75,086/-. Aggrieved assessee came in appeal before us.
10. We have heard rival submissions and gone through facts and
circumstances of the case. We find that the relevant assessment year involved
is AY 2006-07and Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs.
DCIT [2010] 328 ITR 81 (Bom.) = 2010-TIOL-564-HC-MUM-IT,
held that Rule 8D of the Rules as inserted by the I. T (Fifth Amendment) Rules,
2008 w.e.f. 24.3.2008 is prospective and not retrospective. The CIT(A)
restricted the disallowance at 1% of the exempted income u/s. 14A of the Act by
observing as under:
"I find that the decision of Daga
Capital has been reversed by Hon’ble Bombay High Court in their above mentioned
order dtd. 12.08.2010. In this order Hon’ble Court has held that Rule 8D shall
be applicable from assessment year 2008-09 onwards. Here, since the assessment
year involved is 2007-08 therefore I hold that Rule 8D will not apply. However,
in certain recent decisions Hon’ble ITAT Kolkata has held that out of the administrative
expenses, expenses to the tune of 1% of the exempt income can be disallowed
u/s. 14A. Following these decisions I hold that an amount of Rs.7,857/- shall
be disallowable u/s. 14A."
We find that the exempted income is to the extent of
Rs.76,34,047/- in AY 2006-07. Rule 8D of the Rules is not applicable in this
assessment year in the assessee’s case as held by Hon’ble Bombay High Court in
the case of Godrej & Boyce Mfg. Co. Ltd. (Supra) being prospective. We
direct the AO to restrict the disallowance at 1% of the exempted income. This
issue of assessee’s appeals is partly allowed as directed above.
11. The next issue in this appeal of assessee is against the
order of CIT(A) confirming the disallowance of provision for leave encasement.
For this, assessee has raised following ground no.2:
"2. The Ld. CIT(A) has also erred in
not deleting the disallowance of a sum of Rs.1,54,71,071/- being the provision
made for leave encasement in the current assessment year on the basis of
actuarial valuation."
12. At the outset, Ld. counsel for the assessee Shri R. N.
Bajoria, Sr. advocate stated that the assessee company has added a sum of
Rs.1,54,71,071/- on account of provision for leave encasement. According to
him, this amount was added back in the computation of income filed with
original return of income in pursuance to section 43B(f) of the Act. He further
stated that Hon’ble Calcutta High Court in the case of Exide Industries Ltd. Vs. Union of
India (2007) 292 ITR 470 = 2007-TIOL-429-HC-KOL-IT
stuck down the provisions of section 43B(f) of the Act as being arbitrary and
ultra vires. Ld. counsel for the assessee stated that Hon’ble Supreme Court has
stayed the judgment of Hon’ble Calcutta High Court in the case of Exide
Industries Ltd. (supra) and, therefore, he requested the bench to set aside
this issue to the file of the AO with a direction that he will adjudicate the
same as per the final judgment of Hon’ble Supreme Court in the case of Exide
Industries Ltd. On this, Ld. CIT, DR fairly agreed that the issue can be
restored back to the file of the AO.
13. We, after hearing both the side find that the Hon’ble Apex
Court in the case of Exide
Industries Ltd. in SLP (Civil) 22889 of 2008 = 2009-TIOL-110-SC-IT has
stayed the operation of the judgment of Hon’ble Calcutta High Court. Once this
is the position, we restore back this issue to the file of AO to adjudicate the
same afresh in terms of the decision of Hon’ble Apex Court in the case of Exide
Industries Ltd. (supra). Accordingly, this issue of assessee’s appeal is
allowed for statistical purposes.
14. Coming to ITA No. 870/K/2011. The first issue in this appeal
of revenue is as regards to the order of CIT(A) deleting the disallowance made
by AO for non-deduction of TDS by invoking the provisions of section 40(a)(ia)
of the Act on reimbursement of cost for providing access to system and
management audit methodology updates etc. to EYGS LLP and Ernst & Young
LLP, UK. For this, revenue has raised following ground no.1:
"1. That Ld. CIT(A) erred on facts
and circumstances of the case and in treating the amount paid to Ernst &
Young LLP UK and Ernst & Young Global Services LLP as reimbursement of
expenses instead of treating it as fees for technical services paid to a non
resident."
We have already dealt this issue elaborately while adjudicating
the ground of appeal of revenue in ITA No.1092/K/2009 and since we have
dismissed this ground of appeal of revenue, following the same analogy we also
dismiss this ground of appeal of revenue.
15. The next issue in this appeal of revenue is as regards to
the order of CIT(A) allowing the claim of bad debt written off. At the outset,
the Ld. Senior counsel for the Assessee stated that no such issue was before CIT(A).
Hence, it cannot be raised before Tribunal as it is not arising from the order
of CIT(A). On query from the bench, the Ld. CIT, DR fairly conceded that there
is no such issue arisen from the order of CIT(A). Hence, the same is dismissed.
This ground of appeal of revenue is dismissed.
16. These cross appeals being ITA No.1257/K/2011 by revenue and
ITA No. 1215/K/2011 by assessee are arising out of order of CIT(A)-VIII,
Kolkata in appeal no. 27/CIT(A)- VIII/Kol10-11 dated 13.07.2011. Assessment was
framed by DCIT, Circle-8, Kolkata u/s. 143(3) of the Income-tax Act, 1961
(hereinafter referred to as the "Act") for AY 2008-09 vide his order
dated 24.05.2010.
17. The first issue in this appeal of revenue is as regards to
the order of CIT(A) deleting the disallowance made by AO for non-deduction of
TDS by invoking the provisions of section 40(a)(ia) of the Act on reimbursement
of cost for providing access to system and management audit methodology updates
etc. to EYGS LLP and Ernst & Young LLP, UK. For this, revenue has raised
following ground no.1:
"1. That on the facts and
circumstances of the case and in law, the Ld. CIT(A) erred in deleting the
disallowance made by the AO u/s. 40(a)(ia) amounting to a total of
Rs.24,22,61,039/- paid by the assessee to Ernst & Young LLP UK and Ernst
& Young Global Services LLP without deducting tax at source u/s. 195 of the
Income-tax Act, 1961 in relation to assessment year 2008-09."
We have already dealt this issue elaborately while adjudicating
the ground of appeal of revenue in ITA No.1092/K/2009 and since we have
dismissed this ground of appeal of revenue, following the same analogy we also
dismiss this ground of appeal of revenue.
18. The next issue in this appeal of revenue is as regards to
the order of CIT(A) in restricting the disallowance made by AO by invoking the
provisions of section 14A read with Rule 8D of the Rules qua the exempted
income for AY 2008-09. For this, revenue has raised following ground no.2:
"2. That on the facts and
circumstances of the case and in law, the Ld. CIT(A) erred in restricting the
disallowance made by the AO u/s. 14A as per rule 8D to 1% of dividend income in
relation to AY 2008-09."
19. Briefly stated facts are that the assessee company earned
dividend income amounting to Rs.91,24,287/- in addition to dividend of equity
shares of CAP Gemini SA amounting to Rs.69,853/-. This dividend received from
CAP Gemini SA was offered to tax. The exempt income claimed on account of
dividend was qua Rs.91,24,287/-. The AO during the course of assessment
proceedings disallowed a sum of Rs.2,94,941/- by invoking the provisions of
section 14A read with Rule 8D of the Rules by observing in para 4 as under:
"4. As per provisions of section 14A
of the act read with rule 8D, a sum of Rs.2,94,941/- is disallowed. It includes
sum of Rs.2,61,235/- which is 0.5% of the average investment and an amount of
Rs.33,706/-, being proportionate interest."
Aggrieved, assessee preferred appeal before CIT(A), who restricted
the disallowance at 1% of dividend income. Aggrieved, now revenue is in appeal
before us.
20. At the outset, Ld. counsel for the assessee stated that Rule
8D of the Rules will apply w.e.f. AY 2008-09 and AO has rightly computed the
disallowance. He conceded this issue. Accordingly, this issue of revenue’s
appeal is allowed.
21. Coming to ITA No. 1215/K/2011. The first issue in this
appeal of assessee is against the order of CIT(A) confirming the disallowance
of provision for leave encashment. For this, assessee has raised following
ground no.1:
"1. The Ld. CIT(A) has erred on
facts and in law in not deleting the disallowance of a sum of Rs.2,04,00,156/-
being the provision made for leave encashment in the current assessment year on
the basis of actuarial valuation."
22. Since we have set aside this ground of appeal of assessee in
ITA No. 792/K/2009 to the file of AO to adjudicate the same afresh in terms of
the decision of Hon’ble Apex Court in the case of Exide Industries Ltd.
(supra), this issue also restored to the file of AO to adjudicate afresh. This
ground of appeal of assessee is allowed for statistical purposes.
23. The next issue in this appeal of assessee is against the
order of CIT(A) in not adjudicating the issue of withdrawal of interest u/s.
234D of the Act. For this, assessee has raised following ground No. 2:
"2. The Ld. CIT(A) has failed to
adjudicate that interest withdrawn under section 244A is not refund granted
under sub-section (1) of section 143 on which interest under section 234D can
be levied."
24. At the outset, Ld. counsel for the assessee fairly stated
that this issue is a consequential issue so, the AO can be directed to
recomputed the disallowance as per the provisions of the Act. Ld. CIT, DR has
not objected to the same. In view of the above submissions, we feel that this
issue needs readjudication and AO will recompute the withdrawal of interest in
terms of provisions of section 234D of the Act. This issue of assessee’s appeal
is allowed for statistical purposes.
25. These cross appeals being ITA No.1160/K/2012 by revenue and
ITA No. 1000/K/2012 by assessee are arising out of order of CIT(A)-VIII,
Kolkata in appeal no. 28/CIT(A)-VIII/Kol/11-12 dated 17.05.2012. Assessment was
framed by DCIT, Circle-8, Kolkata u/s. 143(3) of the Income-tax Act, 1961
(hereinafter referred to as the "Act") for AY 2009-10 vide his order
dated 18.05.2011.
26. Now, coming to ITA No. 1160/K/2012. The sole issue in this
appeal of revenue is as regards to the order of CIT(A) deleting the
disallowance made by AO for non-deduction of TDS by invoking the provisions of
section 40(a)(ia) of the Act on reimbursement of cost for providing access to
system and management audit methodology updates etc. to EYGS LLP and Ernst
& Young LLP, UK. For this, revenue has raised following ground no.1:
"1. That on the facts and
circumstances of the case and in law, the Ld. CIT(A) erred in deleting the
disallowance made by the AO u/s. 40(a)(ia) amounting to Rs.23,52,28,398/- paid
by the assessee to Ernst & Young LLP UK and Ernst & Young Global
Services LLP without deducting tax at source u/s. 195 of the Income-tax Act,
1961 in relation to assessment year 2009-10."
We have already dealt this issue elaborately while adjudicating
the ground of appeal of revenue in ITA No.1092/K/2009 and since we have
dismissed this ground of appeal of revenue, following the same analogy we also
dismiss this ground of appeal of revenue.
27. Coming to ITA No. 1000/K/2012. The sole issue in this appeal
of assessee is against the order of CIT(A) confirming the disallowance of
provision for leave encashment. For this, assessee has raised following ground
no.1:
"1. The Ld. CIT(A) has erred on
facts and in law in not deleting the disallowance of a sum of Rs.2,77,64,886/-
being the provision made for leave encashment in the current assessment year on
the basis of actuarial valuation."
28. Since we have set aside this ground of appeal of assessee in
ITA No. 792/K/2009 to the file of AO to adjudicate the same afresh in terms of
the decision of Hon’ble Apex Court in the case of Exide Industries Ltd.
(supra), this issue also restored to the file of AO to adjudicate afresh. This
ground of appeal of assessee is allowed for statistical purposes.
29. In the result, revenue’s appeals are dismissed and that of
assessee is partly allowed for statistical purposes.
30. Order is pronounced in the open court.
