Sundaram Clayton Limited, CHENNAI V. DCIT Corporate Circle 6(2), CHENNAI

ITA 1355/CHNY/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3162 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Double taxation relief; Additional depreciation; Earning of tax free income; Wholly owned subsidiary; Non-deduction of tax; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside
• Section: 14A; 32(1)(iia); 195; 201; 13; 22; 32; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , . , $ BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.1376 & 1254/CHNY/2018 ( / ASSESSMENT YEAR: 2013-14 & 2014-15) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-6(2), CHENNAI. VS M/S. SUNDARAM CLAYTON LTD. 29, JAYALAKSHMI ESTATES, HADDOWS ROAD, CHENNAI-600 006. PAN: AAACS 4920J ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1355 & 1356/CHNY/2018 ( / ASSESSMENT YEAR: 2013-14 & 2014-15) M/S. SUNDARAM CLAYTON LTD. 29, JAYALAKSHMI ESTATES, HADDOWS ROAD, CHENNAI - 600 006. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-6(2), CHENNAI. PAN: AAACS 4920J ( /APPELLANT) ( /RESPONDENT) / REVENUE BY : MR. SURESH PERIASAMY, JCIT / ASSESSEE BY : MR. VIKRAM VIJAYARAGHAVAN, ADVOCATE /DATE OF HEARING : 29.03.2021 /DATE OF PRONOUNCEMENT : 14.06.2021 / O R D E R PER G.MANJUNATHA, AM: THESE CROSS APPEALS FILED BY THE REVENUE AND ASS ESSEE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDER S OF THE LEARNED CIT(A)-15, CHENNAI, BOTH DATED 27.12.2017 A ND PERTAIN TO ASSESSMENT YEAR 2013-14 & 2014-15.SINCE, FACTS A RE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF C ONVENIENCE, THESE APPEALS FILED BY THE REVENUE AND ASSESSEE WER E HEARD 2 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONS OLIDATED ORDER. 2. THE REVENUE HAS MORE OR LESS RAISED COMMON GROUN DS OF APPEAL FOR BOTH ASSESSMENT YEARS, THEREFORE, F OR THE SAKE OF BREVITY, GROUNDS OF APPEAL FILED FOR THE ASSESSMENT YEAR 2013- 14 IN ITA NO.1376/CHNY/2018 ARE REPRODUCED AS UNDER :- 1).THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2) THE LEARNED A.R CIT(A) ERRED IN DIRECTING THE AO TO VERIFY THE ASSESSEE SUBMISSION WITH THE RESPECT TO ASSESSM ENT RECORD AND TO RESTRICT THE DISALLOWANCE OF EXCESS D EDUCTION CLAIMED U/S 35(2AB). 2.1) THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE DSIR IS THE CENTRAL AGENCY WHICH ASSESSEE THE R&D WORK DONE BY THE ASSESSEE AND QUANTIFIED THE ELIGIBLE AMOUNT THE ASS ESSEE IS NOT ELIGIBLE TO CLAIM MORE THAN THAT IS CERTIFIED B Y THE DSIR ITSELF. 2.2) THE LD CIT(A) FAILED TO NOTE THAT THE ASSESSEE CLAIMED THE EXCESS DEDUCTION U/S35(2AB). 3)THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 14A TO THE AMOUNT OF DIVIDEND INCOME. 3.1)THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PE R SECTION 251(1)(A) OF THE ACT, THE POWER TO SET ASIDE ARE EXAMINING THE ISSUE AFRESH HAS BEEN OMITTED WITH EFFECT FROM 01.06.2001 AS PER FINANCE ACT 2001. 3.2) THE ORDER OF THE HONBLE ITAT ON THE SIMILAR I SSUE IN THE CASE OF M/S.EIH ASSOCIATED HOTELS LIMITED (2013-TOI L-796-- 3 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ITAT-MAD, DT. 17.07.2013) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IN TCVA NO.227 OF 201 4 IS PENDING BEFORE THE HONBLE HIGH COURT. 3.3 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PER THE DECISION OF HONOURABLE KARNATAKA HC IN THE CASE OF M/S UNITED BREWARIES LTD VS DCIT REPORTED IN 241 TAXMAN 299 (KARNATAKA) WITH RESPECT TO INVESTMENT IN SUBSIDIAR IES IS VERY MUCH APPLICABLE TO THE FACTS OF THE PRESENT CASE. 3.4) THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INVESTMENTS MADE BY THE ASSESSEE COMPANY IN ITS SUB SIDIARY COMPANY IS ALSO ENTITLED FOR DIVIDEND AND HENCE THE SAME SHOULD BE TREATED ON PAR WITH THE OTHER INVESTMENTS MADE 3. 5)THE CIT(A) OUGHT TO HAVE APPRECIATED THAT RULE 8D (III) DO NOT MENTION OF EXEMPTING ANY INVESTMENTS MADE IN TH E WHOLLY OWNED SUBSIDIARY COMPANIES. 3. 6) THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE BALANCE OF THE ADDITIONAL DEPRECIATION CARRIED FORWARD FROM THE EARLIER ASSESSMENT YEAR. 3.7) THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS P ER THE PROVISO TO SECTION 32(1)(IIA) OF THE ACT WHERE THE ASSET IS ACQUIRED AND PUT TO USE BY THE ASSESSEE FOR THE PUR POSE OF BUSINESS FOR A PERIOD OF LESS ONE HUNDRED AND EIGHT Y DAYS IN THAT PREVIOUS YEAR DEDUCTION UNDER THIS SUBSECTION SHALL BE RESTRICTED TO FIFTY PER CENT OF SUCH ASSET. 3.8) THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE DEPARTMENT HAS FILED AN APPEAL U/S260ABEFORE THE HO NBLE HIGH COURT IN THE CASE OF SUNDARAM FASTENERS LTD FO R THE A Y 2008-09 AGAINST THE ORDER OF ITAT ON THE SAME ISSUE 3.9) THE CIT(A) OUGHT TO HAVE APPRECIATED THE DECIS ION IN THE CASE OF BHARAT HOTELS LTD (2016) 380 ITR 552/65 TAX MNN.COM 39 (DELHI)(HC), WHEREIN IT WAS HED THAT THE ADDITI ONAL DEPRECIATION WAS ALLOWABLE ON THE PLANT AND MACHINE RY ONLY FOR THE YEAR IN WHICH THE CAPACITY EXPANSION HAD TA KEN PLACE 4 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 WHICH HAD RESULTED IN THE SUBSTANTIAL INCREASE IN T HE INSTALLED CAPACITY EACH ASSESSMENT YEAR WAS SEPARATE AND INDEPENDENT ASSESSMENT YEAR THE PROVISION OF SECTIO N 32 OF THE ACT DID NOT PROVIDE FOR CARRY FORWARD OF THE RE SIDUAL ADDITIONAL DEPRECIATION 4) FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE A ND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GRO UNDS OF APPEAL FOR BOTH ASSESSMENT YEARS, THEREFORE, F OR THE SAKE OF BREVITY, GROUNDS OF APPEAL FILED FOR THE ASSESSMENT YEAR 2013- 14 IN ITA NO.1355/CHNY/2018 ARE REPRODUCED AS UNDER :- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A OF THE INCOME TAX ACT READ WITH RULE 8D(2)(II) AMOUNTI NG TO RS. 2,41,82,017/-. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS SUFFICIENT INTERNAL ACCRUALS TO COVER THE ENTIRE AMOUNT OF THE INVESTMENTS MADE AND THAT NO PART OF THE BORROWED FUNDS WERE USED BY THE APPELLANT TO MAKE T HE INVESTMENTS. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT NO PART OF THE BORROWED FUNDS COULD BE ATTRIBUTED FOR MAKING T HE INVESTMENTS AND CONSEQUENTLY NO PART OF INTEREST EX PENDITURE COULD BE DISALLOWED BY INVOKING SECTION 14A R.W. RU LE 8D(2)(II). GROUND NO 2: 5 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 THE LEARNED CIT (A) ERRED IN NOT PROVIDING A SPECIF IC DIRECTION IN HIS ORDER ALLOWING OUR CLAIM OF DEDUCTION U/S 35 (1)(IV) OF THE CAPITAL EXPENDITURE IN RESPECT OF THE R&D BUILDING. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE CLAUSE (2) OF SECTION 35(2AB) RESTRICTS THAT THE EXPENDITU RE CLAIMED U/S 35(2AB) SHOULD NOT BE AGAIN CLAIMED UNDER ANY O THER PROVISIONS OF THE ACT. BUT SINCE THIS AMOUNT IS CLA IMED ONLY U/S 35(1)(IV) AND NOT UNDER SECTION 35(2AB), THE SAID C LAUSE IS NOT APPLICABLE TO THE CASE. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE APPELLANT HAD ALSO SUBMITTED THE WORKINGS FOR THE Q UANTUM OF DEDUCTION CLAIMED UNDER SECTION 35(2AB) AND SECTION 35(1)(IV) OF THE ACT TO SUBSTANTIATE THAT THE CAPITAL EXPENDI TURE INCURRED ON R&D BUILDING WAS NOT CLAIMED AS DEDUCTION TWICE AND THE SAME WAS DULY ACCEPTED BY THE CIT (A). GROUND NO 3: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWA NCE U/S 40(A)(I) OF THE INCOME TAX ACT IN RESPECT OF THE FO REIGN REMITTANCES MADE BY THE APPELLANT. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE FOREIGN REMITTANCES MADE TO VARIOUS NONRESIDENTS TOWARDS WAREHOUSING & LOGISTICS SERVICES, EXPORT COMMISSION , PAYMENTS FOR REGISTRATION OF TRADEMARK AND INDEPEND ENT PERSONAL SERVICES ARE NOT SUBJECT TO WITH-HOLDING T AXES AS PER THE PROVISIONS OF DTAA. AIS THE SERVICES OF WAREHOU SING & LOGISTICS SERVICES, EXPORT COMMISSION ARE NOT OF TH E NATURE OF TECHNICAL SERVICES BUT ARE IN THE NATURE OF BUSINES S PROFITS. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PAYMENTS OF THE NATURE OF BUSINESS PROFITS ARE TAX ABLE IN INDIA ONLY TO THE EXTENT ATTRIBUTABLE TO THE PE IN INDIA SINCE THERE IS NO PE OF THE NON-RESIDENT IN INDIA THE SAME IS NOT TAXABLE IN INDIA. IN THE CASE OF INDEPENDENT PERSONAL SERVICES THE STAY IN INDIA BY THE NON-RESIDENT WAS LESS THAN 182 DAYS AND HENCE NOT TAXABLE AS PER DTAA. SINCE NO TAX WAS NEEDED TO BE 6 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 DEDUCTED THE SAID EXPENDITURE COULD NOT BE DISALLOW ED U/S 40(A)(I) OFTHE INCOME TAX ACT. 4. BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO.1376/CHNY/2018 FOR THE ASSESSMENT YEAR 2013-14 ARE THAT THE ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF AUTOMOTIVE COMPONENTS AND APPLICATI ON. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASS ESSMENT YEAR 2013-14 ON 30.11.2013 AND FOR ASSESSMENT YEAR 2014 -15 ON 30.11.2014 DECLARING TOTAL LOSS OF RS.26,13,44,210 /- AND TOTAL INCOME OF RS.5,67,16,260/- FOR THE ASSESSMENT YEAR 2014-15. THE ASSESSMENTS FOR THE IMPUGNED ASSESSMENT YEAR HA S BEEN COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961, W HERE THE ASSESSING OFFICER HAS MADE VARIOUS ADDITIONS INCLU DING ADDITIONS TOWARDS DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT, DISALLOWANCE OF EXPENDITURE INCURRED FOR R&D U/S.35(2AB) / 35(1)(IV) OF THE ACT, DISALLOWANCE OF VARIOUS EX PENDITURE INCURRED IN FOREIGN CURRENCY U/S.40(A)(I) OF THE A CT FOR NON- DEDUCTION OF TDS U/S.195 OF THE ACT AND DISALLOWANC E OF BALANCE 50% ADDITIONAL DEPRECIATION CLAIMED ON NEW PLANT 7 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 &MACHINERY ACQUIRED AND PUT TO USE DURING THE RELEV ANT PREVIOUS YEAR. 5. THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND CHALLENGED VARIOUS ADDITION S MADE BY THE ASSESSING OFFICER. THE LEARNED CIT(A) VIDE IT S APPELLATE ORDER DATED 27.12.2017 HAS PARTLY ALLOWED APPEAL FI LED BY THE ASSESSEE, WHERE HE HAS ALLOWED PARTIAL RELIEF IN R ESPECT OF ADDITIONS MADE TOWARDS DISALLOWANCE OF EXPENDITURE U/S.14A OF THE ACT, DELETED ADDITIONS MADE TOWARDS DISALLOWANC E OF BALANCE 50% OF ADDITIONAL DEPRECIATION AND FURTHER DELETED ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DI SALLOWANCE OF CAPITAL EXPENDITURE INCURRED ON R&D U/S.35((1)(I V) OF THE ACT. HOWEVER, HE CONFIRMED ADDITIONS MADE BY THE ASSESSI NG OFFICER TOWARDS DISALLOWANCE OF VARIOUS PAYMENTS MA DE TO NON- RESIDENTS U/S.40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TDS U/S.195 OF THE ACT. AGGRIEVED BY THE ORDER OF THE L EARNED CIT(A), THE REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFO RE US. 6. THE FIRST ISSUE THAT CAME UP FOR CONSIDERATION F OR BOTH ASSESSMENT YEARS FROM THE APPEAL OF REVENUE AS WELL AS THE 8 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ASSESSEE IS DISALLOWANCE OF EXPENDITURE INCURRED RE LATABLE TO EXEMPT INCOME U/S.14A OF THE INCOME TAX ACT, 1961. DURING FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2013 -14 AND 2014-15, THE ASSESSEE HAS EARNED DIVIDEND INCOME, W HICH WAS CLAIMED EXEMPT U/S.10(34) OF THE INCOME TAX ACT, 19 61. THE ASSESSEE HAD ALSO MADE SUO MOTU DISALLOWANCE OF EXPENDITURE RELATABLE TO EXEMPT INCOME, AS IDENTIFIED BY THE AS SESSE. THE ASSESSING OFFICER HAD INVOKED RULE 8D OF INCOME TAX RULES,1962 AND DETERMINED DISALLOWANCES OF DIRECT EXPENDITURE, INTEREST EXPENDITURE AND OTHER EXPEND ITURE AT RS.2,70,38,767/- FOR THE ASSESSMENT YEAR 2013-14 AN D RS.2,50,46,342/- FOR THE ASSESSMENT YEAR 2014-15. THE LEARNED CIT(A), ON APPEAL, HAS ALLOWED PARTIAL RELI EF WHERE HE HAS CONFIRMED ADDITIONS MADE TOWARDS DISALLOWANCE O F DIRECT EXPENDITURE UNDER RULE 8D(2)(I). HOWEVER, RECOMPUTE D DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D( 2)(II), AFTER EXCLUDING INVESTMENTS IN SUBSIDIARY COMPANIES FROM TOTAL INVESTMENTS. SIMILARLY, THE LEARNED CIT(A) HAS ALSO DIRECTED THE ASSESSING OFFICER TO RECOMPUTE DISALLOWANCES UNDER RULE 8D(2)(III) BY EXCLUDING INVESTMENTS IN SUBSIDIARY C OMPANIES. 9 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 7. THE LEARNED AR FOR THE ASSESSE, AT THE TIME OF H EARING, SUBMITTED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2012-13 IN ITA NO. 3398/CH NY/2018, WHERE UNDER IDENTICAL SET OF FACTS THE TRIBUNAL HAS DELETED ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS INT EREST EXPENDITURE UNDER RULE 8D(2)(II) AND FURTHER DIRECT ED THE ASSESSING OFFICER TO RECOMPUTE DISALLOWANCE OF OTHE R EXPENDITURE UNDER RULE 8D(2)(III) BY CONSIDERING ON LY THOSE INVESTMENTS WHICH EARNED EXEMPT INCOME FOR THE YEAR BY FOLLOWING THE DECISION OF ITAT., DELHI SPECIAL BENC H IN THE CASE OF ACIT VS. VIREET INVESTMENTS PVT .LTD. ( 165 ITD 27)(SB ) . 8. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T ALTHOUGH THE ISSUE IS COVERED IN FAVOUR OF THE ASSE SSEE BY DECISION OF THE ITAT, CHENNAI IN ASSESSEES OWN CAS E, BUT FACT REMAINS THAT ASSESSEE ITSELF HAS COMPUTED SUO MOTU DISALLOWANCES OF DIRECT EXPENDITURE OF RS.42.49 LAK HS IN THE ORIGINAL RETURN OF INCOME FILED FOR RELEVANT ASSESS MENT YEAR. THEREFORE, DISALLOWANCES REQUIRED U/S.14A SHOULD BE RESTRICTED 10 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 TO THE EXTENT OF SUO MOTU DISALLOWANCES COMPUTED BY THE ASSESSE. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS REGARDS DIRECT EXPENSES RELATABLE TO EXE MPT INCOME, AS REQUIRED TO BE COMPUTED UNDER RULE 8D(2)(I), THE ASSESSEE ITSELF HAS COMPUTED TOTAL DISALLOWANCE OF RS.42.49 LAKHS AND HENCE, QUESTION OF REDUCTION OF DISALLOWANCE COMPUT ED BY THE ASSESSEE IN ITS ORIGINAL RETURN OF INCOME DOES NOT ARISE. THEREFORE, DISALLOWANCE COMPUTED BY THE ASSESSEE UN DER RULE 8D(2)(I), IS RESTRICTED TO SUO MOTU DISALLOWANCE AS COMPUTED BY THE ASSESSEE FOR BOTH ASSESSMENT YEARS. 10. AS REGARDS DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II), IT WAS CLAIM OF THE ASSESSEE THAT IT HAS SUFFICIENT OW N FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVE, WHICH IS OVER AN D ABOVE TOTAL INVESTMENTS MADE IN DIVIDEND BEARING INVESTMENTS. WE FIND THAT CO-ORDINATE BENCH OF ITAT., CHENNAI IN ASSESSE ES OWN CASE HAS CONSIDERED IDENTICAL ISSUE AND AFTER CONS IDERING 11 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 RELEVANT FACTS AND HAS ALSO BY FOLLOWING DECISION O F HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (366 ITR 505) HELD THAT NO DISALLOWANCE COULD BE MA DE TOWARDS INTEREST EXPENDITURE, WHEN ASSESSEE HAS SUFFICIENT OWN FUNDS, WHICH IS OVER AND ABOVE THE AMOUNT OF INVESTMENTS IN EXEMPT BEARING INVESTMENTS. WE FURTHER NOTED THAT THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIE S &POWER LTD. ( 33 ITR 340) HAS HELD THAT WHEN MIXED FUNDS ARE U SED FOR MAKING INVESTMENTS IN EXEMPT BEARING INVESTMENTS, T HEN IT WOULD HAVE TO BE PRESUMED THAT INVESTMENTS MADE IN EXEMPT BEARING INVESTMENTS ARE OUT INTEREST FREE FUNDS AVA ILABLE WITH THE ASSESSEE. IN THIS CASE, THE ASSESSEE HAS FILED NECESSARY DETAILS TO PROVE THAT IT HAS OWN FUNDS IN EXCESS OF INVESTMENTS MADE IN SHARES AND SECURITIES WHICH YIELDED EXEMPT INCOME. THEREFORE, BY FOLLOWING THE DECISION OF ITAT, CHENN AI IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, WE ARE OF THE CONSIDERED VIEW THAT ASSESSING OFFICER AS WELL AS L EARNED CIT(A) WERE ERRED IN DISALLOWING INTEREST EXPENDIT URE UNDER RULE 8D(2)(II) OF IT RULES, 1962. HENCE, WE DIRECT THE ASSESSING 12 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 OFFICER TO DELETE DISALLOWANCE OF INTEREST EXPENDIT URE MADE U/S.14A OF THE ACT. 11. AS REGARDS DISALLOWANCE OF OTHER EXPENDITURE @ 0.5%, AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D(2)(III), WE FIND THAT IT IS WELL SETTLED PRINCIPLE OF LAW THAT ONLY THOSE INVESTMENTS WHICH YIELD EXEMPT INCOME FOR THE RELEVANT ASSESSM ENT YEAR NEEDS TO BE CONSIDERED FOR COMPUTATION OF DISALLOWA NCE OF OTHER EXPENSES UNDER SECTION 14A R.W.R 8D(2)(III) O F IT RULES, 1962. WE FURTHER NOTED THAT THE COORDINATE BENCH H AS TAKEN SIMILAR VIEW IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2012-13 IN ITA NO.3398/CHNY/2018, WHERE THE TRIBUNA L BY FOLLOWING THE DECISION OF ITAT., DELHI SPECIAL BENC H IN THE CASE OF ACIT VS. VIREET INVESTMENTS PVT.LTD. (SUPRA) HA S DIRECTED THE ASSESSING OFFICER TO CONSIDER ONLY THOSE INVESTMENT S WHICH YIELDED EXEMPT INCOME FOR THE RELEVANT PREVIOUS YEA R TO COMPUTE DISALLOWANCE UNDER RULE 8D(2)(III) OF IT RU LES, 1962. THEREFORE, CONSISTENT WITH VIEW TAKEN BY COORDINATE BENCH, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE DISALLOWA NCE UNDER RULE 8D(2)(III) BY CONSIDERING ONLY THOSE INVESTMEN TS WHICH YIELD EXEMPT INCOME FOR THE RELEVANT ASSESSMENT YE ARS. 13 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FOR ASSESSMENT YEAR 2013-14 IS DISALLOWANCE OF R&D EXP ENDITURE U/S.35(2AB) AND SECTION 35(1)(IV) OF THE ACT. DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED CAPI TAL EXPENDITURE OTHER THAN BUILDING A SUM OF RS.86,75, 846/- AND REVENUE EXPENDITURE OF RS.6,09,24,237/- FOR RESEARC H & DEVELOPMENT EXPENDITURE AND CLAIMED 200% WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT AMOUNTING TO RS.13,92,00,166/-. IN SUPPORT OF ITS CLAIM, THE ASS ESSEE HAS PRODUCED CERTIFICATE FROM THE DEPARTMENT OF SCIENTI FIC AND INDUSTRIAL RESEARCH IN FORM 3CL, IN WHICH DSIR HAS CERTIFIED A SUM OF RS.85,81,000/- FOR CAPITAL EXPENDITURE OTHER THAN BUILDING AND A SUM OF RS.5,89,43,000/- FOR REVENUE EXPENDITURE AND THUS, OUT OF TOTAL EXPENDITURE CLAIMED BY THE A SSESSEE OF RS.6,09,24,237/-, THE DSIR HAS CERTIFIED AND QUANTI FIED A SUM OF RS.6,75,24,000/-. THE ASSESSING OFFICER HAS ALLO WED WEIGHTED DEDUCTION OF 200% UNDER SECTION 35(2AB) ON THE BASIS OF CERTIFICATE ISSUED BY DSIR IN FORM 3CL AND ACCORDINGLY, DISALLOWED A SUM OF RS.41,52,000/- OUT OF TOTAL DE DUCTION CLAIMED BY THE ASSESSEE U/S.35(2AB) OF THE ACT. FUR THER, THE 14 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ASSESSEE HAS ALSO CLAIMED 100% DEDUCTION OF R&D EXPENDITURE INCURRED TOWARDS BUILDING CONSTRUCTION AMOUNTING TO RS.1,02,85,856/-. SINCE THE CAPITAL EXPENDITURE IS NOT ENTITLED FOR WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT, THE ASSESSING OFFICER HAS DISALLOWED CAPITAL EXPENDITURE ON R&D O N BUILDING AMOUNTING TO RS.1,02,85,856/-. 13. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF CAPI TAL EXPENDITURE ON R&D U/S.35(1)(IV) AMOUNTING TO RS.1,02,85,856/- WITHOUT APPRECIATING FACT THAT ANY CAPITAL EXPENDITURE, WHICH WAS NOT CLAIMED AS DEDUCTION U/S .35(2AB) CAN BE CLAIMED U/S.35(1)(IV) OF THE ACT.IN THIS REG ARD, THE ASSESSEE HAS RELIED UPON DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF M/S.TUBE INVESTMENTS LTD. VS. CIT 216 ITR 94. THE AR FURTHER SUBMITTED THAT AS REGARDS DISALL OWANCE OF WEIGHTED DEDUCTION CLAIMED U/S.35(2AB), ANY UNCERT IFIED PORTION OF R&D EXPENDITURE IS NOT ELIGIBLE FOR ONLY WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT. HOWEVER, ACTUAL EXPENDITURE INCURRED TOWARDS R&D EXPENDITURE CAN BE CLAIMED AS DEDUCTION 15 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 EITHER U/S.35(1) OR 37 OF THE ACT, BECAUSE SAID EXP ENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS OF THE ASSESSEE. 14. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SU PPORTING ORDER OF THE ASSESSING OFFICER SUBMITTED THAT AUTHO RITY FOR CERTIFYING ELIGIBLE DEDUCTION U/S.35(2AB) IS DSIR AND HENCE, THE ASSESSING OFFICER HAS RIGHTLY ALLOWED WEIGHTED DEDUCTION U/S.35(2AB),AS PER CERTIFICATE OF DSIR IN FORM 3CL. AS REGARDS DISALLOWANCE OF CAPITAL EXPENDITURE ON R&D BUILDING , THE ASSESSING OFFICER HAS BROUGHT OUT CLEAR FACTS TO TH E EFFECT THAT ANY EXPENDITURE RELATING TO R&D BUILDING IS CLAIME D U/S.35(2AB) CANNOT BE CONSIDERED U/S.35(1)(IV) OF T HE ACT. THEREFORE, THERE IS NO ERROR IN THE REASONS GIVEN B Y THE ASSESSING OFFICER TO DISALLOW CAPITAL EXPENDITURE O N R&D BUILDING. 15. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS REGARDS DISALLOWANCE OF UNCERTIFIED PORTI ON OF EXPENDITURE INCURRED TOWARDS R&D U/S.35(2AB) OF TH E ACT, WE FIND THAT ALTHOUGH, DSIR HAS NOT CERTIFIED EXPENDIT URE FOR THE 16 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 PURPOSE OF SECTION 35(2AB), BUT THE ASSESSEE HAS PL ACED ON RECORD VARIOUS EVIDENCES TO PROVE THAT SAID EXPENDI TURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSI NESS OF THE ASSESSEE. ONCE A PARTICULAR EXPENDITURE WAS INCURRE D WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSINESS OF THE ASSE SSEE, THEN SUCH EXPENDITURE NEEDS TO BE ALLOWED EITHER UNDER S PECIFIC HEAD OF EXPENDITURE OR UNDER RESIDUAL HEAD OF EXPEN DITURE U/S.37(1) OF THE ACT. IF ANY EXPENDITURE IS NOT CER TIFIED BY DSIR IN FORM 3CL, THEN THE SAME IS NOT ENTITLED FOR WEI GHTED DEDUCTION U/S.35(2AB) OF THE ACT, BUT THERE IS NO R ESTRICTION UNDER LAW TO CLAIM SUCH EXPENDITURE U/S.35(1) / 37( 1) OF THE ACT. THE LEARNED CIT(A), AFTER CONSIDERING RELEVANT FACT S HAS RIGHTLY DELETED ADDITIONS MADE BY THE ASSESSING OFFICER TO WARDS DISALLOWANCE OF UNCERTIFIED PORTION OF R&D EXPENDIT URE. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LEARNED C IT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 16. AS REGARDS DISALLOWANCE OF CAPITAL EXPENDITURE INCURRED ON R & D BUILDING U/S.35(1)(IV), IT WAS CLAIM OF TH E ASSESSEE THAT CAPITAL EXPENDITURE ON R&D BUILDING HAS NOT BEEN C LAIMED U/S.35(2AB) OF THE ACT AND HENCE, SAME IS VERY MUC H 17 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ALLOWABLE U/S.35(1)(IV) OF THE ACT. WE FIND THAT TH E HON'BLE JURISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF M/S. TUBES INVESTMENTS LTD VS. CIT(SUPRA), HAS CONSIDERED AN IDENTICAL ISSUE AND HELD THAT IN ORDER TO CLAIM DEDUCTION U /S.35(1)(IV), APPROVAL OF THE AUTHORITY PRESCRIBED U/S.35(2AB) IS NOT AN ESSENTIAL PRE-REQUISITE, IF IT IS FOUND THAT A PART OF THE CLAIM FALLS WITHIN AMBIT OF SECTION 35(1)(IV) OF THE ACT. FUR THER, MERE FACT OF A CLAIM NOT HAVING BEEN FOUND ADMISSIBLE U/S.35( 2AB) WILL NOT CONSTITUTE A BAR TO ALLOW AN EXPENDITURE U/S.35 (1)(IV), IF THAT EXPENDITURE IS CAPITAL EXPENDITURE AND FALLS SQUARE LY WITHIN AMBIT OF SECTION 35(1)(IV) OF THE ACT. IN THIS CASE , THE ASSESSEE HAS FILED NECESSARY EVIDENCE TO PROVE THAT CAPITAL EXPENDITURE ON R&D BUILDING HAS NOT BEEN CLAIMED U/S.35(2AB) OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ONCE CAPITAL EXPENDITURE WAS INCURRED FOR SCIENTIFIC RESEARCH PU RPOSES, THEN SAME IS ELIGIBLE FOR DEDUCTION U/S.35(1)(IV) OF THE ACT. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) WITHOUT APPRECIATING FACT HAS SIMPLY DISALLOWED CAPITAL EXP ENDITURE ON R&D BUILDING U/S.35(1)(IV) OF THE ACT. HENCE, WE D IRECT THE ASSESSING OFFICER TO DELETE ADDITIONS MADE TOWARDS 18 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 DISALLOWANCE OF CAPITAL EXPENDITURE ON R&D BUILDING U/S.35(1)(IV) OF THE ACT. 17. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.3 OF REVENUE APPEAL FOR ASSESSMENT YEAR 2 013-14 IS DISALLOWANCE OF BALANCE 50% OF ADDITIONAL DEPRECIAT ION CLAIMED ON ASSETS ACQUIRED AND PUT TO USE FOR LESS THAN 180 DAYS DURING THE PRECEDING PREVIOUS YEARS. THE FACTS WITH REGARD TO IMPUGNED DISPUTE ARE THAT THE ASSESSEE HAS ACQUIR ED AND PUT TO USE CERTAIN NEW PLANT AND MACHINERY, WHICH ARE E LIGIBLE FOR ADDITIONAL DEPRECIATION OF 20%, AS PER CLAUSE (IIA ) OF SECTION 32(1) OF THE ACT. SINCE ASSETS ACQUIRED AND PUT TO USE ARE USED FOR LESS THAN 180 DAYS IN THE YEAR OF ACQUISITION, THE ASSESSEE HAS CLAIMED 50% OF ACTUAL DEPRECIATION AND BALANCE 50% OF DEPRECIATION WAS BROUGHT FORWARD AND CLAIMED DURING IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER HAS DISALLO WED BALANCE 50% OF ADDITIONAL DEPRECIATION CLAIMED ON P LANT AND MACHINERY ON THE GROUND THAT THERE IS NO PROVISION , UNDER THE ACT TO CARRY FORWARD ADDITIONAL DEPRECIATION TO S UBSEQUENT YEARS. 19 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 18. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT( A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW BALANCE OF ADDITIONAL DEPRECIATION CARRY FORWARD FROM EARLIE R ASSESSMENT YEAR, WITHOUT APPRECIATING FACT THAT AS PER PROVISO TO SECTION 32(1)(IIA) OF THE ACT, WHERE AN ASSET IS ACQUIRED A ND PUT TO USE FOR THE PURPOSE OF BUSINESS FOR A PERIOD OF LESS TH AN 180 DAYS IN THAT PREVIOUS YEAR DEDUCTION UNDER THIS SUB-SECTION WILL BE RESTRICTED TO 50% OF SUCH ASSET. 19. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER H AND, STRONGLY SUPPORTING ORDER OF THE LEARNED CIT(A) SU BMITTED THAT ADDITIONAL DEPRECIATION SHOULD BE ALLOWED BASED ON THE AMOUNT OF INVESTMENTS MADE IN NEW PLANT AND MACHINERY AND FURTHER, IF SUCH PLANT AND MACHINERY WAS USED FOR LESS THAN 1 80 DAYS DURING PRECEDING PREVIOUS YEAR, THEN BALANCE 50% O F ADDITIONAL DEPRECIATION SHOULD BE ALLOWED IN SUBSEQUENT YEARS , BECAUSE THERE IS NO BAR UNDER THE ACT TO CLAIM FULL ADDITIO NAL DEPRECIATION, IF OTHER CONDITIONS PRESCRIBED FOR CL AIMING ADDITIONAL DEPRECIATION ARE FULFILLED. 20 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 20. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE WITH REGARD TO FACT THAT THE ASSESSEE HAS ACQUIRED ADDITIONAL PLANT AND MACHINERY OVER AN D ABOVE PRESCRIBED LIMIT, WHICH IS ELIGIBLE FOR 20% ADDI TIONAL DEPRECIATION AS PER SECTION 32(1(IIA) OF THE ACT. T HE ONLY DISPUTE IS WITH REGARD TO PERIOD OF ACQUISITION OF SAID AS SET AND CLAIMING DEPRECIATION AS PER PROVISO (IIA) TO SECTION 32(1) OF THE ACT. THE ASSESSING OFFICER HAS DISALLOWED BALANCE 50% OF AD DITIONAL DEPRECIATION ON THE GROUND THAT THERE IS NO PROVISI ON UNDER THE ACT TO CARRY FORWARD BALANCE ADDITIONAL DEPRECIATIO N TO SUBSEQUENT YEARS. IT WAS CLAIM OF THE ASSESSEE THAT ADDITIONAL DEPRECIATION SHOULD BE ALLOWED, IF CONDITIONS PRESC RIBED FOR CLAIMING ADDITIONAL DEPRECIATION ARE FULFILLED. WE FIND THAT THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. RITTAL INDIA PVT .LTD. (2016) 380 ITR 423 (KAR) HAS CONSIDERED A N IDENTICAL ISSUE AND HELD THAT IF PLANT AND MACHINERY IS ELIGI BLE FOR ADDITIONAL DEPRECIATION U/S.32(1)(IIA) AND SUCH PL ANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN S AID FINANCIAL YEAR, THEN BALANCE OF ADDITIONAL DEPRECIATION CAN B E CLAIMED IN 21 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 SUBSEQUENT YEARS. THE HONBLE MADRAS HIGH COURT IN THE CASES OF BRAKES INDIA LTD. VS. DCIT (2017 TIOL 71 0-HC- MAD-IT) AND TVS MOTORS COMPANY LTD. VS.ACIT (2017 TIOL 553-HC-MAD-IT) HAS CONSIDERED AN IDENTICAL ISSUE AN D HELD THAT BALANCE OF 50% OF ADDITIONAL DEPRECIATION CAN BE CLAIMED IN SUBSEQUENT YEARS, PROVIDED CONDITIONS FOR CLAIM ING ADDITIONAL DEPRECIATION IS SATISFIED. IN THIS CASE, THERE IS NO DISPUTE WITH REGARD TO FACT THAT ASSESSEE HAS SATIS FIED CONDITIONS PRESCRIBED FOR CLAIMING ADDITIONAL DEPRE CIATION. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ASSES SEE IS ENTITLED FOR BALANCE 50% ADDITIONAL DEPRECIATION IN SUBSEQUENT YEARS, WHEN IT WAS CLAIMED ONLY 50% OF ADDITIONAL D EPRECIATION IN THE YEAR OF ACQUISITION AND PUT TO USE SAID PLAN T AND MACHINERY. THE LEARNED CIT(A), AFTER CONSIDERING R ELEVANT SUBMISSIONS HAS RIGHTLY DELETED ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF BALANCE 50% ADDITIONAL DEPRECIATION. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LEARNED CIT(A) AND REJECT GROUND TA KEN BY THE REVENUE. 22 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 21. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FOR ASSESSMENT YEAR 2013-14 AND 2014-15 OF ASSESSEE APP EAL IS DISALLOWANCE OF VARIOUS PAYMENTS MADE TO NON-RESIDE NTS U/S. 40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TAX DEDUC TED AT SOURCE U/S.195 OF THE ACT. THE ASSESSING OFFICER HAS DISA LLOWED WAREHOUSING & LOGISTIC SERVICE CHARGES PAID TO NON- RESIDENTS U/S. 40(A)(I) OF THE ACT ON THE GROUND THAT THE IM PUGNED PAYMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERV ICES AND SAID PAYMENT IS DIRECTLY RELATABLE TO INCOME EARNING ACT IVITY SITUATED IN INDIA AND HENCE, IT FALLS UNDER DEFINITION OF F EES FOR TECHNICAL SERVICES AS DEFINED U/S. 9(1)(VII)(B) OF THE ACT. SIMILARLY, THE ASSESSING OFFICER HAS DISALLOWED PROFESSIONAL FEES PAID TO TILEKE & GIBBINS INTERNATIONAL LTD. TOWARDS PROFESS IONAL SERVICES ON THE GROUND THAT SAID PAYMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES . LIKEWISE, THE ASSESSI NG OFFICER HAS DISALLOWED PAYMENTS MADE TO MR. YOSHIKAZU TSUDA TO WARDS CONSULTANCY CHARGES BY HOLDING THAT PERIOD OF STAY OF THE CONSULTANT IN INDIA IS MORE THAN 183 DAYS AND HEN CE, SAME IS TAXABLE IN INDIA, AS PER SECTION 9(1)(I) OF THE ACT , SINCE HE BECOMESA RESIDENT IN INDIA U/S. 6(1)(A) OF THE ACT. SIMILARLY, FOR 23 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ASSESSMENT YEAR 2014-15, THE ASSESSING OFFICER HAS DISALLOWED REWORK CHARGES AND SUBSCRIPTION CHARGES PAID TO NON-RESIDENTS ON THE GROUND THAT PAYMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES, WHICH FALLS UNDER DEFI NITION AS PER SECTION 9(1)(VII)(B) OF THE ACT . THE ASSESSING O FFICER HAS ALSO MADE DISALLOWANCE TOWARDS FEES PAID TO MICHIGAN UN IVERSITY AND CENTRE FOR CREATIVE LEADERSHIP TOWARDS TUITION FEE FOR COURSE CONDUCTED BY THEM TO THE EMPLOYEES OF THE AS SESSEE ON THE GROUND THAT SAME WAS COVERED BY DEFINITION OF R OYALTY IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. IT W AS CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT PAYMENT S TO WAREHOUSING AND LOGISTIC SERVICE CHARGES AND EXPORT COMMISSION IS COVERED BY ARTICLE 7 OF DTAA AND HEN CE, WHICH IS IN THE NATURE OF BUSINESS PROFITS AND NOT LIABLE TO TAX IN INDIA, CONSEQUENTLY, REQUIREMENT OF DEDUCTION OF TDS U/S. 195 DOES NOT ARISE. THE ASSESSEE FURTHER CLAIMED THAT PROFES SIONAL FEES PAID TO TILEKE & GIBBINS INTERNATIONAL LTD. IS ALSO COVERED BY ARTICLE 7 AS BUSINESS PROFITS AND HENCE, IS NOT TA XABLE IN INDIA. LIKEWISE, INDEPENDENT PROFESSIONAL SERVICE RENDERED BY NON- 24 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 RESIDENTS IS NOT LIABLE TO TAX IN INDIA, IF STAY OF SAID CONSULTANT IS LESS THAN 183 DAYS IN INDIA. 22. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS REGARDS WAREHOUSING AND LOGISTIC SERVICE CHARGES PAID TO FOUR PARTIES AMOUNTING TO RS.89,82,340/-, W E FIND THAT WAREHOUSING & LOGISTIC SERVICE CHARGES IS COVERED B Y ARTICLE 7 OF DTAA AS BUSINESS PROFITS OF THE RESPECTIVE DTAAS AND HENCE, IS OUTSIDE SCOPE OF DEFINITION OF SECTION 9( 1)(VII)(B) OF THE ACT. WE FURTHER NOTED THAT IN ORDER TO BRING ANY P AYMENT WITHIN THE AMBIT OF ROYALTY OR FEES FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VII)(B) OF THE ACT, RECIPIENT OF SERVICE SHOUL D BE MADE AVAILABLE FOR TECHNICAL KNOWLEDGE OF SUCH SERVICE . IN THIS CASE, PAYMENTS MADE BY ASSESSEE TOWARDS WAREHOUSING AND LOGISTIC SERVICE CHARGES AND ALSO REWORK & SUBSCRIPTION CHAR GES IS A MERE PAYMENT FOR RENDERING SERVICES BY NON-RESIDENT S IN THE TERRITORY OF OUTSIDE INDIA. THEREFORE, WE ARE OF TH E CONSIDERED VIEW THAT SAID PAYMENT IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES WHICH CAN BE BROUGHT TO TAX U/S.9(1)(VII) (B) OF THE ACT. SINCE THE PAYMENTS ARE IN THE NATURE OF BUSINESS PR OFITS, AS PER 25 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 ARTICLE 7 OF RESPECTIVE DTAAS, SAME CANNOT BE BROUG HT TO TAX IN INDIA IN THE ABSENCE OF ANY PERMANENT ESTABLISHM ENT IN INDIA OF THE SERVICE PROVIDER. SINCE PAYMENT IS NOT LIABL E FOR TAX IN INDIA, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TDS U /S.195 OF THE ACT AND CONSEQUENTLY, PAYMENTS CANNOT BE DISALLOWE D U/S.40(A)(I) OF THE ACT. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) WITHOUT APPRECIATING FACTS HAS SIMPLY MADE ADDITIONS U/S.40(A)(I) OF THE ACT AND HENCE, WE DIRECT THE ASSESSING OFFICER TO DELETE ADDITIONS MADE TOWARDS WAREHOUSIN G AND LOGISTIC SERVICE CHARGES FOR THE ASSESSMENT YEAR 20 13-14 AND REWORK AND SUBSCRIPTION CHARGES FOR THE ASSESSMENT YEAR 2014- 15. 23. AS REGARDS PROFESSIONAL FEES PAID TO TILEKE & G IBBINS INTERNATIONAL LTD., WE FIND THAT ARTICLE 12 OF THE INDIA-THAILAND DTAA DOES NOT COVER FEES FOR TECHNICAL SERVICES. FURTHER, PAYMENT MADE FOR PROFESSIONAL SERVICES IS COVERED BY ARTICLE 7 AS BUSINESS PROFITS AND HENCE, IS NOT TAXABLE IN I NDIA, BECAUSE SERVICE PROVIDER DOES NOT HAVE PERMANENT ESTABLISH MENT IN INDIA. SINCE THE PAYMENT IS NOT LIABLE TAX IN INDIA , THE ASSESSEE IS NOT REQUIRED TO DEDUCT TDS AS PER SECTION 195 OF THE ACT AND 26 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 CONSEQUENTLY, PAYMENTS CANNOT BE DISALLOWED U/S.40( A)(I) OF THE ACT. 24. INSOFAR AS PAYMENT MADE TO MR.YOSHIKAZU TSUDA TOWARDS CONSULTANCY CHARGES AMOUNTING TO RS.87,056/ -, WE FIND THAT THE ASSESSEE HAS PLACED ON RECORD NECESSARY EV IDENCE TO PROVE THAT CONSULTANT STAY IN INDIA IS LESS THAN 18 3 DAYS AND HENCE, SAID PAYMENT IS NOT TAXABLE IN INDIA, AS PER ARTICLE 14 OF DTAA BETWEEN INDIA AND JAPAN. SINCE PAYMENT IS OUT SIDE SCOPE OF TAX IN INDIA, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TDS U/S.195 OF THE ACT AND CONSEQUENTLY, SAID PAYM ENT CANNOT BE DISALLOWED U/S.40(A)(I) OF THE ACT. 25. AS REGARDS TUITION FEE PAID TO MICHIGAN UNIVER SITY AND CENTER FOR CREATIVE LEADERSHIP FOR ASSESSMENT YEAR 2014-15 AMOUNTING TO RS.11,79,390/-, WE FIND THAT PAYMENTS MADE FOR TEACHING IN/BY EDUCATIONAL INSTITUTIONS ARE EXCLUD ED FROM THE DEFINITION OF FEES FOR TECHNICAL SERVICES AS PER AR TICLE 12(5)(C) OF RESPECTIVE DTAAS AND HENCE, SAID PAYMENTS ARE OUTS IDE SCOPE OF TAXATION IN INDIA. SINCE THE IMPUGNED PAYM ENT IS NOT LIABLE TO TAX IN INDIA, THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS 27 ITA NOS.1376, 1254, 1355 & 1356/CHNY/2018 U/S.195 OF THE ACT AND CONSEQUENTLY, PAYMENT CANNOT BE DISALLOWED U/S.40(A)(I) OF THE ACT. THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) WITHOUT APPRECIATING RELEVANT FACTS HAS SIMPLY MADE ADDITIONS TOWARDS VARIOUS PAYMENTS U/S. 40(A)(I) OF THE ACT. HENCE, WE DIRECT THE ASSESSING OFFICER TO DELETE ADDITIONS MADE TOWARDS PAYMENTS MADE TO NON-RESIDEN TS U/S.40(A)(I) OF THE ACT. 26. IN THE RESULT, APPEALS FILED BY REVENUE AND THE ASSESSEE FOR ASSESSMENT YEARS 2013-14 & 2014-15 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA) # & / JUDICIAL MEMBER & / ACCOUNTANT MEMBER # /CHENNAI, ) / DATED 14 TH JUNE, 2021 DS +, -, /COPY TO: 1. APPELLANT 2. RESPONDENT 3. . () /CIT(A) 4. . /CIT 5. , 2 /DR 6. /GF .