Deloitte Haskins & Sells, Gurgaon V. ACIT, New Delhi

ITA 3715/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8127 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 08-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Business expenditure; Diversion of income; Corroborative evidences; Capital expenditure; TDS; Liquidation
• Section: 143(3); 40(b); 40(a)(ia); 37(1); 195; 194J; 40a(ia); 13; 22; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS.3715/DEL/2017 (ASSESSMENT YEAR 2011-12) M/S DELOITTE HASKINS & SELLS 7 TH FLOOR, BUILDING 10, TOWER-B, DLF CYBER CITY COMPLEX, DLF PHASE-II, GURGAON-122 002. PAN-AABFD 2095B VS. THE ASS T. CIT , CIRCLE-37(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.3716/DEL/2017 (ASSESSMENT YEAR 2012-13) M/S DELOITTE HASKINS & SELLS 7 TH FLOOR, BUILDING 10, TOWER-B, DLF CYBER CITY COMPLEX, DLF PHASE-II, GURGAON-122 002. PAN-AABFD 2095B VS. THE ASST. CIT, CIRCLE-61(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. PERCY PARDIWALA ADV & SH. NIRAJ SHETH, ADV. RESPONDENT BY SH. JAGDISH SINGH SR. DR. 2 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T ORDER PER SUDHANSHU SRIVASTAVA, JM: ITA NO. 3715/DEL/2017 IS THE ASSESSEES APPEAL AGAI NST ORDER DATED 30.03.2015 FOR ASSESSMENT YEAR 2011-12 WHEREAS ITA NO.3716/DEL/2017 IS THE ASSESSEES APPEAL FOR 2012- 13. AS BOTH THESE APPEALS INVOLVED IDENTICAL ISSUES, THEY WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A CHARTERED ACCOUNTANT FIRM. FOR ASSESSMENT YEAR 2011 -12, THE RETURN OF INCOME WAS FILED DECLARING AN INCOME OF RS.10,44,95,714/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.15,11,45,380/- AFTER MAKING THE FOLLOWING DISALLOWANCES/ADDITIONS: (I) DISALLOWANCE OF SUBSCRIPTION FEES PAID TO DELO ITTE TOUCHE TOHMATSU - RS.2,55,59,636/-. (II) DISALLOWANCE OF TDS PAYABLE - RS.44,09,937/-. (III) DISALLOWANCE OF PAYMENTS TO RETIRING PARTNERS - 3 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T RS.1,66,80,091/. 2.1 IN ASSESSMENT YEAR 2012-13, THE RETURN OF INCO ME WAS FILED DECLARING AN INCOME OF RS. 3,27,04,110/- AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R CALLED THE ACT) WAS COMPLETED AT AN INCOME OF RS.6,10,37,970/- AFTER MAKING A DISALLOWANCE OF RS.2,83,33,858/- PAID AS SUBSCRIPTIO NS FEES TO DELOITTE TOUCHE TOHMATSU. APART FROM THIS, THE AS SESSING OFFICER (AO) DID NOT ALLOW DEDUCTION OF EXPENDITURE OF RS.44 ,09,937/- REPRESENTING TAX DEDUCTED AT SOURCE FOR FINANCIAL Y EAR 2010-11 BUT PAID IN FINANCIAL YEAR 2011-12. THE ASSESSING OFFIC ER ALSO DID NOT GRANT ASSESSEES CLAIM OF TDS AMOUNTING TO RS.8,59, 85,393/-. 2.2 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FIR ST APPELLATE AUTHORITY CHALLENGING THE ORDERS OF THE A SSESSING OFFICER IN BOTH THE CAPTIONED ASSESSMENT YEARS. HOWEVER, TH E APPEALS OF THE ASSESSEE WERE ONLY PARTLY ALLOWED BY THE LD. COM MISSIONER OF INCOME TAX (APPEALS) {CIT (A)} AND NOW THE ASSESSEE HAS APPROACHED THIS TRIBUNAL AND HAS CHALLENGED THE ORD ERS OF THE LD. CIT (A) THE BY RAISING THE FOLLOWING GROUNDS OF APP EAL: 4 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T ITA NO.3715/DEL/2017 FOR ASSESSMENT YEAR 2011-12 THE APPELLANT OBJECTS TO THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS)-XX, NEW DELHI (LEARNED CIT (A )) PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 ( THE ACT) FOR THE AY 2011-12, ON THE FOLLOWING AMONG OTHER GROUND S: 1. DISALLOWANCE OF SUBSCRIPTION FEES RS.2,55,59,636 1.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.2,55,59,636, BEING SUBSCRIPTION FEES PAID FOR ME MBERSHIP OF DELOITTE GLOBAL NETWORK (DTT) BY CONSIDERING THE SAME AS CAPITAL IN NATURE. 1.2 THE LEARNED CIT (A) ERRED IN NOT APPRECIATING T HE FACTS OF THE MATTER IN RIGHT PERSPECTIVE AND ALSO ERRED IN FOLLO WING THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER FOR THE AY 2010- 11. 1.3 THE LEARNED CIT (A) ERRED IN HOLDING THAT SUCH EXPENDITURE NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE APP ELLANT. 1.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPREC IATION UNDER SECTION 32 OF THE ACT ON SUBSCRIPTION PAYMENT BEING CONSIDERED BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE. 2. DISALLOWANCE OF TAX DEDUCTED AT SOURCE (TDS) P AYMENT RS.44,09,937 2.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE DI SALLOWANCE OF RS.44,09,937, BEING AMOUNT OF TDS PAYABLE AS ON 31 MARCH 2011. 2.2 THE LEARNED CIT(A) ERRED IN HOLDING THAT SINCE THE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING, THE TAX DED UCTED FROM EXPENSES, BUT PAID AFTER 31 MARCH 2011 IS NOT ALLOW ABLE AS AN EXPENSE. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIA TED THAT ON DEDUCTION OF TAX LIABILITY TOWARDS PAYEE IS DISCHAR GED AND HENCE THE ENTIRE EXPENDITURE OUGHT TO BE ALLOWED AS DEDUCTION. 5 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 2.3 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED T HAT AS PER THE PROVISIONS OF THE ACT, NO DISALLOWANCE CAN BE M ADE IN RESPECT OF EXPENDITURE ON WHICH TAX IS DEDUCTED AND PAID WITHIN THE PRESCRIBED TIME. 2.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUC TION FOR RS.44,09,937 IN THE AY 2012-13 I.E. THE YEAR IN WHI CH THE TDS OF RS.44,09,937 IS PAID. 3. DISALLOWANCE OF PAYMENT TO RETIRED PARTNERS RS.1 ,66,80,091 3.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE DI SALLOWANCE OF RS.1,66,80,091, BEING PAYMENT TO RETIRED PARTNERS I N DISREGARD TO THE UNDERLYING PRINCIPLE OF DIVERSION BY OVERRID ING TITLE. 3.2 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED T HAT AS PER CLAUSE 10.N OF THE PARTNERSHIP DEED, THE SAID AMOUN T WAS NOT INCOME OF THE APPELLANT FIRM AS IT WAS DIVERTED BY OVERRIDING TITLE. 3.3 THE LEARNED CIT (A) ERRED IN CONCLUDING THAT TH E PAYMENT TO RETIRED PARTNERS IS AN APPLICATION OF INCOME WITHOU T CONSIDERING THE FACT THAT THERE IS A PRIOR CHARGE ON THE INCOME BY WAY OF SUPERIOR TITLE AND THEREFORE IT IS NOT AN INCOME OF THE APPELLANT. 3.4 THE LEARNED CIT (A) ERRED IN CONFIRMING THE FIN DING OF THE ASSESSING OFFICER THAT PAYMENT MADE TO RETIRED PART NERS HAS TO BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT AS NO TAX IS DEDUCTED. 3.5 THE LEARNED CIT (A) ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN APPLYING THE PROVISIONS OF SEC TION 40(B) OF THE ACT IN RESPECT OF PAYMENT TO RETIRED PARTNERS. 3.6 THE LEARNED CIT (A) ERRED IN NOT APPRECIATING T HE FACT THAT THE AMOUNT OF RS.1,66,80,091 IS INCLUDED IN THE INC OME OF THE RETIRED PARTNERS AND OFFERED TO TAX IN THEIR RETURN OF INCOME. 3.7 WITHOUT PREJUDICE, THE LEARNED CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION FOR THE AMOUNT OF RS.1,66,80,091 AS BUSIN ESS 6 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 3.8 THE LEARNED CIT (A) ERRED IN NOT CONSIDERING RE LIANCE PLACED BY THE APPELLANT ON THE HONBLE BOMBAY HIGH COURT A ND THE MUMBAI TRIBUNAL JUDGEMENTS PASSED IN CASE OF ASSOCI ATED CONCERNS OF THE APPELLANT, WHERE ON IDENTICAL FACTS , THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. 3.9 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPREC IATION ON SUCH AMOUNT BEING CONSIDERED BY THE ASSESSING OFFIC ER AS PAYMENT FOR INTANGIBLE ASSET. 4. CREDIT OF TAX DEDUCTED AT SOURCE (TDS) 4.1 THE LEARNED CIT (A) OUGHT TO HAVE SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO GRANT CREDIT FOR THE ENTIRE AM OUNT OF TDS OF RS.8,67,44,316 AS CLAIMED BY THE APPELLANT. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITH OUT PREJUDICE TO THE OTHER. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT T HE TIME OF HEARING OF THIS APPEAL. ITA NO.3716/DEL/2017 FOR ASSESSMENT YEAR 2012-13 THE APPELLANT OBJECTS TO THE ORDER OF THE COMMISSI ONER OF INCOME TAX(APPEALS)-XX, NEW DELHI (LEARNED CIT(A) ) PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 ( THE ACT) FOR THE AY 2012-13, ON THE FOLLOWING AMONG OTHER GROUND S: 1. DISALLOWANCE OF SUBSCRIPTION FEES RS.2,83,33,858 1.1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.2,83,33,858 BEING SUBSCRIPTION FEES PAID FOR MEM BERSHIP OF DELOITTE GLOBAL NETWORK BY CONSIDERING THE SAME AS CAPITAL IN NATURE. 7 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 1.2. THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THE FACTS OF THE MATTER IN RIGHT PERSPECTIVE AND ALSO ERRED IN FOLLO WING THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER FOR THE AY 2010- 11. 1.3 THE LEARNED CIT (A) ERRED IN HOLDING THAT SUC H EXPENDITURE IS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 1.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CI T (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPREC IATION UNDER SECTION 32 OF THE ACT ON SUBSCRIPTION PAYMENT BEING CONSIDERED BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE. 2. TDS PAYMENT RS.44,09,937 2.1 WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT T O HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION F OR EXPENDITURE OF RS.44,09,937 REPRESENTING TDS DEDUCT ED IN THE FINANCIAL YEAR (FY) 2010-11 BUT PAID IN THE FY 20 11-12. 3. CREDIT OF TAX DEDUCTED AT SOURCE (TDS) 3.1 THE LEARNED CIT (A) OUGHT TO HAVE SPECIFICA LLY DIRECTED THE ASSESSING OFFICER TO GRANT CREDIT FOR THE ENTIRE AM OUNT OF TDS OF RS.8,59,85,393 AS CLAIMED BY THE APPELLANT. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS W ITHOUT PREJUDICE TO THE OTHER. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AS WELL ON FACTS IN CONFIRMING THE ADD ITIONS MADE BY THE AO TO THE RETURNED INCOME. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUB MITTED THAT AS FAR AS THE DISALLOWANCE PERTAINING TO SUBSCRIPTION P AYMENT TO DELOITTE TOUCHE TOHMATSU WAS CONCERNED, THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE DELHI BE NCH OF THE 8 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T TRIBUNAL IN ASSESSMENT YEAR 2009-10 IN ITA NO.2927/ DEL/2013 VIDE ORDER DATED 23.10.2018. THE LD. AUTHORIZED RE PRESENTATIVE EXPLAINED THE NECESSITY OF PAYING SUBSCRIPTION FEES AND FURTHER EXPLAINED HOW THE SUBSCRIPTION FEES IS COLLECTED FRO M THE MEMBERS/COMPANIES BY DELOITTE HASKINS & SELLS, MUMB AI. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE ASSESSMENT ORDER FRAMED U/S 144C(3) R.W.S. 143(3) OF THE ACT IN THE CASE OF DELOITTE TOUCHE TOHMATSU (DTT) AND POINTED OUT THAT IN THE CASE OF DTT, THE SUBSCRIPTION FEES RECEIVED FROM ME MBERS HAVE BEEN TAXED AS ITS INCOME. THE LD. COUNSEL FOR THE A SSESSEE FURTHER DREW OUR ATTENTION TO THE DECISION OF THE CO-ORDINAT E BENCH IN THE CASE OF DELOITTE HASKINS AND SELLS, MUMBAI IN ITA N O. 5096/MUM/2011 VIDE ORDER DATED 30.11.2016 WHEREIN AN IDENTICAL ISSUE AROSE FOR CONSIDERATION BEFORE THE BENCH WHERE THE SUBSCRIPTION FEES PAID BY DELOITTE HASKINS AND SELL S, MUMBAI TO DTT WAS DISALLOWED U/S 40A (IA) OF THE ACT. IT WAS SU BMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE WAS D IRECTED TO BE DELETED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER R ELIED UPON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF DE LOITTE HASKINS 9 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T AND SELLS, KOLKATA IN ITA NOS. 587 AND 588/KOL/2016 VIDE ORDER DATED 11.07.2018. IT WAS SUBMITTED BY THE LD. COUNSE L FOR THE ASSESSEE THAT SIMILAR SUBSCRIPTION FEES WAS PAID BY THE KOLKATA FIRM WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND WAS SUBSEQUENTLY ALLOWED BY THE TRIBUNAL. THE LD. COUNS EL FOR THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE CO -ORDINATE BENCH IN THE CASES OF OTHER SISTER CONSULTANCY FIRMS WHO H AVE PAID SUBSCRIPTION FEES TO THEIR PARENT BODY. THE LD. COU NSEL FOR THE ASSESSEE CONCLUDED BY STATING THAT THE FEES HAVE BE EN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND HAVE TO BE ALLOWED. 3.1 WITH RESPECT TO ASSESSEES GROUND CHALLENGING DISALLOWANCE OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS.44,09,937/- IN ASSESSMENT YEAR 2011-12, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO PROVIDE DETAILS OF PAYMENTS OF TDS SUBSEQUENT TO TH E END OF THE FINANCIAL YEAR AND EXPLAIN THE LIABILITY OF EXPENSE S TO WHICH THE ASSESSEE HAD RESPONDED. IT WAS SUBMITTED THAT IT HAD BEEN 10 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE DED UCTION OF TAX AT SOURCE HAS BEEN DONE UNDER THE PROVISIONS OF THE AC T I.E., WHEN THE EXPENDITURE IS DISBURSED, THE TAX IS DEDUCTED AT SO URCE FROM SUCH DISBURSEMENT AND THE NET AMOUNT IS DISBURSED TO THE PAYEE AND, THUS, THE LIABILITY TO PAY TO THE PAYEE IN RESPECT OF THAT ITEM OF EXPENDITURE IS FULLY DISCHARGED. WITH SUCH ACCOUNTI NG ANOTHER LIABILITY I.E., OBLIGATION TO DEPOSIT THE TAX SO DE DUCTED AT SOURCE IS CREATED WHICH HAS A DIRECT NEXUS WITH THE DISBURSEMEN T TO THE PAYEE. THUS, THE LIABILITY IN RESPECT OF SUCH EXPEN DITURE STANDS FULLY DISCHARGED. IT WAS SUBMITTED THAT, HOWEVER, THE ASS ESSING OFFICER DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND THE AMOUNT OUTSTANDING IN RESPECT OF TDS PAYABLE WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE ON THE GROUND TH AT THE ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND THE TAX D EDUCTED AT SOURCE WAS BEING PAID IN THE NEXT FINANCIAL YEAR. TH E LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT, AN EXP ENDITURE CAN BE DISALLOWED ONLY WHEN THE STATUTORY LIABILITY HAS NOT BEEN DEDUCTED OR AFTER HAVING DEDUCTED HAS NOT BEEN DEPOSITED AS PER CHAPTER- 11 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T XVII-B OF THE ACT. IT WAS SUBMITTED THAT THIS PROVIS ION WAS NOT APPLICABLE AS THE AMOUNT OF STATUTORY LIABILITY ON WHICH HAD BEEN DEDUCTED HAD BEEN DEPOSITED WITHIN THE SPECIFIED DUE DATE. 3.2 WITH RESPECT TO DISALLOWANCE OF PAYMENTS MADE T O THE RETIRING PARTNERS, THE LD. AUTHORIZED REPRESENTATIV E SUBMITTED THAT THE CONFIRMATIONS OF THE RETIRED PARTNERS ARE ON RE CORD STATING THAT THEY HAVE OFFERED THIS INCOME TO TAX IN THEIR RESPE CTIVE RETURNS. RELIANCE WAS ALSO PLACED ON THE ORDER OF ITAT MUMBAI BENCH IN THE CASE OF C.C. CHOKSHI & CO. WHEREIN AN IDENTICAL PAYM ENT MADE TO THE RETIRED PARTNERS WAS HELD TO BE ALLOWABLE. IT WAS SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT HAD DISMISSED THE DEP ARTMENTS APPEAL IN THIS CASE AND, THEREFORE, THE SAME WAS A B INDING PRECEDENT. RELIANCE WAS ALSO PLACED ON ANOTHER JUDGM ENT OF THE CHENNAI BENCH PERTAINING TO A RELATED CONCERN OF TH E ASSESSEE WHERE AN IDENTICAL DISALLOWANCE WAS HELD TO BE ALLOWAB LE. RELIANCE WAS ALSO PLACED ON ANOTHER ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF MULLA & MULLA & CRAIGIE WHEREIN AN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 12 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 3.3 WITH RESPECT TO GROUND NO.4 IN ASSESSEES APPE AL FOR ASSESSMENT YEAR 2010-11, THE LD. AUTHORIZED REPRESE NTATIVE SUBMITTED THAT SUITABLE DIRECTIONS MAY BE ISSUED FO R GRANTING THE CREDIT OF TDS OF RS.8,67,44,316/- AS CLAIMED BY THE ASSESSEE. 4.0 COMING TO THE ASSESSEES APPEAL IN ASSESSMENT YEAR 2012-13, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTE D THAT GROUND NO.1 PERTAINED TO DISALLOWANCE OF SUBSCRIPTION FEES OF RS.28,33,858/- WHICH WAS IDENTICAL TO ASSESSEES APPE AL FOR ASSESSMENT YEAR 2011-12 AND THE ARGUMENTS WOULD BE THE SAME ON THE ISSUE. 4.1 WITH RESPECT TO GROUND NO.2 IN ASSESSEES AP PEAL IN ASSESSMENT YEAR 2012-13, THE LD. AUTHORIZED REPRESE NTATIVE SUBMITTED THAT THIS GROUND IS ALSO RELATED TO GROUN D NO.2 OF ASSESSEES APPEAL IN ASSESSMENT YEAR 2011-12 WHEREIN IT WAS BEING PRAYED THAT IF THE DISALLOWANCE OF TDS OF RS.44,09,9 37/- (DISALLOWED BY AO IN FINANCIAL YEAR 2010-11, FOR TH E REASON IT WAS PAID IN FINANCIAL YEAR 2011-12) IS UPHELD BY THIS T RIBUNAL IN ASSESSEES APPEAL IN ASSESSMENT YEAR 2011-12, THEN THE SAME SHOULD BE ALLOWED AS A DEDUCTION IN ASSESSMENT YEAR 2012-13. 13 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 4.2 WITH RESPECT TO GROUND NO.3 OF THE ASSESSEES APPEAL IN ASSESSMENT YEAR 2012-13, THE LD. AUTHORIZED REPRESE NTATIVE SUBMITTED THAT THIS GROUND SOUGHT OF DIRECTION TO T HE ASSESSING OFFICER TO GRANT CREDIT OF TDS AMOUNTING TO RS.8,59 ,85,393/-. 5.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE (DR) SUBMITTED THAT AS FAR AS THE ISSUE OF SUBSCRIPTION FEES PAID TO DELOITTE TOUCHE TOHMATSU IN BOTH THE YEARS WAS CONCE RNED, HE WAS STRONGLY SUPPORTING THE FINDINGS OF THE ASSESSING O FFICER AS WELL AS THE LD. CIT (A). IT WAS SUBMITTED THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS OF QUANTIFICATION OF SUBSCRIPTI ON FEES AND FURTHER THE ASSESSEE COULD NOT ESTABLISH THAT THESE EXPENSE S HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES BUSINESS. 5.1 WITH REFERENCE TO THE ARGUMENTS OF THE LD. AUTHORIZED REPRESENTATIVE IN RESPECT OF DISALLOWANCE OF RS.44,0 9,937/- RELATING TO TAX DEDUCTED AT SOURCE, THE LD. SR. DR SUBMITTED THAT IT IS UNDISPUTED THAT THE TAX DEDUCTED AT SOURCE WAS NOT PAID INTO THE ACCOUNT OF THE GOVERNMENT BEFORE THE END OF THE FIN ANCIAL YEAR AND, THEREFORE, THE SAME HAD RIGHTLY BEEN DISALLOWE D. IT WAS FURTHER 14 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T SUBMITTED THAT SINCE THE ASSESSEE WAS FOLLOWING THE C ASH SYSTEM OF ACCOUNTING, THE SAME WAS DEDUCTIBLE ONLY IN THE YEAR IN WHICH THE PAYMENT HAS BEEN MADE AND NOT IN THE YEAR IN WHICH T HE CLAIM HAS BEEN MADE AS HAVING ACCRUED. 5.2 WITH RESPECT TO THE DISALLOWANCE OF PAYMENTS M ADE TO THE RETIRED PARTNERS AMOUNTING TO RS.1,66,80,091/- IN A SSESSMENT YEAR 2011-12, THE LD. SR. DR SUBMITTED THAT THIS PA YMENT HAD BEEN MADE TO THE RETIRED PARTNERS AND THAT THIS PAYMENT WAS IN THE NATURE OF CAPITAL OUTGO AS THE PAYMENTS TO RETIRED PARTNERS ARE MADE ONLY OUT OF THE CAPITAL BALANCES OF THE PARTNE RS. IT WAS SUBMITTED THAT THE ASSESSEE FIRM HAD DEDUCTED THE P AYMENT FROM THE CURRENT INCOME OF THE PARTNERSHIP FIRM WHICH WAS NOT PERMISSIBLE. 5.3 WITH RESPECT TO ASSESSEES GROUND NO.4, IN ASS ESSMENT YEAR 2010-11 FOR CREDIT OF TAX DEDUCTED AT SOURCE, THE LD. SR. DR HAD NO OBJECTION TO THE SAME BEING GRANTED AFTER DU E VERIFICATION. 6.0 WITH RESPECT TO ASESSEES APPEAL FOR ASSESSMEN T YEAR 2012-13, THE LD. SR. DR SUBMITTED THAT GROUND NO.1 PERTAINING TO DISALLOWANCE OF SUBSCRIPTION FEES WAS IDENTICAL TO GR OUND NO.1 IN 15 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T ASSESSMENT YEAR 2011-12 AND THE SAME ARGUMENTS WOULD HOLD GOOD IN THIS YEAR ALSO. 6.1 WITH RESPECT TO ASSESSEES GROUND NO.2 IN ASSE SSMENT YEAR 2012-13 REGARDING ALLOWING DEDUCTION OF TDS DED UCTED IN FINANCIAL YEAR 2010-11 BUT PAID IN 2011-12, THE LD. SR. DR HAD NO OBJECTION OF THE EFFECT BEING GIVEN AS PER THE DIRE CTIONS OF THE LD. CIT (A) IN ASSESSMENT YEAR 2012-13. 6.2 LIKEWISE, THE LD. SR. DR HAD NO OBJECTION TO TH E CREDIT OF TAX DEDUCTED AT SOURCE BEING GRANTED TO THE ASSESSE E AFTER DUE VERIFICATION. 7.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE MATERIAL ON RECORD. SO FAR AS THE ISSUE OF DISA LLOWANCE OF SUBSCRIPTION FEES IS CONCERNED, THIS GROUND IS COMM ON IN BOTH ASSESSMENT YEARS 2011-12 & 2012-13. WE AGREE WITH TH E CONTENTIONS OF THE LD. SR. DR THAT THIS ISSUE STAND S COVERED BY THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSMENT YEAR 2009-10 IN ITA NO.2927/DEL/2013 VIDE ORDER DATED 23 .10.2018. THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBU NAL ARE 16 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T CONTAINED IN PARAGRAPHS 11 TO 17 OF THE SAID ORDER AND THE SAME ARE BEING REPRODUCED HEREIN UNDER FOR A READY REFER ENCE: 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE AS SESSEE HAS BEEN PAYING SUBSCRIPTION CHARGES SINCE ASSESSMENT Y EAR 2007- 08. IT APPEARS THAT THIS PAYMENT OF SUBSCRIPTION CH ARGES HAS BEEN QUESTIONED ONLY IN THE YEAR UNDER CONSIDERATIO N. THE OBSERVATIONS OF THE ASSESSING OFFICER WHILE DISALLO WING THE CLAIM OF SUBSCRIPTION CHARGES HAVE BEEN MENTIONED E LSEWHERE. 12. FIRST OBJECTION RELATES TO THE PAN OF THE DTT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PA ID SUBSCRIPTION FEES TO A COMPANY REGISTERED IN USA. A CCORDING TO THE ASSESSING OFFICER, IT CANNOT BE CLAIMED AS BUSI NESS EXPENDITURE. IN OUR UNDERSTANDING OF LAW, SUCH OBSE RVATION OF THE ASSESSING OFFICER DOES NOT HOLD ANY WATER, BECA USE UNDER THE COMPANIES ACT, A COMPANY CAN BE INCORPORATED UN DER ANY OTHER LAW ALSO. THE ASSESSING OFFICER HAS FURTHER M ENTIONED THAT IN THE PARTNERSHIP DEED, THERE IS NO CLAUSE RE LATING TO PAYMENT OF DTT. WE FAIL TO UNDERSTAND THE NECESSITY OF SUCH CLAUSE IN THE PARTNERSHIP DEED. 13. THE ASSESSING OFFICER FURTHER OBSERVED THAT DHS MUMBAI HAS PAID TO DTT AFTER DEDUCTING TAX AT SOURCE U/S 1 94J OF THE ACT WHICH MEANS THAT TDS HAS BEEN DEDUCTED FOR FEES FOR PROFESSION OR TECHNICAL SERVICES. THE ASSESSING OFF ICER WAS OF 17 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T THE OPINION THAT ON THE ONE HAND DHS MUMBAI IS MAKING PAYMENT AS FEES FOR PROFESSION OR TECHNICAL SERVICE S AND, ON THE OTHER HAND, THE ASSESSEE IS CLAIMING THE SAME AS SU BSCRIPTION FEES. AS MENTIONED ELSEWHERE, IN THE CASE OF DHS MUMBAI IN ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06, PAYM ENT MADE TO DTJ-WAS DISALLOWED U/S 40A(IA) OF THE ACT. THEREAFTER, DHS MUMBAI STARTED DEDUCTING TAX AT SOURCE TO AVOID UNNECESSARY LITIGATION. BUT THIS HAS NOTHING TO DO WITH THE SUBSCRIPTION CHARGES PAID BY THE ASSESSEE TO DHS MU MBAI AS ITS SHARE OF CONTRIBUTION. 14. IN OUR CONSIDERED OPINION, THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING DISALLOWANCE ARE NOT B ASED ON SOUND PRINCIPLES. IN OUR UNDERSTANDING OF THE FACTS , BY BECOMING PART OF GLOBAL NET WORK OF PROFESSIONAL FIRMS, IT I S EASIER TO GET WORK OF INTERNATIONAL CLIENTS WHICH ARE REFERRED BY FIRMS OF OTHER COMPANIES FROM OTHER COUNTRIES. SIMILARLY, THE ASSE SSEE MAY ALSO REFER ITS CLIENTS TO ITS ASSOCIATED FIRM IN OT HER COUNTRIES WHERE THE CLIENTS MAY REQUIRE PROFESSIONAL SERVICES . THE USE OF THE NAME DELOTTE IS IN ITSELF SUFFICIENT TO JUSTIFY THE BUSINESS NECESSITY OF THE SUBSCRIPTION CHARGES. 15. THE CO-ORDINATE BENCH IN THE CASE OF DHS MUMBAI ITA NO. 5096/MUM/2011 AND ANOTHER HAS EXAMINED ARTICLE 1 OF VEREIN IN DETAIL. THE RELEVANT PART READS AS UNDER: 18 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 'ARTICLE 1 NAME, DOMICILE AND PURPOSES 1.1 NAME AND DOMICILE. A VEREIN IS HEREBY ESTABLISHED WITH D OMICILE IN ZURICH, SWITZER LAND, UNDER THE NAME OF DELOITTE TOUCHE TOHMATSU ('VEREIN'). THE VEREIN CONSISTS OF MEMBERS THAT ARE PROFESSIONAL FIRMS ('MEMBER FIRMS'). THE MEMBER FIR MS ARE ENGAGED IN RENDERING PROFESSIONAL SERVICES, TO THE EXTENT THEY MAY LAWFULLY BE PERFORMED UNDER LOCAL L AWS (7.1), IN THE FIELDS OF ACCOUNTING, AUDITING, INSO LVENCY, LAW, MANAGEMENT CONSULTING, TAXATION AND RELATED SE RVICES ('PROFESSIONAL SERVICES'). THE VEREIN IS GOVERNED B Y THESE ARTICLES, BY THE SUPPLEMENTARY AGREEMENT AMONG THE MEMBER FIR MS SUPPLEMENTING THESE ARTICLES ('SUPPLEMENTAL AGREEMENT'), AND BY THE APPLICABLE PROVISIONS OF THE SWISS CIVIL CODE . 1.2 PURPOSES. THE PURPOSES OF THE VEREIN SHALL BE: (A) TO FURTHER INTERNATIONAL COOPERATION AND COHESION AMONG THE MEMBER FIRMS; (B) TO ASSURE THAT THEIR PRACTICES SHALL CONFORM TO PROFESSIONAL STANDARDS OF THE HIGHEST QUALITY; (C) TO ADVANCE THE INTERNATIONAL AND NATIONAL LEADERSH IP OF THE MEMBER FIRMS IN RENDERING PROFESSIONAL SERVI CES; AND TO PERFORM ALL OTHER FUNCTIONS INCIDENTAL TO TH E ABOVE PURPOSES. ARTICLE 8 DEALS WITH FINANCIAL MATTERS AND CLAUSE ( B) OF THE SAID ARTICLE READS AS UNDER:- 19 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T (A) EACH MEMBER FIRM SHALL CONTRIBUTE TO WARD THE BUDGETED OPERATING EXPENSES OF THE VEREIN FOR EACH FISCAL YEAR IN SUCH PROPORTIONS AS SHALL BE ALLOCATED BY T HE BOARD OF DIRECTORS; AND (B) THE AMOUNT ALLOCATED TO EACH MEMBER FIR M SHALL BE BASED UPON AGGREGATE REVENUES AND SUCH OTHER F ACTO RS, IF ANY, AS DELOTTE HASKINS AND SELLS IT A NO.: 5096/MUM/2011 ITA NO.: 5097/MUM/2011 ITA NO.: 5094/MUM/2011 MAY BE DETERMINED BY THE BOARD OF DIRECTORS AND APPROVED BY THE MEMBER FIRMS. AND ARTICLE 12 DEALS WITH DISSOLUTION, WHICH READS AS UNDER:- 12.1 BY RESOLUTION A DISSOLUTION OF THE VEREIN SHA LL OCCUR IF A RESOLUTION TO THAT EFFECT IS, ADOPTED BY THE M EMBER FINNS. 12.2 DISTRIBUTIONS. UPON DISSOLUTION OF THE VEREIN, ANY LIQUIDATION PROCEEDS SHALL BE APPLIED IN THE FOLLOW ING ORDER: (A) PAYMENT OR DISCHARGE OF ALL LIABILITIES OF THE VERE IN, INCLUDING ANY UNPAID PRINCIPAL OF AND ACCRUED INTER EST ON ANY LOANS AND ADVANCES MADE BY THE MEMBER FIRMS TO THE VEREIN; AND (B) PAYMENT OF ANY REMAINING BALANCE TO EACH MEMBER FINN IN THE PROPORTION THAT ITS ALLOCATED , CONTRIB UTIONS TO 20 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T BUDGETED OPERATING EXPENSES OF THE VEREIN BEAR TO T HE TOTAL BUDGETED OPERATING EXPENSES OF THE VEREIN FOR THE T HEN CURRENT FISCAL YEAR, LESS ANY UNPAID PORTION OF THE MEMBER FINN'S CONTRIBUTION OUTSTANDING ON THE DATE OF DISS OLUTION' FROM THE READING OF ABOVE ARTICLES, IT IS SEEN THAT THE ASSOCIATION CONSTITUTES OF MEMBER FIRMS WHICH ARE ENGAGED IN RENDERING OF PROFESSIONAL SERVICES AND T HE PURPOSE OF VEREIN IS TO FURTHER THE INTERNATIONAL C OOPERATION AND COHESION AMONG THE MEMBER FIRMS; TO ASSURE THAT PRACTICES OF THE MEMBERS SHALL CONFORM TO PROFESSIO NAL STANDARDS OF HIGHEST QUALITY; TO ADVANCE THE INTERN ATIONAL AND NATIONAL LEADERSHIP OF THE MEMBER FIRMS IN REND ERING PROFESSIONAL SERVICES, ETC. EACH MEMBER CONTRIBUTES TOWARDS THE BUDGETED OPERATING EXPENSES OF VEREIN I N SUCH PROPORTION WHICH HAS BEEN DELOTTE HASKINS AND SELLS ITA NO.: 5096/MUM/2011 ITA NO.: 5097/MUM/2011 ITA NO. 5094/MUM/2011 ALLOCATED TO THEM. THE AMOUNT ALLOCATED TO THE EACH MEMBER FIRM IS BASED ON AGGRE GATE REVENUES AND OTHER FACTORS AS ILLUSTRATED THEREIN. IN PURSUANCE OF SUCH ALLOCATION, INVOICES WERE ISSUED BY DTT TO ASSESSEE IN INDIA ALLOCATING THE DTT'S OPERATION AL BUDGET. THIS IS EVIDENT FROM CERTIFICATE OF THE CHA RTERED ACCOUNTANT GIVEN AT PAGE 67. WHILE MAKING THE SAID PAYMENT, THE ASSESSEE HAD NOT DEDUCTED THE &TDS INT ER ALIA ON THE GROUND THAT, FIRSTLY, THE RELATIONSHIP BETWEEN 21 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 'THE DTT AND ITS MEMBER IS BASED ON PRINCIPLE OF MUTUALITY', THEREFORE, THE VEREIN ITSELF DOES NOT E ARN ANY INCOME OR RENDERS ANY KIND OF PROFESSIONAL SERVICES AND THE EXPENSES ARE MADE THROUGH CONTRIBUTION BY ITS MEMBERS; AND SECONDLY, THE REIMBURSEMENT OF EXPENSE S IS BASED ON ALLOCATION MADE BY THE DTT WHICH IN TURN I S ON THE BASIS OF ACTUAL EXPENSES. HOWEVER BOTH THE AUTHORITIES, ASSESSING OFFICER AS WELL AS CIT (A), INSTEAD OF ADJUDICATING THE ISSUE WHETHER THE SUBSCRIPTION FEES PAID BY THE ASSESSEE TO DTT SWITZ ERLAND IS TAXABLE UNDER THE ACT IN INDIA OR NOT, HAVE PROC EEDED TO DISALLOW THE PAYMENT ON THE PREMISE THAT EVEN IF TH ERE EXISTED A DOUBT REGARDING CHANGEABILITY OF INCOME T AX, THE ASSESSEE SHOULD HAVE ANY WAY DEDUCTED THE TAX AND SHOULD HAVE COMPLIED WITH THE PROVISION OF SECTION 195 AND 197. IN SUPPORT, STRONG RELIANCE HAS BEEN PLACE D ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF AR THUR ANDERSEN & CO. AND HONBLEE SUPREME COURT JUDGMENT IN THE CASE TRANSMISSION CORPORATION ANDHRA PRADESH (SUPRA).' 16. AS MENTIONED ELSEWHERE, SIMILAR ISSUE WAS CONSI DERED BY THE KOLKATA BENCH IN THE CASE OF DHS KOLKATA [SUPRA ]. THE RELEVANT FINDINGS READ AS UNDER: 22 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T 10. WE HAVE HEARD LEARNED ARGUMENTS ON PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE FAR AS THE CA SE BEFORE US IS CONCERNED, THE ASSESSEE PAID AN AMOUNT OF RS. 48,95,212/- TO OHS, MUMBAI. IT IS THE CLAIM OF THE ASSESSEE THAT PAYMENT WAS ITS SHARE OF SUBSCRIPTION ALLOCATED TO VARIOUS INDIAN ENTITIES OF A COMMON GL OBAL NETWORK ON THE BASIS OF THE REVENUE BY OHS, MUMBAI, OF WHICH THE ASSESSEE IS A MEMBER. THE TOTAL SUBSCRIPT ION IS PAID BY OHS, MUMBAI AFTER DEDUCTION OF TAX AT SOURC E (TDS) TO DTT TOWARDS UTILIZATION OF COMMON KNOWLEDG E SYSTEMS, COMMON INFORMATION TECHNOLOGY SYSTEMS AND BETTER ACCESS FOR CLIENTS OF UNIFORM AND HIGH QUALI TY SERVICES BY THE INDIAN MEMBERS OF THE NETWORK. THE ASSESSEES CONTRIBUTION/SHARE OF RS.48,95,212/- COMPRISED IT SHARE OF RS.31,86,534/- FOR THE RELEVA NT PREVIOUS YEAR AND DIFFERENTIAL SHARE OF RS.17,08,67 9/- PAID FOR THE EARLIER YEARS BEING THE DIFFERENCE BET WEEN THE CONTRIBUTION PAYABLE ON THE BASIS OF THE REVENUE AN D CONTRIBUTION ALREADY PAID EARLIER FOR THOSE YEARS A ND WAS CLAIMED IN LINE WITH THE CASH SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE ASSESSEE PRODUCED DEB IT NOTES ISSUED BY DHS, MUMBAI AS SUPPORTING EVIDENCE. THE ASSESSEE HAS TO PAY SUBSCRIPTION FEES THROUGH DELLO ITE, HASKINS AND SELLS, MUMBAI (DHS, MUMBAI) FOR THIS PURPOSE TO DTT. HOWEVER, AS DHS MUMBAI MAKES THE 23 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T PAYMENT AFTER DEDUCTING TOS AND THE ASSESSEE ONLY REIMBURSES ITS SHARE OF EXPENSES, TAX WAS NOT REQUI RED TO BE DEDUCTED AGAIN IN RESPECT OF ITS REIMBURSEMENT O F SHARE OF EXPENSES OF RS.48,95,212/- TO OHS, MUMBAI. WE NO TE THAT IT IS NOT THE CASE OF THE AO THAT THE EXPENSES WERE NOT GENUINE. IT IS ALSO NOT THE CASE OF THE AO THAT THE EXPENSES WERE NOT INCURRED PAGE / 6 M/S. DELOITTE HASKINS & SELLS IT NOS .587 & 588/ KOL/ 2 0 16 ASSESSMENT YEARS : 2 0 10- 11 SI 2 0 11 -1 2 WHOLLY AND EXCLUSIVELY FOR TH E PURPOSES OF BUSINESS OR PROFESSION. THE ASSESSEE HA S CLAIMED THE EXPENSES IN ACCORDANCE WITH ITS CASH SY STEM OF ACCOUNTING AND THE AO HAS NOT DISPUTED THE SYSTE M OF ACCOUNTING. THE AO HAS CONCLUDED THAT THE ASSESSEE HAD PAID FOR THE PROFESSIONAL SERVICES RENDERED BY OHS, MUMBAI WITHOUT SPECIFYING THE NATURE AND DETAILS OF SERVICES RENDERED BY OHS, MUMBAI. THE ASSESSEE HAS FURNISHED COPIES OF DEBIT NOTES ISSUED BY OHS, MUMB AI MENTIONING THE AMOUNT DEBITED AS 'BEING YOUR SHARE OF OTT OPERATIONAL BUDGET (SUBSCRIPTION FEE) & TECH, SUBSCRIPTION FEES PAID TO DELOITTE TOUCH TOHMATSU, NEW YORK' WHICH HAVE NOT BEEN QUESTIONED BY THE AO. THE ASSESSEE HAS ALSO FURNISHED EVIDENCE TO PROVE THAT THE ASSESSEE IS A MEMBER OF THE GLOBAL NETWORK OF OTT, ENJOYS CERTAIN ADVANTAGES AS A RESULT OF THE MEMBERSHIP AN D HAS 24 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T PAID ITS CONTRIBUTION OF ; THE SUBSCRIPTION TO THE MEMBERSHIP OF THE GLOBAL NETWORK. 11. WE NOTE THAT HON'BLE HIGH COURT OF BOMBAY IN TH E CA OF CIT VS. ZEE ENTERTAINMENT FNTERPRISES LTD. [2018] 9 2 TAXMANN.COM 30 (BOMBAY) HELD THAT REIMBURSEMENT OF EXPENSES IS NOT TAXABLE. SIMILARLY, THE HON'BLE HIG H COURT OF KARNATAKA IN THE CASE OF CIT VS. KALVANI STEELS LTD. [2018] 91 TAXMANN.COM 359 (KARNATAKA), HELD AS FOLL OWS: '11. THIS PROVISION MAKES IT CLEAR THAT DEDUCTION A T SOURCE SHALL BE ON SUCH INCOME NOT OTHERWISE. THE PRIMARY FACTOR TO ATTRACT SECTION 194J IS THE INGREDIENT OF 'INCOM E COMPRISED THEREIN'. IF NO INCOME IS REFLECTED IN TH E BALANCE SHEET AND P&L A/C OF HSL TOWARDS THE REIMBURSEMENT CHARGES PAID ON COST TO COST BASIS BY KSL AND ML, I T CEASES TO HAVE THE CHARACTER OF INCOME. AS SUCH, TH E ASSESSEE CANNOT BE TREATED AS THE ASSESSEE IN DEFAU LT IN NOT DEDUCTING TAX AT SOURCE U/S 194J OF THE ACT. TH E ARGUMENTS OF THE REVENUE THAT THE FEES PAID BY THE ASSESSEE IS TOWARDS TECHNICAL SERVICES IS IMAGINARY ONE NOT ESTABLISHED WITH SUBSTANTIAL MATERIALS.' MOREOVER, WE NOTE THAT COORDINATE BENCH OF ITAT KOL KATA IN THE CASE OF CIT VS. ERNST & YOUNG (P.) LTD. [201 4] 49 TAXMANN.COM386 (KOLKATA-TRIB.) UPHELD THE SAME PRIN CIPLE 25 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T ON THE IDENTICAL ISSUE UNDER CONSIDERATION, WHEREIN IT WAS HELD AS FOLLOWS: 'THE TWO CONCERNS, NAMELY, EY&S LLP AND ERNST AND YOUNG U.K. LLP, WERE SET UP BY MEMBER FIRMS OF ERNS T AND YOUNG FOR PROVIDING RESOURCES TO OBTAIN BEST METHOD OLOGIES AT A LOWER COST WHICH IN THE PRESENT DAYS OF GLOBAL IZATION IS IMPERATIVE FOR ANY PROFESSIONAL FIRM. DEVELOPMEN T OF SUCH METHODS BY ANY ONE CONCERN WOULD HAVE BEEN COS T PROHIBITIVE APART FROM LACKING UNIFORMITY AND MUTUA L COMPATIBILITY. ACCORDINGLY, ARRANGEMENT WAS ARRIVED AT FOR SUCH SERVICES TO BE DEVELOPED IN A POOL BY THE SAID TWO CONCERNS TO WHICH THE MEMBER FIRMS WOULD HAVE ACCES S TO IT AND REIMBURSING THEIR RESPECTIVE SHARES OF COST INCURRED THEREFOR. SUCH REIMBURSEMENT WAS AGREED ON THE BASI S OF RESPECTIVE TURNOVER OF THE MEMBER FIRMS. THESE FACT S ARE NOT DENIED BY THE REVENUE AND THESE ARE REIMBURSEME NT OF EXPENSES. ONCE THESE ARE REIMBURSEMENT OF EXPENSES, THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S 195. ACCOR DINGLY, THE ORDER OF THE COMMISSIONER (APPEALS) IS TO BE CONFIRMED.' THEREFORE, WE NOTE THAT THE SAID AMOUNT OF RS.48,95 ,212/- WAS TOWARDS THE REIMBURSEMENT OF THE EXPENSES, WHIC H WAS IN FACT INCURRED ON BEHALF OF THE ASSESSEE AND THERE WAS NO PROFIT ELEMENT. THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF LD. CIT (A) DELETING TH E AFORESAID 26 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T ADDITION. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.567/KOL/2016 AND GROUND NO.2 RAISED BY REVENUE I N ITA NO.588/KOL/2016, ARE DISMISSED. 17. CONSIDERING THE FACTS OF TOTALITY, IN THE LIGHT OF THE DECISION OF THE CO-ORDINATE BENCH (SUPRA) WE HAVE NO HESITAT ION IN SETTING ASIDE THE FINDINGS OF THE LD. CIT(A). THE A SSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.2, 16,68,412/-. GROUND NO.1 WITH ITS SUB GROUNDS IS ALLOWED. 7.0.1 WE ALSO NOTE THAT THE AHMEDABAD BENCH OF ITAT ALSO REACHED A SIMILAR CONCLUSION BY DISMISSING THE DEPA RTMENTAL APPEAL ON THE ISSUE FOR ASSESSMENT YEARS 2013-14 & 2014-15 IN ITA NO.1983/AHD/2017 AND 1984/AHD/2017 VIDE ORDER D ATED 01.10.2019. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDINATE BENCHES (SUPRA), WE ALLOW GROUND NO.1 IN BOTH THE Y EARS UNDER CONSIDERATION AND DIRECT THE ASSESSING OFFICER TO D ELETE THE DISALLOWANCE. 7.1 AS FAR AS GROUND NO.2 IN ASSESSMENT YEAR 2011- 12 IS CONCERNED, WE NOTE THAT, UNDISPUTEDLY, THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING AND, THEREFORE, GENERALLY WHATEVER IS THE 27 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T CASH OUTFLOW, THE ASSESSEE IS ENTITLED TO CLAIM THE SAME AS A DEDUCTIBLE EXPENDITURE. IN THE PRESENT CASE, THE AS SESSEE HAS MADE CASH PAYMENT TO THE VARIOUS PARTIES AFTER DULY DEDU CTING TAX AT SOURCE. THE PORTION OF THE AMOUNT PAID TO THEM HAS ALREADY BEEN ALLOWED TO THE ASSESSEE AS A DEDUCTIBLE EXPENDITURE . HOWEVER, THE ISSUE IS WHETHER THE AMOUNT OF TAX DEDUCTED AT SOURC E FROM THE PAYMENT MADE TO THE RECIPIENT OF SUCH INCOME CAN BE SAID TO BE THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE AND PAID DURING THE YEAR AND, THEREFORE, IS IT ALLOWABLE TO THE ASS ESSEE AS BUSINESS EXPENDITURE. WE NOTE THAT ACCORDING TO THE PROVISIO NS OF SECTION 198 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED TH E ACT), TAX DEDUCTED IN ACCORDANCE WITH THE PROVISIONS OF THE AC T IS DEEMED TO BE THE INCOME RECEIVED BY THE RECIPIENT OF THE INCO ME. THEREFORE, ACCORDING TO THE ACT ITSELF THE AMOUNT OF TDS IS DE EMED TO HAVE BEEN RECEIVED BY THE RECIPIENT OF THE INCOME. THERE FORE, IN OUR CONSIDERED OPINION, IT CANNOT NOT BE SAID THAT THE ASSESSEE HAD NOT PAID THE AMOUNT OF TAX DEDUCTED AT SOURCE TO THE RE CIPIENT OF THE INCOME FROM WHOSE PAYMENTS THE TAX HAD BEEN DEDUCTED . TDS IS A LIABILITY CAST UPON THE ASSESSEE TO DEDUCT THE SUM FROM THE 28 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T RECIPIENT OF SUCH INCOME. THE MOMENT THE ASSESSEE D EDUCTS THE TAX AT SOURCE FROM THE SUMS PAID TO THE OTHER PERSON IT BECOMES THE LIABILITY OF THE ASSESSEE WHO CAN BE HELD TO BE AN A SSESSEE IN DEFAULT FOR THE ABOVE SUM AS WELL AS LIABLE TO PAY INTEREST AND PENALTY ALSO. THEREFORE, THE AMOUNT OF TDS IS TO BE CONSIDERED AS THE SUM PAID BY THE ASSESSEE ON BEHALF OF THE RECIP IENT OF THE INCOME. THEREFORE, IT CANNOT BE SAID THAT THE ABOVE SUM HAD NOT BEEN PAID BY THE ASSESSEE EVEN WHILE FOLLOWING THE C ASH SYSTEM OF ACCOUNTING. IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEE HAS DULY DEPOSITED THE TAX DEDUCTED AT SOURCE WITHIN THE TIME PRESCRIBED UNDER THE ACT. ACCORDINGLY, WE ARE UNABLE TO CONCUR WITH THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE AND DIRECT THAT THE IMPUGNED AMOUNT OF TDS BE GRANTED AS A DEDUCTION IN ASSESSMENT YEAR 2011-12. THUS, GROUND NO. 2 ALSO STANDS ALLOWE D IN ASSESSMENT YEAR 2011-12. 7.2 AS FAR AS THE ISSUE OF DISALLOWANCE OF PAYMENT TO RETIRED PARTNERS IN ASSESSMENT YEAR 2011-12 IS CONCERNED, I T IS SEEN THAT THIS ISSUE IS ALSO SETTLED IN FAVOUR OF THE ASSESSE E BY NUMEROUS JUDGMENTS OF THE HONBLE HIGH COURTS AS WELL AS THE CO-ORDINATE 29 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T BENCHES OF THE TRIBUNAL. WE FIND THAT AN IDENTICAL ISSUE HAD COME UP BEFORE THE ITAT CHENNAI BENCH IN THE CASE OF A R ELATED CONCERN OF THE ASSESSEE IN ASSESSMENT YEAR 2011 - 12 AND TH E ITAT CHENNAI BENCH IN ITA NO. 2077/MDS/2016, VIDE ORDER DATED 25 /11 /2018, AFTER RELYING ON AN ORDER OF ITAT MUMBAI BENCH IN T HE CASE OF CC CHOKSHI & CO. FOR ASSESSMENT YEARS 2000-01 AND 2001 -02 HAD HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE HONBLE HI GH COURT OF BOMBAY IN THE CASE OF DCIT VERSUS WADIA GHANDY & CO MPANY, VIDE JUDGMENT DATED 12/02/2019, ALSO UPHELD AN IDENTICAL ORDER OF ITAT MUMBAI AND NOTED THAT PAYMENT TO THE PARTNER WOULD A MOUNT TO DIVERSION OF INCOME AT SOURCE BY OVERRIDING TITLE. THE COURT WENT ON TO OBSERVE THAT IT WAS NOT NECESSARY TO REFER TO LONG LINE OF DECISIONS WHERE A SIMILAR VIEW IN SIMILAR CIRCUMSTANCES HAD BE EN TAKEN. THE UNDISPUTED FACTS ARE THAT THE PARTNERSHIP FIRM ENVI SAGED PAYMENT TO A OUTGOING PARTNER ON THE BASIS THAT THE PARTNER WOULD HAVE RENDERED SERVICE DURING HIS TENURE AS A PARTNER OF THE FIRM BUT COULD NOT ENJOY THE FRUITS THEREOF ON ACCOUNT OF TH E FACT THAT THE WORK HAVING REMAINED INCOMPLETE, THE CONCERNED CLIEN T HAD NOT BEEN BILLED FOR THE WORK ALREADY DONE. THE HONBLE BOMBAY HIGH 30 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T COURT HELD THAT IN SIMILAR CIRCUMSTANCES, THE COURT S HAVE HELD THAT PAYMENT TO THE PARTNER WOULD AMOUNT TO DIVERSION OF INCOME AT SOURCE BY OVERRIDING TITLE. THE LD. SENIOR DEPARTME NTAL REPRESENTATIVE COULD NOT POINT OUT ANY JUDGMENT TO THE CONTRARY ON THIS ISSUE AS WELL AND, THEREFORE, IN VIEW OF THE RA TIO OF THE DECISIONS AS AFORESAID AND AS RELIED UPON BY THE LD. AUTHORIZ ED REPRESENTATIVE, ON IDENTICAL FACTS, RESPECTFULLY FO LLOWING THE ABOVE CITED JUDICIAL PRECEDENTS, WE ALLOW GROUND NO.3 OF TH E ASSESSEES APPEAL IN ASSESSMENT YEAR 2011-12 AND DIRECT THE AS SESSING OFFICER TO DELETE THE DISALLOWANCE. 7.3 THE ONLY GROUND REMAINING FOR ADJUDICATION IN ASSESSMENT YEAR 2011-12 IS GROUND NO.4. IT IS IDENT ICAL TO GROUND NO.3 IN ASSESSMENT YEAR 2012-13 AND BOTH GROUNDS SE EK DIRECTIONS FOR ALLOWING THE CREDIT OF TAX DEDUCTED AT SOURCE. T HE LD. SR. DR HAS NO OBJECTION TO THE SAME. ACCORDINGLY, WE DIRECT TH E ASSESSING OFFICER TO GRANT DUE CREDIT OF TAX DEDUCTED AT SOUR CE IN BOTH ASSESSMENT YEARS 2011-12 & 2012-13 AFTER DUE VERIFI CATION AND AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. 31 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T THUS,THIS GROUND STANDS ALLOWED FOR STATISTICAL PUR POSES IN BOTH THE YEARS UNDER APPEAL. 7.4 THE ONLY GROUND NOW REMAINING IN ASSESSMENT YEA R 2012-13 IS RELATED TO GROUND NO.2 OF ASSESSEES APP EAL IN ASSESSMENT YEAR 2011-12. IT HAS BEEN PRAYED THAT IF THE DISALLOWANCE OF TDS OF RS.44,09,937/- (DISALLOWED B Y AO IN FINANCIAL YEAR 2010-11, FOR THE REASON IT WAS PAID I N FINANCIAL YEAR 2011-12) IS UPHELD BY THIS TRIBUNAL IN ASSESSEES A PPEAL IN ASSESSMENT YEAR 2011-12, THEN THE SAME SHOULD BE AL LOWED AS A DEDUCTION IN ASSESSMENT YEAR 2012-13. AS WE HAVE AL READY ALLOWED GROUND NO. 2 IN ASSESSMENT YEAR 2011-12, THIS GROUN D BECOMES IN FRUCTOUS AND IS DISMISSED. 7.0 IN THE FINAL RESULT, THE ITA NO.3715/DEL/2017 STANDS ALLOWED WHEREAS ITA NO.3716/DEL/2017 STANDS PARTLY A LLOWED. ORDER PRONOUNCED ON 15 TH JANUARY, 2021. SD/- /- - SD/- /- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/01/2021 PK/PS 32 ITA NOS.3715 & 3716/DEL/2017 M/S DELOITTE HASKINS & SELLS VS. ACI T COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI