STAR INDIA P. LTD, MUMBAI V. ADDL CIT RG 11(1), MUMBAI

ITA 4818/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4336 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 26-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR ITA NO M A Y PER A
• Keywords: Depreciation; Transfer pricing; Earning of tax free income; Revenue expenditure
• Section: 92E; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.4818/M/10 ( % ' (' / ASSESSMENT YEAR: 2006-07) STAR INDIA PRIVATE LIMITED STAR HOUSE, OFF. DR. E. MOSES ROAD, MAHALAXMI, MUMBAI 400011 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 11(1) AAYAKAR BHAVAN, MAHARISHI KARVE MARG, MUMBAI 400020 / I.T.A. NO. ITA 4675/M/10 ( % ' (' / ASSESSMENT YEAR: 2006-07) ASSTT. COMMISSIONER OF INCOME TAX RANGE 11(1) ROOM NO. 439, AAYAKAR BHAVAN, MAHARISHI KARVE MARG, MUMBAI 400020 / VS. STAR INDIA PRIVATE LIMITED STAR HOUSE, OFF. DR. E. MOSES ROAD, MAHALAXMI, MUMBAI 400011 ./ ./ PAN/GIR NO. : AAACN1335Q ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 11.03.2016 !' /DATE OF PRONOUNCEMENT: 01.04.2016 #$ / O R D E R ASSESSEE BY: SHRI PORUS KAKA & SHRI DIVESH CHAWLA DEPARTMENT BY: SHRI SUMIT KUMAR ITA NO. 4818&4675/M/10 A.Y. 2006-07 2 PER AMARJIT SINGH, JM: THIS ORDER SHALL DISPOSE OF BOTH THE APPEALS TOGETH ER BEARING ITA NO. 4818/M/10 TITLED AS STAR INDIA PVT. LTD. VS ADDL CI T RG. 11(1) AND ITA NO. 4675/M/10 TITLED AS ADDL. CIT RG. 11(1) VS STAR IND IA PVT. LTD. BEING THE PARTIES ARE THE SAME AND THE MATTER OF CONTROVERSY IS ALSO SIMILAR IN NATURE WHICH CAN BE CONVENIENTLY ADJUDICATED BY A SINGLE O RDER. THE SAID APPEALS ARE PERTAINING TO THE A.Y. 2006-07. 2. THE ASSESSEE IS IN THE PROFESSION OF PRODUCING & PROCURING TELEVISION PROGRAMMES AND SUPPLYING THE SAME TO THE OVERSEAS M EDIA COMPANIES, AGENT FOR ADVERTISEMENT SALES FOR OVERSEAS MEDIA COMPANIE S AND CARRIES ON CHANNEL SUBSCRIPTION BUSINESS. THE RETURN OF INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 WAS FINALIZED BY THE A.O. VIDE ORDER DATED 07.12.2009 ASSESSING THE TOTAL INCOME OF RS.166,20,10,410/-. FEELING AG GRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) 8, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)], WHO PASS ED THE ORDER DATED 22.03.2010 IN QUESTION. SINCE BOTH THE PARTIES WER E NOT SATISFIED WITH THE FINDING OF LEARNED CIT(A) THEREFORE BOTH THE APPEAL S HAVE BEEN FILED. 3. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.16,86,893/- REPRESENTING EXPENDITURE INCURRED BY THE APPELLANT ON LEASEHOLD IMPROVEMENTS AS BEING CAPITAL IN NATURE. 2. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.69,883/- ON ACCOUNT OF ADVANCES WRITTEN OFF BY THE APPELLANT EVENTHOUGH THE ADVANCE WAS GIVEN FOR THE PURPOSE OF BUSINESS OF THE APPELL ANT IN THE NORMAL COURSE OF ITS ACTIVITIES. ITA NO. 4818&4675/M/10 A.Y. 2006-07 3 3. (A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D. (B) WITHOUT PREJUDICE THE LEARNED CIT(A) HAS ERRED IN DISREGARDING THE APPELLANTS SUBMISSIO NS REGARDING WORKING OF ESTIMATED EXPENSES OF RS.50,000/- AND DIRECTING THE ASSESSING OFFICER TO MAKE DISALLOWANCE AS PER RULE 8D (C) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE APPELLANT S SUBMISSIONS THAT WHERE THE APPELLANT HAS BOTH OWN FUNDS AS WELL AS BORROWED FUNDS AND THE OWN FUNDS ARE SUFFICIENT AS COMPARED TO THE AMOUNT OF INVESTMENTS, THEN IT IS TO BE PRESUMED THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUNDS. D) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN DISREGARDING THE APPELLANTS SUBMISSIONS THAT LONG TERM INVESTMENTS MADE BY APPELLANT FOR CAPITAL APPRECIATION (WHEN EVER ARISE S) ON WHICH TAX IS PAYABLE, SHOULD NOT BE CONSIDERED WHILE COMPUTING THE AVERAGE VALUE OF INVESTMENTS FO R THE PURPOSE OF COMPUTING THE DISALLOWANCE AS PER RULE 8D. E) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE APPELLANT SUBMISSIONS THAT DISALLOWANCE AS PER RULE 8D SHOULD BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME EARNED BY THE APPELLANT OF RS.9,15,734/-. F) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN DISREGARDING THE APPELLANTS SUBMISSIONS THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D ARE APPLICABLE ONLY FROM ASSESSMENT YEAR 2007-08. 4. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.30,63,248/-, REPRESENTING EXPENDITURE INCURRED BY THE APPELLANT IN RESPECT OF REIMBURSEMENT OF PROPERTY TAXES TO PRECISION COMPONENT (P) LTD. (PCPL) ITA NO. 4818&4675/M/10 A.Y. 2006-07 4 4. ON THE APPEAL FILED BY THE REVENUE, THE REVENUE HAS ALSO TAKEN THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)-3, MUMBAI HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW ENTIRE EXPENDITURE INCURRED FOR ADVERTISEMENT AND PROMOTION AT RS.57,78,45,583/- IGNORING THE FACT TH AT THE SAME HAS ALSO BENEFITTED THE FOREIGN ASSOCIATED ENTERPRISES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)-3, MUMBAI HAS ERRED IN HOLDING THAT THE COMMISSION WOULD ACCRUE T O THE ASSESSEE ON THE DATE OF ACTUAL RECEIPT OF COMMISSION OR ON THE PAYMENT BY THE CLIENT DIRECTLY TO THE PRINCIPAL AND NOT ON THE RAISING OF INVOICES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)- 3, MUMBAI HA S ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION @ 60% ON COMPUTER PERIPHERALS, TREATING THE SAME AS COMPUTERS, THOUGH THE SAME IS NOT SPECIFIED IN THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)- 3, MUMBAI HA S ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/SL4A R.W.RULE8D OF THE ACT WITH RESPECT TO INTEREST EXPENSE, IGNORING THE FACT THAT THE ASSESSEE EARNED EXEMPTED INCOME AND INCURRED DIRECT AND INDIRECT EXPENSES TO EARN THE SAID EXEMPTED INCOME AND THE ASSESSING OFFICER WAS RULE BOUND BY RULE 8D(2)(II) OF THE I T RULES, 1962,TO CALCULATE THE DISALLOWANCE TAKING INTO ACCOUNT INTEREST EXPENSE ALSO. ITA NO. 4818&4675/M/10 A.Y. 2006-07 5 ITA NO. :- 4818/M/10(ASSESSEES APPEAL):- ISSUE NO . 1&2:- 5. THE ISSUE NUMBER 1 AND 2 RAISED BY THE ASSESSEE ARE NOT PRESSED BY THE LEARNED REPRESENTATIVE OF THE ASSESSEE DUE TO SMALL NESS OF AMOUNT INVOLVED, THEREFORE, THESE GROUNDS ARE DISMISSED AS NOT PRESS ED. ISSUE NO. 3 :- 6. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS A RGUED THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). THE ASSESSEE HAS TAKEN THE VARIOUS GROUNDS SUCH AS HE HAS EARNED THE EXEMPT IN COME FROM THE INVESTMENT OF HIS OWN FUNDS AND THE LONG TERM CAPITAL GAIN IS NOT REQUIRED TO BE CONSIDERED FOR THE PURPOSE TO CALCULATE THE EXPENDI TURE TO EARN THE EXEMPT INCOME AND THE PROVISION CONTAINED IN SECTION 14A R EAD WITH RULE 8D OF THE ACT IS NOT APPLICABLE AND THE DISALLOWANCE SHOULD B E RESTRICTED UP TO THE EXEMPTED INCOME EARNED BY THE APPELLANT TO THE TUNE OF RS.9,15,734/-. IT IS APPARENT THAT THE PROVISIONS OF SECTION 14A READ WI TH RULE 8D OF THE ACT IS NOT APPLICABLE FOR THE ASSESSMENT YEAR IN QUESTION I.E. 2006-2007 AND WAS TO BE APPLICABLE FROM THE ASSESSMENT YEAR 2008-09 ONWA RDS. THE BOMBAY HIGH COURT HAS SETTLED LAW IN THIS CONNECTION IN CASE GO DREJ & BOYCE MFG. CO. LTD. VS. DCIT 2010(43 DTR 177). THE FINDING IS HEREBY R EPRODUCED BELOW TO ARRIVE AT CONCLUSION:- ITA NO. 4818&4675/M/10 A.Y. 2006-07 6 CONCLUSION:- 74. OUR CONCLUSIONS IN THIS JUDGMENT ARE AS FOLLOW S: (I) DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS FA LLING WITHIN THE AMBIT OF S. 10(33) OF THE I.T. ACT, 1961 , AS WAS APPLICABLE FOR ASST. YR. 2002-03 IS NOT INCLUDIBLE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. CONSEQUENTLY, NO DE DUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY TH E ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, BY VIRTUE OF THE PROVISIONS O F S. 14A(1); (II) THE PAYMENT BY A DOMESTIC COMPANY UNDER S.115- O(1) OF ADDITIONAL INCOME-TAX ON PROFITS DECLARED, DISTRIBU TED OR PAID IS A CHARGE ON A COMPONENT OF THE PROFITS OF THE COMPANY . THE COMPANY IS CHARGEABLE TO TAX ON ITS OWN LIABILITY A ND NOT ON BEHALF OF OR AS AN AGENT FOR ITS SHAREHOLDERS. IN THE HAND OF THE SHAREHOLDER AS THE RECIPIENT OF DIVIDEND, INCOME BY WAY OF DIVIDEND DOES NOT FORM PART OF THE TOTAL INCOME BY VIRTUE OF THE PROVISIONS OF S.10(33). INCOME FROM MUTUAL FUNDS S TANDS ON THE SAME BASIS; (III) THE PROVISIONS OF SUB-SS (2) AND (3) OF S. 14 A OF THE IT ACT, 1961 ARE CONSTITUTIONALLY VALID; (IV) THE PROVISIONS OF R. 8D OF THE IT RULES AS INS ERTED BY THE IT (FIFTH AMENDMENT )RULES, 2008 ARE NOT ULTRA VIRES THE PROVISIONS OF S. 14A, MORE PARTICULARLY SUB-S. (2) AND DO NOT OFFEND ART. 14 OF THE CONSTITUTION; ITA NO. 4818&4675/M/10 A.Y. 2006-07 7 (V) THE PROVISIONS OF R.8D OF THE IT RULES WHICH HA VE BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 SHALL APPLY WITH EFFECT FROM ASST. YR. 2008-09; (VI) EVEN PRIOR TO ASST. YR. 2008-09, WHEN R.8D WAS NOT APPLICABLE, THE AO HAS TO ENFORCE THE PROVISIONS OF SUB-S (1) OF S. 14A. FOR THAT PURPOSE, THE AO IS DUTY BOUND TO DET ERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MA TERIAL ON THE RECORD. (VII) THE PROCEEDINGS FOR ASST. YR. 2002-03 SHALL S TAND REMANDED BACK TO THE A.O. THE AO SHALL DETERMINE AS TO WHET HER THE ASSESSEE HAS INCURRED ANY EXPENDITURE (DIRECT OR IN DIRECT) IN RELATION TO DIVIDEND INCOME / INCOME FROM MUTUAL FU NDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLA TED UNDER S. 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFEC TING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, TH E AO SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE FINDING OF THE HONBLE BOMBAY HIGH C OURT NO DOUBT THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME IS L IABLE TO BE DISALLOWED ON ITA NO. 4818&4675/M/10 A.Y. 2006-07 8 REASONABLE BASIS BY PROVIDING THE REASONABLE OPPORT UNITY TO THE ASSESSEE IN ACCORDANCE WITH THE LAW SPECIFICALLY IN VIEW OF THE OBSERVATIONS MADE BY THE HONBLE BOMBAY HIGH COURT (SUPRA). ACCORDINGLY THI S ISSUE IS HEREBY RESTORED TO THE FILE OF ASSESSING OFFICER TO RE-EXA MINE THE MATTER AFRESH IN ACCORDANCE WITH LAW. ACCORDINGLY THIS ISSUE IS DEC IDED IN FAVOUR OF THE ASSESSEE. ISSUE NO. 4:- 7. ACCORDING, TO THIS ISSUE THE MATTER OF CONTROVER SY IS THAT WHETHER, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWA NCE OF RS.30,63,248/- REPRESENTED THE EXPENDITURE INCURRED BY THE APPELLA NT IN RESPECT OF REIMBURSEMENT OF PROPERTY TAXES TO PRECISION COMPON ENT(P) LTD.(PCPL). IT IS ARGUED BY THE ASSESSEE THAT IN ACCORDANCE WITH THE LETTER DATED 01.04.2001 TO THE PCPL, THE ASSESSEE COMPANY WAS UNDER OBLIGATION TO PAY THAT PROPERTY TAX AND THE SAID TAX WAS PAID. THEREFORE, THE EXPENDIT URE TO THE TUNE OF RS.30,63,248/- IS REQUIRED TO BE ALLOWED. THE LEAR NED A.O. RECORDED THE FINDINGS THAT IN VIEW OF THE CLAUSE 4 OF THE AGREEM ENT DATED 01.04.2001 THE LIABILITY WAS WITH THE LICENSOR I.E. PCPL AND PCPL WAS UNDER OBLIGATION TO PAY THE TAX. THEREFORE, THIS EXPENDITURE WAS NOT F OUND TO BE JUSTIFIED AND DISALLOWED THE SAME. THERE SHOULD NOT BE ANY DISPU TE THAT THE ISSUE RELATING TO PAYMENT OF RENT IS NORMALLY DECIDED BETWEEN THE LAN D LORD AND TENANT. THOUGH THE AGREEMENT HAS FASTENED THE LIABILITY ABOUT PAYM ENT OF PROPERTY TAX UPON THE LAND LORD, YET THE FACT REMAINS THAT THE ASSESS EE HAS REIMBURSED ITS PROPERTY TAX WHICH WAS CONTRARY TO THE TERM OF LICENSE AGREE MENT. UNDER NORMAL CIRCUMSTANCES, SUCH KIND OF VIOLATION OF AGREEMENT DOES NOT HAPPEN. HOWEVER, THE ASSESSEE HAS DRAWN SUPPORT FROM A LETT ER CLAIMED TO HAVE BEEN ITA NO. 4818&4675/M/10 A.Y. 2006-07 9 SIGNED BY THE ASSESSEE AND THE LAND LORD, WHICH STA TES THAT THE ASSESSEE HERE IN SHOULD REIMBURSE THE PROPERTY TAX. WE NOTICE THAT THE MONTHLY RENT PAID BY THE ASSESSE E WAS RS.1,16,000/-. HOWEVER, THE PROPERTY TAX REIMBURSED BY THE ASSESSE E WORKS OUT TO RS.30,63,248/-, WHICH WORKS OUT TO ABOUT 26 MONTHS OF RENT. THIS PROPORTION APPEARS TO BE HIGHLY DISPROPORTIONATE AND BEYOND HU MAN CONDUCT AND PROBABILITIES. A TENANT, UNDER NORMAL CIRCUMSTANCE S WOULD NOT AGREE TO BEAR SUCH A HIGH COST. HENCE THERE APPEARS TO BE MERIT IN VIEW TAKEN BY TAX AUTHORITIES. HOWEVER, WE NOTICE THAT THEY HAVE TAK EN ADVERSE VIEW WITHOUT CONDUCTING ANY ENQUIRY. THE LEARNED A.R. CONTENDED THE REIMBURSEMENT OF PRO PERTY TAX PARTAKES THE CHARACTER OF RENT ONLY. THERE IS MERIT IN ITS SAID CONTENTION ALSO. HENCE, WHAT IS REQUIRED TO BE SEEN IS AS TO WHETHER TO AGGREGAT E AMOUNT OF RENT PLUS REIMBURSEMENTS COMPARES WELL WITH THE EARLIER YEARS PAYMENT. IF IT DOES NOT COMPARE WELL, THEN IT IS THE DUTY OF THE ASSESSEE T O JUSTIFY THE PAYMENT. IN VIEW OF THE ABOVE, THIS ISSUE REQUIRED FRESH EXA MINATION AT THE END OF ASSESSING OFFICER. ACCORDINGLY WE SET ASIDE THE OR DER OF LEARNED CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF AS SESSING OFFICER FOR FRESH EXAMINATION. ITA NO. :- 4675/M/10 (REVENUES APPEAL) :- ISSUE NO. 1:- 8. THE FIRST POINT WHICH HAS BEEN RAISED BY THE REV ENUE IS IN CONNECTION WITH THE ALLOWANCE OF THE EXPENDITURE INCURRED UPON THE ADVERTISEMENT AND ITA NO. 4818&4675/M/10 A.Y. 2006-07 10 PROMOTION AT RS.57,78,45,583/-. THE LEARNED DEPAR TMENTAL REPRESENTATIVE HAS CLAIMED THAT THE SAID EXPENDITURE INCURRED FOR ADVERTISEMENT AND PROMOTION HAS BEEN ALLOWED BY THE LEARNED CIT(A) WR ONGLY AND ILLEGALLY THEREFORE THE SAME IS NOT REQUIRED TO BE ALLOWED IN THE INTEREST OF JUSTICE. HOWEVER, ON THE OTHER HAND LEARNED REPRESENTATIVE O F THE ASSESSEE HAS REFUTED THE SAID CONTENTIONS. KEEPING IN VIEW OF THE ARGUM ENT ADVANCED BY THE LEARNED REPRESENTATIVE OF THE PARTIES AND PERUSING THE RECORD, IT IS OBSERVED THAT THIS MATTER OF CONTROVERSY, HAS ALREADY BEEN ADJUDI CATED BY THE INCOME TAX APPELLATE TRIBUNAL IN THE ASSESSEES OWN CASE IN IT A NO. 1249/M/04 & ITA 378/M/04 DECIDED ON 16.04.2008 AND (2006) 103 I TD 73, (MUM)TM IN THE ITAT MUMBAI BENCH D, THIRD MEMBER CASE OF STAR INDIA (P) LTD. VS. ADDL. CIT RG. 11(1) DATED 13.07.2006 . MOREOVER, THIS MATTER OF CONTROVERSY HAS ALSO BEEN ADJUDICATED BY THE HONBL E BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR THE A.Y. 1998-99, ITA NO 16 5 OF 2009 AND A.Y.2001-02, ITA NO.1119 OF 2009. WHEREIN, SUCH EX PENDITURE HAS BEEN TREATED AS REVENUE EXPENDITURE. THEREFORE, IN THE SAID CIRCUMSTANCE BY HONORING THE JUDGMENT PASSED BY THE CO-ORDINATE BEN CH THIS TRIBUNAL FIND NOWHERE, REASONS TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS GROUND. ISSUE NO. 2:- 9. THE REVENUE HAS TAKEN THE SECOND GROUND OF APPEA L THAT THE LEARNED CIT(A), HAS ERRED IN HOLDING THAT COMMISSION ACCRUE D TO THE ASSESSEE ON THE DATE OF ACTUAL RECEIPT OF COMMISSION OR ON THE DATE OF PAYMENT BY THE CLIENT DIRECTLY TO THE PRINCIPAL AND NOT ON THE RAISING OF INVOICES. THE ONLY QUESTION WHICH IS REQUIRED TO BE DECIDED THAT WHEN THE COMMI SSION RECEIVED BY THE ITA NO. 4818&4675/M/10 A.Y. 2006-07 11 ASSESSEE COMPANY IS REQUIRED TO BE TAXED. THE ASSE SSEE COMPANY IN THE ASSESSMENT YEAR 1997-98 CHANGED HIS METHOD OF ACCOU NTING TO SHOW THE SAID COMMISSION ON RECEIPT BASIS. NO DOUBT, THE A.O. DI SALLOWED THE SAME BUT THE HONBLE TRIBUNAL IN HIS JUDGMENT DATED 13.07.2006 C ITED AS STAR INDIA PVT. LTD. VS. ACIT [2006]103 ITD 73, MUMBAI FOUND JUSTIF IABLE TO TAX AN AMOUNT AT THE TIME OF RECEIPT AND APPEAL AGAINST THE SAID ORDER WAS DISMISSED BY THE HONBLE BOMBAY HIGH COURT IN ITA NO.165 OF 2009 DAT ED 24.03.2009. NO DOUBT IN THE SAID CIRCUMSTANCE THE GROUND RAISED BY REVENUE DOES NOT SEEMS JUSTIFIABLE THEREFORE WE HAVE ARRIVED AT THIS CONCL USION THAT THE LEARNED CIT(A) HAS PASSED THE ORDER CORRECTLY AND JUDICIOUSLY ON T HIS ISSUE WHICH DOES NOT REQUIRE TO BE INTERFERED WITH AT THIS APPELLATE STA GE. HENCE, THIS ISSUE IS IN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. ISSUE NO. 3:- 10. THE REVENUE HAS RAISED AN OBJECTION ON ACCOUNT OF ALLOWANCE OF DEPRECIATION @ 60% ON COMPUTER PERIPHERALS LIKE RAC K, PRINTER, PORT, ROUTERS, CORD ETC. THIS CONTROVERSY HAS BEEN DECIDED BY THE TRIBUNAL IN CASE FILED AS DCIT VS. DATACRAFT INDIA LTD. CITED AS (2011)9 ITR (TRIB) 712 (MUMBAI)(SB) AND BY THE HONBLE HIGH COURT OF DELHI WHILE THE DE CIDING THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD. THE PLEA WHICH HAS B EEN TAKEN BY THE REVENUE IS THAT THE DEPRECIATION WHICH HAS BEEN ALL OWED @ 60% AND THE VALUE OF THE PAPER AND OTHER MATERIALS, IS HIGHER BUT THE MATTER HAS BEEN CONSIDERED BY THE LEARNED CIT(A) WHO ALLOWED THE SAME ON THE B ASIS OF THE ASSESSMENT HELD IN THE YEAR OF 2003-04, 2004-05 AND 2005-06. WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT( A). HENCE, THE PLEA OF THE REVENUE IS HEREBY DECLINED. ITA NO. 4818&4675/M/10 A.Y. 2006-07 12 ISSUE NO. 4:- 11. WHILE RAISING THE ISSUE NO.4 THE REVENUE HAS TA KEN THE PLEA WITH REGARD TO DISALLOWANCE MADE U/S 14A READ WITH RULE 8D. WH ILE, OBJECTING THE EXEMPT INCOME AND INCURRING THE EXPENDITURE THEREON . AS A MATTER OF CONTROVERSY, HAS ALREADY BEEN ADJUDICATED, WHILE DE CIDING THE APPEAL FILED BY THE ASSESSEE WHICH CERTAIN DIRECTIONS WHICH HAS BE EN GIVEN TO THE A.O. WITH REGARD TO THE IMPLEMENTATION OF PROVISION CONTAININ G SECTION 14A OF THE ACT AND IN VIEW OF JUDGMENT PASSED BY THE GODREJ & BOYC E MFG. CO. LTD. VS. DCIT 2010(43 DTR 177), BOMBAY HIGH COURT. THEREFOR E, THERE IS NO NEED TO DECIDE THE MATTER AGAIN. THE DIRECTIONS GIVEN ABOVE HAS RESOLVED THE CONTROVERSY BETWEEN THE PARTIES. HENCE THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF ASSESSEE. 12. THE REVENUE HAS ALSO FILED THE ADDITIONAL GROUN DS WITH REGARD TO THE DETERMINATION OF ARMS LENGTH COMPENSATION AS PER O RDER OF THE TRANSFER PRICING OFFICER(T.P.O). THE ASSESSEE FILED THE FOR M NO. 3CEB RELATING TO THE ARMS LENGTH TRANSACTION U/S 92E OF THE ACT R.W. RU LE 10E OF THE I.T. RULES, WHICH, SPEAKS ABOUT THE TRANSACTIONS EXCEEDING RS. 12 CRORES. THE SAID FORM WAS REFERRED TO T.P.O, MUMBAI WITH THE PRIOR APPROV AL OF CIT(A) AND ORDER U/S 92CA(3) WAS PASSED BY THE T.P.O. DATED 27.02.20 09 AND WAS RECEIVED BY THE A.O. WHICH RESTRICTS THE T.P.O. FOR PASSING THE SAID ORDER. THE T.P.O. HAS HELD IN HIS ORDER THAT : BASED ON THE DISCUSSIONS IN THE PRECEDING PARAGRAPH S, THE ARMS LENGTH PRICE FOR THIS TRANSACTION IS NOT BEIN G DISTURBED AND THE TRANSACTION IS CONSIDERED AT THE TRANSACTION VALUE. THEREFORE, THERE WILL BE NO ADJUSTMENT TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 4818&4675/M/10 A.Y. 2006-07 13 IT IS HEREBY CLARIFIED THAT THE FINDINGS AND DISCUS SIONS MADE IN THIS ORDER ARE APPLICABLE ONLY IN RESPECT OF REF ERENCE RECEIVED FOR A.Y. CONSIDERING, THE SAME, NO ADJUSTMENT IS MADE TO THE DECLARED ARMS LENGTH PRICE BY THE ASSESSEE. ACCORDINGLY, N O ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IS BEING MAD E TO THE TAXABLE INCOME DECLARED BY THE ASSESSEE. 13. IN VIEW OF THE REPORT OF TRANSFER PRICING OFFIC ER NO ADJUSTMENT WAS MADE TO DECLARE THE ARMS LENGTH PRICE BY THE ASSES SEE, THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCE NO ADDITION ON ACCOUNT OF TRA NSFER PRICING ADJUSTMENT WAS BEING MADE TO TAXABLE INCOME DECLINED BY THE AS SESSEE. NOTHING CAME INTO NOTICE THAT THE FINDINGS GIVEN BY THE ASSESSIN G OFFICER AS WELL AS LEARNED CIT(A) WERE WRONG AGAINST LAW AND FACT. HENCE THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. 14. IN VIEW OF THE SAID CIRCUMSTANCES THE APPEAL FI LED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED AS WELL AS APPEAL OF THE REVE NUE IS HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST APRIL 2016. SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 1 ST APRIL, 2016 MP MP MP MP ITA NO. 4818&4675/M/10 A.Y. 2006-07 14 * + ,%'#- .-(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. * / BY ORDER, - & //TRUE COPY// //$ ! (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI