Assessing 0fficer can invoke Rule 8D only when he records satisfaction in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. The condition precedent for the Assessing 0fficer entering upon a determination of the amount of the expenditure incurred in relation to exempt income
The undisputed fact is that the property in question is an I.T. Park, with all infrastructure facilities and services. This is not a simple building. The Ministry of Commerce and Industries, notifies certain building as I.T. Park only if various facilities and infrastructure, as specified by the Department, are provided. It is an undisputed fact that all the technical requirements, infrastructures, facilities and services are being provided in this building and it was only for this reason that not only the Ministry of Commerce & Industries, but also the CBDT notified the same as an I.T. Park which entitles the assessee to earn certain incentives.
It is observed that the claim of the assessee about wrong classification of double taxation credit was rejected by the AO because the assessee did not file a revised return. This view was canvassed by the AO on the basis of the afore-referred judgment in the case of Goetze India Ltd. (supra) However, it is pertinent to note that para -4 of this judgment provides that operation of this judgment is restricted to the AO and it does not, in any way, affect the powers of the Tribunal under section 254 of the Act. We, therefore, direct the AO to examine and allow assessee’s claim about the eligible amount of double taxation credit as per law after allowing a reasonable opportunity of being heard to the assessee.
It is undisputed that the transaction involve two domestic companies, who are individual and independent subsidiaries of their own and independent holding companies. This is also not in dispute that neither of the holding companies could be called the AE of the other contracting party. This is also not in dispute that, there is any transaction, involving a non resident company.
From a plain reading of the above clauses, it is seen that the Assessee is not doing any service which falls within the definition of “FIS” as contemplated in Para-4 of Article-12. We agree with the findings of the learned Commissioner (Appeals) that these are merely facilitation services with regard to the selection of awareness for Wockhardt Awards and WHL has not given any technical knowledge from such services, therefore, the learned Commissioner (Appeals) has rightly deleted the said addition. Accordingly, ground no.2, raised by the Revenue is dismissed.
The contention of the assessee that the authorities cannot go beyond the overall profit of the group of AEs in determining the ALP of the international transaction is also not acceptable because it will constitute a new method/ yardstick for determining the ALP. The transfer pricing adjustments made in India may result in the overall profit earned by all the AEs taken as one unit being breached.
Ground No.2 is on the issue of penalty levied by the Stock Exchange. The claim is an amount of Rs. 1,15,663/- on account of payment made to the stock exchange for violation of byelaws of the Stock Exchange. Assessee submitted that the Stock Exchanges are not statutory authorities and therefore, violation of their byelaws could not be considered as violation of law and is only a breach of contractual obligation and therefore, claim is allowable as a deduction. AO however, was of the opinion that the penalty paid violates the provisions of section 37(1) and therefore, the same cannot be allowed as business deduction. The CIT (A) allowed the amount stating that the Stock Exchanges are not government or semi-government bodies and the payments are only for technical violation of regulations which cannot be considered as payment prohibited by law or in connection with an offence. The Revenue is aggrieved by this.
The Hon’ble Supreme Court in Mahendra Mills (supra) has laid down that the assessee is entitled to exercise his option even through the filing of revised return and that option cannot be denied to him nor can depreciation be thrust on the assessee against his willingness.
Here in this case, it is not disputed fact that the assessee is sharing staff, office premises, etc. with its parent company. The allocation of the expenses have been identified as per the memorandum of understanding with regard to nature and the quantum of expenses which were to be borne out by the parent company and to be reimbursed by the assessee. Nowhere the Assessing Officer has spelled out as what were the expenses, which have been reimbursed are unreasonable or excessive looking to the fair market value of the services and expenses reimbursed.
Expenses incurred by the assessee on the foreign tour of spouses of the Directors were wholly gratuitous and for a purpose outside the course of its business. As the incurred expenditure was for extra-commercial reasons, so, same is not deductible under section 37(1) of the Act.
