DCIT, Circle - 8, Kolkata, Kolkata v. M/s. Ernst & Young (P)Ltd, Kolkata

ITA 1160/KOL/2012 | 2009-2010
Pronouncement Date: 30-04-2014

Appeal Details

RSA Number 116023514 RSA 2012
Assessee PAN AABCE9188P
Bench Kolkata
Appeal Number ITA 1160/KOL/2012
Duration Of Justice 1 year(s) 8 month(s) 20 day(s)
Appellant DCIT, Circle - 8, Kolkata, Kolkata
Respondent M/s. Ernst & Young (P)Ltd, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 30-04-2014
Assessment Year 2009-2010
Appeal Filed On 09-08-2012
Judgment Text
A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE /AND ! ) [BEFORE SHRI MAHAVIR SINGH JM & SHRI SHAMIM YAHYA AM] ' / I.T.A NO.1159/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2003-04 & ' / I.T.A NO.870/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2007-08 & ' / I.T.A NO.1092/KOL/2009 #$ %&/ ASSESSMENT YEAR: 2006-07 & ' / I.T.A NO.1257/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2008-09 & ' / I.T.A NO.1160/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. ERNST & YOUNG PVT. LTD. CIRCLE-8 KOLKATA. (PAN: AABCE9188P) (() /APPELLANT ) (*+()/ RESPONDENT ) & ' / I.T.A NO.792/KOL/2009 #$ %&/ ASSESSMENT YEAR: 2006-07 & ' / I.T.A NO.1215/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2008-09 & ' / I.T.A NO.1000/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2009-10 M/S. ERNST & YOUNG PVT. LTD. VS. DEPUTY COMMISSI ONER OF INCOME-TAX CIRCLE-8 KOLKATA. (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 30.04.2014 DATE OF PRONOUNCEMENT: 30.04.2014 FOR THE REVENUE: SHRI VARINDER MEHTA CIT DR 2 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S FOR THE ASSESSEE: SHRI R. N. BAJORIA ADVOCATE SHRI D. GHOSH & SHRI K. MANGLIK CA / ORDER PER BENCH: THIS FRIST APPEAL BEING ITA NO.1159/K/2012 BY REVEN UE IS ARISING OUT OF ORDER OF CIT(A)-VIII KOLKATA IN APPEAL NO. 50/CIT(A)-VIII/K OL/11-12 DATED 17.05.2012. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) GRANTING INTEREST U/S. 244A OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT). FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN GRANTING INTEREST U/S. 244A ON INTEREST AND ALSO HO LDING THAT WHILE ISSUING REFUND INTEREST AMOUNT WILL TAKE PRIORITY BEFORE PRINCIPAL AMOUNT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FA CTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT CIT(A) HAS FACTUALLY NOTED ERRO RS COMMITTED BY AO WHILE COMPUTING INTEREST U/S. 244A OF THE ACT AND HE BROUGHT OUT TH E FACTUAL DETAILS UNDER FOLLOWING EIGHT ASPECTS: A) IN TREATING RS.2 29 85 384/- REFUNDED ON 30.9.0 5 AS REFUND OUT OF GTAX PAID EVEN THOUGH IT INCLUDED RS.31 63 564 TOWARDS INTEREST U/ S. 244A OF THE INCOME TAX ACT B) IN GRANTING INTEREST ON RS.1 49 79 822 FOR THE P ERIOD 1.10.2005 TO 31.7.06 INSTEAD OF GRANTING INTEREST ON RS.1 81 43 386 AND CONSEQUENTL Y GRANTING SHORT INTEREST; C) IN NOT GRANTING INTEREST ON RS.44 78 062 FROM 28 .7.06 TO 31.7.06 I.E. FOR 1 MONTH AS PER PROVISIONS OF RULE 119A OF THE INCOME TAX RULES; D) IN GRANTING INTEREST ON RS.1 94 57 884 FOR THE P ERIOD 1.8.06 TO 28.2.07 INSTEAD OF GRANTING INTEREST ON RS.2 26 21 448 AND CONSEQUENTL Y GRANTING SHORT INTEREST; E) IN GRANTING INTEREST ON RS.3 05 88 892 FOR THE P ERIOD 1.3.07 TO 29.3.07 INSTEAD OF GRANTING INTEREST ON RS.3 44 19 137 AND CONSEQUENTL Y GRANTING SHORT INTEREST; F) IN REDUCING RS.6 66 681 BEING INTEREST GRANTED I N ORDER DT. 29.3.07 PASSED U/S. 154/251/143(3) OF THE ACT TWICE. ONCE AS REFUND GRA NTED ON 29.3.07 AND AGAIN AS PART OF RS.2 07 91 649 REFUNDED ON 30.3.07; G)IN REDUCING RS.2 07 91 469 INSTEAD OF RS.2 07 91 649 REFUNDED ON 30.3.07 BY ADJUSTMENT AGAINST DEMAND OF AY 2005-06 H) IN GRANTING INTEREST ON RS.97 97 423 FOR THE PER IOD 1.4.07 TO 31.3.09 INSTEAD OF GRANTING INTEREST ON RS.1 42 94 169 AND CONSEQUENTLY GRANTIN G SHORT INTEREST. 3 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S THE LD. CIT DR STATED THAT THE COMPUTATION OF CIT( A) IS WRONG BUT HE COULD NOT POINT OUT WHICH PART OF CIT(A)S ORDER IS WRONG AND HOW. HE C OULD NOT IDENTIFY MISTAKE IN ALLOWING INTEREST U/S. 244A OF THE ACT. DESPITE THE ENTIRE FACTS AVAILABLE IN THE ORDER OF CIT(A) THE LD. CIT DR COULD NOT POINT OUT ANY ERROR WE FEEL THAT THE DIRECTIONS OF CIT(A) ARE AS PER LAW AND WE UPHOLD THE SAME. THIS APPEAL OF REVENUES APPEA L IS DISMISSED. 4. THESE CROSS APPEALS BEING ITA NO.1092/K/2009 BY REVENUE AND ITA NO. 792/K/2009 BY ASSESSEE ARE ARISING OUT OF ORDER OF CIT(A)-VII I KOLKATA IN APPEAL NO. 102/CIT(A)- VIII/KOL/CIRCLE-8/2008-09 DATED 05.03.2009. ASSESS MENT WAS FRAMED BY DCIT CIRCLE-8 KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR AY 2006-07 VIDE HIS ORDER DATED 15.07.2008. 5. THE ONLY ISSUE IN THIS APPEAL OF REVNUE (ITA NO. 1092/K/2009) IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON REIMB URSEMENT OF COST FOR PROVIDING ACCESS TO SYSTEM AND MANAGEMENT AUDIT METHODOLOGY UPDATES ETC . TO EYGS LLP AND ERNST & YOUNG LLP UK. FOR THIS REVENUE HAS RAISED FOLLOWING SO LE GROUND: 1. THAT LD. CIT(A) ERRED ON FACTS AND IN LAW IN DE LETING THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF INCOME TAX ACT 1961 OF A TOTAL SUM OF RS.7 11 91 335/- WHICH WAS MADE BY THE ASSESSING OFFICER FOR NON-DEDUCTION OF TAX AT S OURCE AS PER PROVISION OF INCOME TAX ACT 1961. 6. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIM ED DEDUCTION FOR RS.6 88 12 554/- AND RS.23 78 781/- BEING AMOUNT PAYABLE TO EYGS LLP AND ERNST & YOUNG LLP UK RESPECTIVELY TOWARDS REIMBURSEMENT OF COSTS FOR PROVIDING ACCESS TO SYSTEM & MANAGEMENT AUDIT METHODOLOGY UPDATES KNOWLEDGE UPDATES THROUGH WEB ETC. ASSISTANCE IN DEVELOPMENT OF COMMON PROGRAMS AND POLICIES ENDEAVORING TO ENSURE THAT PROFESSIONAL AND TO OTHER PEOPLE RESOURCES ARE AVAILABLE TO ASSIST THE FIRM OR ITS C LIENTS IN ALL JURISDICTION. BUT THE AO DISALLOWED BOTH THESE AMOUNTS CLAIMED BY WAY OF REIMBURSEMENT OF COST FOR SERVICES UTILIZED IN THE ASSESSEES BUSINESS. ACCORDING TO HIM ASSESSEE IS L AIBLE TO DEDUCT TAX BUT IT HAS FAILED TO DEDUCT TAX UNDER SECTION 195 OF THE ACT. HE ACCORDINGLY DISALLOWED A SUM OF RS.7 11 91 335/- PAID TOWARDS COST OF REIMBURSEMENTS U/S. 40(A)(IA) OF THE ACT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF ITAT KOLKATA IN ASSESSEES OWN CASE FOR AY 2003-04 IN IT A NO. 1750/KOL/2006 VIDE ORDER DATED 16 TH NOV. 2007 WHEREIN IT HAS BEEN HELD AS UNDER: 4 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 10. WE WENT THROUGH THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE DOCUMENTS. IN OUR CONSIDERED VIEW AS PER THE PROVI SIONS OF SECTION 195 WE AGREE WITH THE VIEW TAKEN BY THE DELHI BRANCH OF THE TRIBUNAL THAT BEFORE A TDS IS REQUIRED TO BE CHARGED ON ANY SUM IT HAS TO BE SHOWN THAT IT IS A N INCOME AS PER THE PROVISIONS OF SECTION 195 BECAUSE THE VERY WORDING UNDER SECTION 195 ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT MEANS THAT CHARGEABLE AS INCOME AS PER SECTION 4 OF THE INCOME-TAX ACT. UNLESS AND UNTIL IT IS CHARGEABLE THERE IS NO REQUIREMENT OF WITHHOLDING TAX BY ANY INDIA PERSON RESPONSIBLE FOR PAYING TO ANY NON-RESIDENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY ANY SUM PAYABLE ON ANY ACC OUNT. THERE IS NO REBUTTAL FRORN THE SIDE OF THE DEPARTMENT THAT THE EXPENSES ARE RELATI NG TO REIMBURSEMENT OF EXPENSES FOR SUPPLY OF DATA AS PER THE AGREEMENT STATED TO HAVE BEEN MADE AMONGST THE GLOBAL FIRMS TO WHICH THE ASSESSEE COMPANY IS TREATED AS ONE OF THE MEMBERS. APART FROM THIS FACTUAL ASPECT IT HAS BEEN OBSERVED THAT IN THE CASE LAW RE PORTED IN 142 ITR 493 IN THE CASE OF DUNLOP INDIA LTD. THE FACTS APPEAR TO BE IDENTICAL TO THAT OF THE PRESENT CASE IN HAND. THEREFORE BOTH FACTUALLY AS WELL AS LEGALLY THE AS SESSEE HAS A CASE AND ON THIS ISSUE THE ASSESSEE THEREFORE. SHOULD SUCCEED IN OUR CONSIDER ED OPINION AS THE AMOUNT IS TOWARDS THE REIMBURSEMENT AND WITH THE PASSAGE OF TIME NOW GLOBALIZATION HAS BEEN ADOPTED BY DIFFERENT COUNTRIES FOR FACILITATING DATA AND TECH NICAL SKILL OF DIFFERENT COUNTRIES. SIMPLY BECAUSE THEE SUPPLY OF DATA PERTAINS TO TECHNICAL S ERVICES THE DEPARTMENT SHOULD NOT BE RIGID FOR APPLICATION OF SECTION 195 WITHOUT EXAMIN ING THE ACTUAL FACTUAL ASPECT OF THE MATTER THAT IT IS A RESULT OF AN AGREEMENT IN BETW EEN THE PARTIES FOR SHARING THE DATA AMONGST THE MEMBERS FIRMS IN THE GLOBALIZATION PR OCESS. THIS ASPECT IN PARLICULAR HAS NOT BEEN CONTROVERTED BY THE DDEPARTMENT AT ANY STA GE OF THE PROCEEDING. HENCE WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. AGGRIEVED REVENUE CAME IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CXASE. BEFORE US LD. COUNSEL FOR THE ASSESSEE STA TED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE. WE FIND TH AT THE TRIBUNAL IS CONSISTENTLY DELETING THIS DISALLOWANCE AS REPRODUCED ABOVE ONE OF THE TRIBUNA LS DECISION IN AY 2003-04. WE FIND THE FACTUAL POSITION THAT THE ASSESSEE COMPANY IS A MEM BER OF THE INTERNATIONAL ORGANIZATION OF ERNST & YOUND AND ITS SEVERAL ASSOCIATE CONCERNS WO RLDWIDE. ERNST & YOUNG GLOBAL SERVICES LLP AND ERNST YOUNG UK LLP PROVIDE ADMINISTRATIVE A ND MANAGEMENT SUPPORT SERVICES IN CONNECTIONWITH TECHNOLOGY UPDATES SYSTEM AND METHO DOLOGY AND UPGRADES TRAINING THROUGH WEBS ETC. TO THE ASSESSEE AND TO OTHER ASSOCIATE CO NCERNS OF THE GROUP. THE ASSESSEE AND ITS OTHER ASSOCIATE CONCERNS SHARE THE COSTS. A SUM OF RS.6 88 12 554 WAS REIMBURSED TO ERNST & YOUNG GLOBAL SERVICES LLP AND A SUM OF RS.23 78 781 TO ERNST & YOUNG UK LLP BY THE ASSESSEE DURING THE CURRENT ASSESSMENT YEAR ON ACCO UNT OF ITS SHARE OF COSTS FOR SUCH SERVICES. THE SAID CONCERNS WERE SET UP BY MEMBER FIRMS OF ER NST & YOUNG FOR PROVIDING RESOURCES TO OBTAIN BEST METHODOLOGIES AT A LOWER COST WHICH IN THE PRESENT DAYS OF GLOBALISATION WAS IMPERATIVE FOR ANY PROFESSIONAL FIRM. DEVELOPMENT OF SUCH METHODS BY ANYONE CONCERN WOULD 5 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S HAVE BEEN COST PROHIBITIVE APART FROM LACKING UNIFO RMITY AND MUTUAL COMPATIBILITY. ACCORDINGLY ARRANGEMENT WAS ARRIVED AT FOR SUCH SE RVICES TO BE DEVELOPED IN POOL BY THE SAID TWO CONCERNS TO WHICH THE MEMBER FIRMS WOULD HAVE A CCESS TO IT AND REIMBURSING THEIR RESPECTIVE SHARES OF COST INCURRED THEREFOR. SUCH R EIMBURSEMENT WAS AGREED ON THE BASIS OF RESPECTIVE TURNOVER OF THE MEMBER FIRMS. THESE FAC TS ARE NOT DENIED BY REVENUE EVEN NOW BEFORE US AND THESE ARE REIMBURSEMENT OF EXPENSES. ONCE THESE ARE REIMBURSEMENT OF EXPENSES THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S. 195 O F THE ACT. ACCORDINGLY WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DIS MISSED. 8. COMING TO ITA NO. 792/K/2009. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN UPHOLDING THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES 1962 (HEREINAFTER REFERRED TO AS THE RULES). 9. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS E ARNED DIVIDEND INCOME AT RS.76 34 047/- AND CLAIMED THE SAME AS EXEMPT. THE ASSESSEE CLAIME D THAT IT HAD NOT INCURRED ANY EXPENDITURE TO EARN THIS DIVIDEND INCOME. DURING THE COURSE OF ASSESSMENT PROCEDINGS THE ASSESSEE EXPLAINED BEFORE AO THAT IT HAS INVESTED SHORT TERM SURPLUS FUND AVAILABLE WITH IT IN GRINDLAYS CASH FUND. THE ASSESSEE ALSO FILED COMPLETE DETAILS I.E. THE DATE OF INVESTMENT DIVIDEND REINVESTED REFUND RECEIPTS AND CLOSING BALANCE AS ON 31.03.2003. COMPLETED COPY OF STATEMENT INCLUDING BANK STATEMENT WAS SUBMITTED. THE ASSESS EE EXLAINED THAT THESE FUNDS WERE NOT INVESTED OUT OF BORROWED FUND BUT WERE INVESTED OUT OF SURPLUS FUNDS AVAILABLE WITH THE COMPANY FOR SHORT PERIOD. THE AO ESTIMATED THE PRO PORTIONATE MANAGEMENT EXPENSES QUA THE EXEMPTED INCOME AT 10% AND THEREFORE COMPUTED THE PROPORTIONATE MANAGEMENT EXPENSES AT RS.35 23 840/-. AGGRIEVED ASSESSEE PREFERRED APPE AL BEFORE CIT(A) WHO INVOKED RULE 8D OF THE RULES BY NOTING THAT THE SPECIAL BENCH IN THE C ASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (2008) 119 TTJ 209 (MUM) (SB) HAS HELD TH AT RULE 8D READ WITH SECTION 14A OF THE ACT IS RETROSPECTIVELY APPLICABLE AND THEREFORE H E ASKED THE ASSESSEE TO SUBMIT COMPUTATION IN TERM OF RULE 8D FOR MAKING THE DISALLOWANCE. ACCOR DINGLY HE RESTRICTED THE DISALLOWANCE AT RS.14 75 086/-. AGGRIEVED ASSESSEE CAME IN APPEAL BEFORE US. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE RELEVANT ASSESSMENT YEAR INVOLVED IS AY 2006-07AND HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT [2010] 328 ITR 81 (BOM.) HELD 6 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S THAT RULE 8D OF THE RULES AS INSERTED BY THE I. T ( FIFTH AMENDMENT) RULES 2008 W.E.F. 24.3.2008 IS PROSPECTIVE AND NOT RETROSPECTIVE. THE CIT(A) RESTRICTED THE DISALLOWANCE AT 1% OF THE EXEMPTED INCOME U/S. 14A OF THE ACT BY OBSERVIN G AS UNDER: I FIND THAT THE DECISION OF DAGA CAPITAL HAS BEEN REVERSED BY HONBLE BOMBAY HIGH COURT IN THEIR ABOVE MENTIONED ORDER DTD. 12.08.201 0. IN THIS ORDER HONBLE COURT HAS HELD THAT RULE 8D SHALL BE APPLICABLE FROM ASSESSME NT YEAR 2008-09 ONWARDS. HERE SINCE THE ASSESSMENT YEAR INVOLVED IS 2007-08 THERE FORE I HOLD THAT RULE 8D WILL NOT APPLY. HOWEVER IN CERTAIN RECENT DECISIONS HONBLE ITAT KOLKATA HAS HELD THAT OUT OF THE ADMINISTRATIVE EXPENSES EXPENSES TO THE TUNE O F 1% OF THE EXEMPT INCOME CAN BE DISALLOWED U/S. 14A. FOLLOWING THESE DECISIONS I H OLD THAT AN AMOUNT OF RS.7 857/- SHALL BE DISALLOWABLE U/S. 14A. WE FIND THAT THE EXEMPTED INCOME IS TO THE EXTENT O F RS.76 34 047/- IN AY 2006-07. RULE 8D OF THE RULES IS NOT APPLICABLE IN THIS ASSESSMENT Y EAR IN THE ASSESSEES CASE AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. (SUPRA) BEING PROSPECTIVE. WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE AT 1% OF THE EXEMPTED INCOME. THIS ISSUE OF ASSESSEES APPEALS IS PARTLY ALLOWED AS DIRECTED AB OVE. 11. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT. FO R THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2. THE LD. CIT(A) HAS ALSO ERRED IN NOT DELETING T HE DISALLOWANCE OF A SUM OF RS.1 54 71 071/- BEING THE PROVISION MADE FOR LEAVE ENCASHMENT IN THE CURRENT ASSESSMENT YEAR ON THE BASIS OF ACTURIAL VALUATION. 12. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SHR I R. N. BAJORIA SR. ADVOCATE STATED THAT THE ASSESSEE COMPANY HAS ADDED A SUM OF RS.1 54 71 071/- ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT. ACCORDING TO HIM THIS AMOUNT WAS ADDED BACK IN THE COMPUTATION OF INCOME FILED WITH ORIGINAL RETURN OF INCOME IN PURSUANCE TO SECT ION 43B(F) OF THE ACT. HE FURTHER STATED THAT HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE IN DUSTRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470 STUCK DOWN THE PROVISIONS OF SECTION 43B(F) OF THE ACT AS BEING ARBITRARY AND ULTRA VIRES. LD. COUNSEL FOR THE ASSESSEE STATED THAT HO NBLE SUPREME COURT HAS STAYED THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) AND THEREFORE HE REQUESTED THE BENCH TO SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT HE WILL ADJUDICATE THE SAME AS PER THE FINAL JUDGMENT OF HO NBLE SUPREME COURT IN THE CASE OF EXIDE INDUSTRIES LTD. ON THIS LD. CIT DR FAIRLY AGREED THAT THE ISSUE CAN BE RESTORED BACK TO THE FILE OF THE AO. 7 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 13. WE AFTER HEARING BOTH THE SIDE FIND THAT THE H ONBLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD. IN SLP (CIVIL) 22889 OF 2008 HAS ST AYED THE OPERATION OF THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT. ONCE THIS IS THE POSI TION WE RESTORE BACK THIS ISSUE TO THE FILE OF AO TO ADJUDICATE THE SAME AFRESH IN TERMS OF THE DE CISION OF HONBLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA). ACCORDINGLY THIS I SSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 14. COMING TO ITA NO. 870/K/2011. THE FIRST ISSUE IN THIS APPEAL OF REVNUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON REIMBURSEMENT OF COST FOR PROVIDING ACCESS TO SYSTEM AND MANAGEMENT AUDIT METHODOLOGY U PDATES ETC. TO EYGS LLP AND ERNST & YOUNG LLP UK. FOR THIS REVENUE HAS RAISED FOLLOW ING GROUND NO.1: 1. THAT LD. CIT(A) ERRED ON FACTS AND CIRCUMSTANCE S OF THE CASE AND IN TREATING THE AMOUNT PAID TO ERNST & YOUNG LLP UK AND ERNST & YOU NG GLOBAL SERVICES LLP AS REIMBURSEMENT OF EXPENSES INSTEAD OF TREATING IT AS FEES FOR TECHNICAL SERVICES PAID TO A NON RESIDENT. WE HAVE ALREADY DEALT THIS ISSUE ELABORATELY WHILE ADJUDICATING THE GROUND OF APPEAL OF REVENUE IN ITA NO.1092/K/2009 AND SINCE WE HAVE DISMISSED T HIS GROUND OF APPEAL OF REVENUE FOLLOWING THE SAME ANALOGY WE ALSO DISMISS THIS GRO UND OF APPEAL OF REVENUE. 15. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) ALLOWING THE CLAIM OF BAD DEBT WRITTEN OFF. AT THE OUTSET T HE LD. SENIOR COUNSEL FOR THE ASSESSEE STATED THAT NO SUCH ISSUE WAS BEFORE CIT(A). HENCE IT CA NNOT BE RAISED BEFORE TRIBUNAL AS IT IS NOT ARISING FROM THE ORDER OF CIT(A). ON QUERY FROM TH E BENCH THE LD. CIT DR FAIRLY CONCEDED THAT THERE IS NO SUCH ISSUE ARISEN FROM THE ORDER O F CIT(A). HENCE THE SAME IS DISMISSED. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 16. THESE CROSS APPEALS BEING ITA NO.1257/K/2011 B Y REVENUE AND ITA NO. 1215/K/2011 BY ASSESSEE ARE ARISING OUT OF ORDER OF CIT(A)-VIII KOLKATA IN APPEAL NO. 27/CIT(A)- VIII/KOL10-11 DATED 13.07.2011. ASSESSMENT WAS FRA MED BY DCIT CIRCLE-8 KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REF ERRED TO AS THE ACT) FOR AY 2008-09 VIDE HIS ORDER DATED 24.05.2010. 8 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 17. THE FIRST ISSUE IN THIS APPEAL OF REVNUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON REIMBURSEMENT OF COST FOR P ROVIDING ACCESS TO SYSTEM AND MANAGEMENT AUDIT METHODOLOGY UPDATES ETC. TO EYGS LLP AND ERNS T & YOUNG LLP UK. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S. 40(A) (IA) AMOUNTING TO A TOTAL OF RS.24 22 61 039/- PAID BY THE ASSESSEE TO ERNST & Y OUNG LLP UK AND ERNST & YOUNG GLOBAL SERVICES LLP WITHOUT DEDUCTING TAX AT SOURCE U/S. 195 OF THE INCOME-TAX ACT 1961 IN RELATION TO ASSESSMENT YEAR 2008-09. WE HAVE ALREADY DEALT THIS ISSUE ELABORATELY WHILE ADJUDICATING THE GROUND OF APPEAL OF REVENUE IN ITA NO.1092/K/2009 AND SINCE WE HAVE DISMISSED T HIS GROUND OF APPEAL OF REVENUE FOLLOWING THE SAME ANALOGY WE ALSO DISMISS THIS GRO UND OF APPEAL OF REVENUE. 18. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES QUA THE EXEMPTED INCOME FOR AY 2008-09. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE BY THE AO U/S. 14 A AS PER RULE 8D TO 1% OF DIVIDEND INCOME IN RELATION TO AY 2008-09. 19. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMP ANY EARNED DIVIDEND INCOME AMOUNTING TO RS.91 24 287/- IN ADDITION TO DIVIDEND OF EQUITY SH ARES OF CAP GEMINI SA AMOUNTING TO RS.69 853/-. THIS DIVIDEND RECEIVED FROM CAP GEMIN I SA WAS OFFERED TO TAX. THE EXEMPT INCOME CLAIMED ON ACCOUNT OF DIVIDEND WAS QUA RS.91 24 287/-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISALLOWED A SUM OF RS.2 94 941/- BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES BY OBSER VING IN PARA 4 AS UNDER: 4. AS PER PROVISIONS OF SECTION 14A OF THE ACT REA D WITH RULE 8D A SUM OF RS.2 94 941/- IS DISALLOWED. IT INCLUDES SUM OF RS.2 61 235/- WH ICH IS 0.5% OF THE AVERAGE INVESTMENT AND AN AMOUNT OF RS.33 706/- BEING PROPORTIONATE I NTEREST. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO RESTRICTED THE DISALLOWANCE AT 1% OF DIVIDEND INCOME. AGGRIEVED NOW REVENUE IS IN APPE AL BEFORE US. 9 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 20. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STA TED THAT RULE 8D OF THE RULES WILL APPLY W.E.F. AY 2008-09 AND AO HAS RIGHTLY COMPUTED THE D ISALLOWANCE. HE CONCEDED THIS ISSUE. ACCORDINGLY THIS ISSUE OF REVENUES APPEAL IS ALLO WED. 21. COMING TO ITA NO. 1215/K/2011. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAISNT THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PROV ISION FOR LEAVE ENCASHMENT. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT DELETING THE DISALLOWANCE OF A SUM OF RS.2 04 00 156/- BEING THE PROVISION MADE FO R LEAVE ENCASHMENT IN THE CURRENT ASSESSMENT YEAR ON THE BASIS OF ACTURIAL VALUATION. 22. SINCE WE HAVE SET ASIDE THIS GROUND OF APPEAL O F ASSESSEE IN ITA NO. 792/K/2009 TO THE FILE OF AO TO ADJUDICATE THE SAME AFRESH IN TERMS O F THE DECISION OF HONBLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) THIS ISSUE A LSO RESTORED TO THE FILE OF AO TO ADJUDICATE AFRESH. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. 23. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN NOT ADJUDICATING THE ISSUE OF WITHDRAWAL OF INTEREST U/ S. 234D OF THE ACT. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO. 2: 2. THDE LD. CIT(A) HAS FAILED TO ADJUDICATE THAT I NTEREST WITHDRAWN UNDER SECTION 244A IS NOT REFUND GRANTED UNDER SUB-SECTION (1) OF SECT ION 143 ON WHICH INTEREST UNDR SECTION 234D CAN BE LEVIED. 24. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FAI RLY STATED THAT THIS ISSUE IS A CONSEQUENTIAL ISSUE SO THE AO CAN BE DIRECTED TO RECOMPUTE THE D ISALLOWANCE AS PER THE PROVISIONS OF THE ACT. LD. CIT DR HAS NOT OBJECTED TO THE SAME. IN VIEW OF THE ABOVE SUBMISSIONS WE FEEL THAT THIS ISSUE NEEDS READJUDICATION AND AO WILL RECOMPUTE TH E WITHDRAWAL OF INTEREST IN TERMS OF PROVISIONS OF SECTION 234D OF THE ACT. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 25. THESE CROSS APPEALS BEING ITA NO.1160/K/2012 BY REVENUE AND ITA NO. 1000/K/2012 BY ASSESSEE ARE ARISING OUT OF ORDER OF CIT(A)-VIII KOLKATA IN APPEAL NO. 28/CIT(A)- VIII/KOL/11-12 DATED 17.05.2012. ASSESSMENT WAS FR AMED BY DCIT CIRCLE-8 KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REF ERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 18.05.2011. 10 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 26. NOW COMING TO ITA NO. 1160/K/2012. THE SOLE I SSUE IN THIS APPEAL OF REVNUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLO WANCE MADE BY AO FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON REIMBURSEMENT OF COST FOR PROVIDING ACCESS TO SYSTEM AND MANAGEMENT AUDIT MET HODOLOGY UPDATES ETC. TO EYGS LLP AND ERNST & YOUNG LLP UK. FOR THIS REVENUE HAS RAISE D FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S. 40(A) (IA) AMOUNTING TO RS.23 52 28 398/- PAID BY THE ASSESSEE TO ERNST & YOUNG LLP UK AND ER NST & YOUNG GLOBAL SERVICES LLP WITHOUT DEDUCTING TAX AT SOURCE U/S. 195 OF THE INC OME-TAX ACT 1961 IN RELATION TO ASSESSMENT YEAR 2009-10. WE HAVE ALREADY DEALT THIS ISSUE ELABORATELY WHILE ADJUDICATING THE GROUND OF APPEAL OF REVENUE IN ITA NO.1092/K/2009 AND SINCE WE HAVE DISMISSED T HIS GROUND OF APPEAL OF REVENUE FOLLOWING THE SAME ANALOGY WE ALSO DISMISS THIS GRO UND OF APPEAL OF REVENUE. 27. COMING TO ITA NO. 1000/K/2012. THE SOLE ISSUE I N THIS APPEAL OF ASSESSEE IS AGAISNT THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PROV ISION FOR LEAVE ENCASHMENT. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT DELETING THE DISALLOWANCE OF A SUM OF RS.2 77 64 886/- BEING THE PROVISION MADE FO R LEAVE ENCASHMENT IN THE CURRENT ASSESSMENT YEAR ON THE BASIS OF ACTURIAL VALUATION. 28. SINCE WE HAVE SET ASIDE THIS GROUND OF APPEAL O F ASSESSEE IN ITA NO. 792/K/2009 TO THE FILE OF AO TO ADJUDICATE THE SAME AFRESH IN TERMS O F THE DECISION OF HONBLE APEX COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) THIS ISSUE A LSO RESTORED TO THE FILE OF AO TO ADJUDICATE AFRESH. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. 29. IN THE RESULT REVENUES APPEALS ARE DISMISSED AND THAT OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 30. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH APRIL 2014 ./ #01 2 JD.(SR.P.S.) 11 ITA NO. 1159/K/2012 870/K/2011 1092/K/2009 1257/K/2011 1160/K/2012 792/K/2009 1215/K/2011 & 1000/K/2012 M/S. ERNST & YOUNG PVT. LTD. . AYS 2003-04 & OTHER S 3 *4 5 4%6- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT M/S. ERNST & YOUNG PVT. LTD. 22 CAMAC STREET KOLKATA-16 2 *+() / RESPONDENT DCIT CIRCLE-8 KOLKATA. 3 . # ( )/ THE CIT(A) KOLKATA 4. 5. # / CIT KOLKATA 4:; *# / DR KOLKATA BENCHES KOLKATA +4 */ TRUE COPY #