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10-01-2020, Total Oil India, Section 40(a)(ia), 11(3)(1), Tribunal Mumbai

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6 months 4 weeks ago #12045 by amit
Section - 40(a)(ia), 11(3)(1), 195, 9(1)(vii), 234D, 244A, 172
Order Date - 10-01-2020
Favouring - Assessee Partly
Court - Tribunal Mumbai
Appellant - Total Oil India Pvt. Ltd.
Respondent - ACIT
Justice - C.N. PRASAD JM & S. RIFAUR RAHMAN AM
Citation - 120Taxpundit109
Appeal No. - ITA No. 245/MUM/2019
Asstt. Year - 2015-16

Order

PER : C.N. PRASAD (JM)

1. These cross appeals are filed by the assessee and revenue against the order of the Ld. Commissioner of Income-tax (Appeals) – 55, Mumbai [hereinafter for short “Ld. CIT(A)”] dated 19.11.2018 for the A.Y. 2015-16.

2. The assessee in its appeal raised the following grounds: -

“1. Disallowance of reimbursement of expenses under section 40(a)(ia) of the Act

Based on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in facts and in law in upholding the disallowance made by the Assistant Commissioner of Income tax, Range 11(3)(1) ('AO') of reimbursement of demurrage expenses made to non-residents including group entities of the Appellant under section 40(a)(i) of the Act on account of alleged non-deduction of taxes at source under section 195 of the Act.

2. Reimbursement of demurrage expenses of INR 2,07,31,596

Based on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in facts and in law:

2.1. in upholding the disallowance of reimbursement of demurrage charges amounting to INR 2,07,31,596 made to non-residents including group entities pertaining to AY 2013-14 of the Appellant under section 40(a)(i) on account of non-deduction of taxes at source under section 195 of the Act.

2.2. in upholding the action of the learned AO in characterising such reimbursement of demurrage charges as fees for technical services taxable under section 9(1)(vii) of the Act.

2.3. in not appreciating the fact that the payments to the nonresidents including group entities are pure cost reimbursements and do not contain any service element.

2.4. in disregarding the order of the Commissioner of Income tax (Appeals) dated 18 March 2013 for AY 2008-09 in Appellant's own case wherein the issue in respect of allowability of demurrage charges has been decided in favour of Appellant.

3. Levy of interest under section 234D of INR 24,09,189 Based on the facts and in the circumstances of the case and in law, the interest levied under section 234D amounting to INR 24,09,189 ought to be deleted.”

4. Short grant of interest under section 244A of INR 37,78,627

Based on the facts and in the circumstances of the case and in law, interest under section 244A of the Act of INR 37,78,627 ought to be allowed.”

3. Ground No.1 of grounds of appeal is general in nature and need no adjudication.

4. Ground No.2 of grounds of appeal is relating to disallowance of reimbursement of demurrage charges of the current assessment year of ₹.2,07,31,596/- u/s. 40(a)(i) of the Act on account of non-deduction of taxes at source u/s. 195 of the Act.

5. At the outset, Ld. Counsel for the assessee submitted that identical issue has been dec ded in favour of the assessee by the Coordinate Bench of the Tribunal in ITA No. 4135/MUM/2016 for the A.Y. 2010-11. It is also submitted that the Tribunal had taken similar view in ITA.Nos. 1074 & 5950/Mum/2017 dated 29.11.2019 for the A.Y. 2011-12 and 2012-13. Copy of the orders are placed on record. Referring to Para Nos. 7 to 9 of the Tribunal order for the A.Y. 2010-11, Ld. Counsel for the assessee submitted that the Tribunal allowed the claim of the assessee and deleted the disallowance made u/s.40(a)(i) of the Act in respect of reimbursement of demurrage expenses claimed by the assessee following the decision of the Hon'ble Bombay High Court in the case of CIT v. Dempo and Co. Pvt Ltd., [381 ITR 303].

6. Ld. DR vehemently supported the orders of the authorities below.

7. We have heard the rival submissions, perused the orders of the authorities below and the order of the Tribunal in assessee's own case for the A.Y. 2010-11. On a perusal of the order of the Tribunal we find that this issue has been decided in favour of the assessee by the Coordinate Bench following the decision of the Hon'ble Bombay High Court in the case of the CIT v. Dempo and Co. Pvt Ltd., (Supra). While allowing the claim of the assessee the Tribunal observed as under: -

“7. Under this issue the assessee has challenged the disallowance of reimbu sement of expenses u/s 40(a)(ia) of the Act. The assessee claimed the reimbursement of demurrage expenses of Rs.2,59,99,105/- The said amount was disallowed u/s 40(a)(ia) of the Act. The said amount was disallowed u/s 40(ia) of the Act on account of non deduction tax at source u/s 195 of the Act. The AO chara terizing such reimbursement of demurrage repayment costs as fee for technical services taxable u/s 9(1)(vii) of the Act. It is argued by the Ld. Representative of the assessee that the assessee company nowhere indulge in any service element and the said amount was purely reimbursement and the said issue has been covered in the assessee’s favour by the decision of the Bombay High Court in the case of CIT Vs. Dempo and Co. P. Ltd. (381 ITR 303) and also by the decision of the Hon’ble ITAT Mumbai Bench in the case of Kuloday Technopack (P) Ltd. Vs. ITO (86 Taxmann.com 74). Therefore, the claim of the Assessee is liable to be allowed. On the other hand, the Ld. Representative of the revenue has refuted the said contention. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.: -

“8.2 The submission made by the appellant has been examined. It is noticed that the entire submission made by the

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