GE Money Financial Services (P) Ltd. v. Asstt. CIT

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The Tax PublishersITA No. 5882/Del/2010, ITA No. 5816/Del/2011 & ITA No. 6282/Del/2012 2016 TaxPub(DT) 2232 (Del-Trib) : (2016) 179 TTJ 0588 I Income Tax Act, 1961, Section 32 Depreciation--Allowability--Leased vehicles Assessee NBFC was part of the GE group of companies was disallowed Depreciation on vehicles given on finance lease. Held: Relying on ICDS Ltd vs. CIT 350 ITR 527 the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the assets, which were leased out. Decision: In assessees favour II Income Tax Act, 1961, Section 145 Accounting method--Rejection--Interest on sticky loans Assessing Officer made addition towards interest on sticky loans, which was confirmed by the CIT(A). Held: Assessing Officer was directed to delete the addition towards interest of sticky loans and advances which was not recognized as income by the assessee in accordance with the mandatory prudential norms issued by the Reserve Bank of India. Decision: In assessees favour Case Law Analysis Followed CIT V Vishisth Chay Vyapar Co Limited 196 taxman 169 (Del-HC) 358 ITR 295 in CIT V Excel Industries III Inocome Tax Act, 1961, Section 37(1) Business expenditure under section 37(1)--Allowability--Loss on sale of repossessed assets Assessing Officer disallowed loss on sale of repossessed vehicles. Held: Loss on sale of repossessed vehicles in the hands of the lessor is an allowable expenditure thus held in CIT v Citicorps Maruti finance Limited In ITA No 1712& 1714/2010 dated 09-11-2010 affirmed by SC in CC 22330/2011 dated 13.01.2012. Decision: In assessees favour Case Law Analysis Cases Relied CIT v Citicorps Maruti finance Limited In ITA No 1712& 1714/2010 dated 09-11-2010 IV Income Tax Act, 1961, Section 92C Transfer pricing--Computation of ALP--Adjustment in ALP--TP add back on intra group services The assessee was found to have received management, IT group services from GECF Inc. USA and GE Asia (GECC). These were read as at NIL ALP and the entire management fee was disallowed in TP on the grounds that (i) Assessee could not establish whether such services were needed by the assessee (i.e. Need Test ) (ii) Whether such services are rendered to the assessee by AE (i.e. Rendition test) (iii) Whether the assessee has derived any economic or commercial benefit from these services (i.e. Benefit test) (iv) Basis of allocation (v) These services are duplicative in nature (vi) There is only incidental benefit from these services. DRP upheld the asst. order of AO. Held: The officer himself had held that incidental benefits have flowed from management fees. These being of stewardship nature was not demonstrated by the TPO. Neither had he taken the onus of computing the ALP but simply held it as NIL. Benefit test is no conclusive reason as it is not for the department to sit in the arm chair of the assessee to decide reasoning of transaction. They were not duplicate services given that those were not provided by the assessee. The basis of allocation and the rationale being on cost plus is as per OECD norms. Assessees documentation has proven that they have rendered these services. Given they being a large conglomerate the requirement and necessity is also clear does not require greater manifestation. Holding the above on this the case was remanded to the TPO for considering the above points and earlier rulings on this topic. The remand being not of routine nature but of requirement to calculate the ALP and the value for the services after giving a proper hearing. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 5882/Del/2010, ITA No. 5816/Del/2011 & ITA No. 6282/Del/2012
2016 TaxPub(DT) 2232 (Del-Trib) : (2016) 179 TTJ 0588

Income Tax Act, 1961, Section 32

Depreciation--Allowability--Leased vehicles

Assessee NBFC was part of the GE group of companies was disallowed Depreciation on vehicles given on finance lease. Held: Relying on ICDS Ltd vs. CIT 350 ITR 527 the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the assets, which were leased out.

Decision: In assessees favour

Income Tax Act, 1961, Section 145

Accounting method--Rejection--Interest on sticky loans

Assessing Officer made addition towards interest on sticky loans, which was confirmed by the CIT(A). Held: Assessing Officer was directed to delete the addition towards interest of sticky loans and advances which was not recognized as income by the assessee in accordance with the mandatory prudential norms issued by the Reserve Bank of India.

Decision: In assessees favour

Case Law Analysis

Followed

CIT V Vishisth Chay Vyapar Co Limited 196 taxman 169 (Del-HC)

358 ITR 295 in CIT V Excel Industries

III

Inocome Tax Act, 1961, Section 37(1)

Business expenditure under section 37(1)--Allowability--Loss on sale of repossessed assets

Assessing Officer disallowed loss on sale of repossessed vehicles. Held: Loss on sale of repossessed vehicles in the hands of the lessor is an allowable expenditure thus held in CIT v Citicorps Maruti finance Limited In ITA No 1712& 1714/2010 dated 09-11-2010 affirmed by SC in CC 22330/2011 dated 13.01.2012.

Decision: In assessees favour

Case Law Analysis

Cases Relied

CIT v Citicorps Maruti finance Limited In ITA No 1712& 1714/2010 dated 09-11-2010

Income Tax Act, 1961, Section 92C

Transfer pricing--Computation of ALP--Adjustment in ALP--TP add back on intra group services

The assessee was found to have received management, IT group services from GECF Inc. USA and GE Asia (GECC). These were read as at NIL ALP and the entire management fee was disallowed in TP on the grounds that (i) Assessee could not establish whether such services were needed by the assessee (i.e. Need Test ) (ii) Whether such services are rendered to the assessee by AE (i.e. Rendition test) (iii) Whether the assessee has derived any economic or commercial benefit from these services (i.e. Benefit test) (iv) Basis of allocation (v) These services are duplicative in nature (vi) There is only incidental benefit from these services. DRP upheld the asst. order of AO. Held: The officer himself had held that incidental benefits have flowed from management fees. These being of stewardship nature was not demonstrated by the TPO. Neither had he taken the onus of computing the ALP but simply held it as NIL. Benefit test is no conclusive reason as it is not for the department to sit in the arm chair of the assessee to decide reasoning of transaction. They were not duplicate services given that those were not provided by the assessee. The basis of allocation and the rationale being on cost plus is as per OECD norms. Assessees documentation has proven that they have rendered these services. Given they being a large conglomerate the requirement and necessity is also clear does not require greater manifestation. Holding the above on this the case was remanded to the TPO for considering the above points and earlier rulings on this topic. The remand being not of routine nature but of requirement to calculate the ALP and the value for the services after giving a proper hearing.