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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
2. Common issue is raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order.
We shall first adjudicate 2009-2010. -517/Coch/2019 2 Sri.P.S.Sreenivasan. 3. The ground raised reads as follow:-
“1. The learned Commissioner of Income (Appeals) grossly erred in sustaining the addition to the extent of Rs.l,50,000/-, while the gross value of benefit availed by the appellant as free foreign trip on canvassing 15 persons for the tour was only Rs.1,30,000/-;
The learned Commissioner (Appeals) failed to appreciate the fact that for canvassing large number tourists (minimum 15), there were incidental expenses on travelling, staff, office, telephone charges etc. In such line of business, the normal net profit/income cannot be more than 20% of the gross receipts/benefits accrued, (in the instant case it was in kind in the form of free trip to UK/Switzerland);
The learned CIT(A) observed in his order that for estimating the net income at Rs.2 lakhs, neither has the Assessing Officer brought any material on record, nor did the appellant adduce supporting evidence. The appellant had produced all bank account details and also the details of advertisements before the Assessing Officer. Therefore, the Commissioner (Appeals) erred in his findings.
4. The learned CIT(A) ought to have satisfied that no payment other than through Bank channel could have been possible in such line of business and in the absence of any incriminating material to show otherwise, the particulars of income disclosed should have been accepted. Hence, the learned Commissioner was not justified in fixing the addition at Rs.l,50,000/-.
The appellant craves leave to add or to amend the aforesaid grounds before disposal of the appeal.”
Brief facts of the case are as follows:- -517/Coch/2019 3 Sri.P.S.Sreenivasan. The assessee, an individual, was associated with a tour operator as local coordinator and booking agent for conducted tours abroad. The assessee was supposed to make arrangements for canvassing tourists. The benefit derived by the assessee was a free tour with the tourists on enrolling certain number of passengers. The Assessing Officer held that free tour enjoyed by the assessee was a benefit or incentive in kind and same needs to be brought tax. Accordingly, for assessment year 2009-2010, a sum of Rs.2,00,000 was brought to tax. The relevant observation of the Assessing Officer reads as follow:-
“The system is that according to the Tour Operator with which he is associated for tour outside India and being a booking agent and local co-ordinator, he make necessary arrangement for booking of the tour, remitting money to the Tour Operator etc. The benefit he get is a tour along with the booked persons to the destiny free of cost. It is undisputed fact that the assessee is co-ordinating the tour as per tour agencies request and his benefit is free of cost tour to the destiny. The free of cost tour he enjoy is with the hard work and effort made for co- ordination of the tour to different nations of the world. Though he is not remunerated for this effort in cash he get the benefit other way and enjoy it. Therefore, the cost of the tour, thought he is getting the tour free of cost, has to be treated as remuneration or payment or incentive for co- ordination of the tour. The assessee has filed paper cutting of the Tour Agency, wherein in Palakkad the assessee, Shri Sreenivasan is the co-ordinating Agent. Considering all the aspects, I am of the considered view that the benefit he get and enjoy as free of cost tour is an incentive or remuneration received by the assessee, it has to be brought to tax.
-517/Coch/2019 4 Sri.P.S.Sreenivasan. Considering the tours conducted as international tours and the cost involved is more than one lakh per tour and slightly vary based on the destination. After considering all the aspects of the case, I fairly estimate this benefit enjoyed by him, to be net Rs.2,00,000/-for this assessment year and bring the same liable to Income Tax as his business income. It is stated that the assessee has already drawn Rs.70,359/- towards tour expenses but it is treated as the expenses for his family members accompanied him in the tour. (Addition Rs.2 lakhs)”
5. Aggrieved by the addition of Rs.2 lakh, the assessee preferred appeal to the first appellate authority. The assessee submitted before the first appellate authority that on account of these foreign travels made by him, no addition can be made, since no income had accrued to him. Further, it was submitted that the cost of tour per person was only Rs.1,30,000 incurred during the relevant assessment year and pleaded that only a fraction of Rs.1,30,000 could be could be brought to tax, because assessee had to incur incidental expenses on travelling, telephone, office maintenance with regard to canvassing customers on behalf of the tour operator. The CIT(A) restricted the addition to Rs.1,50,000 instead of Rs.2 lakh made by the Assessing Officer. The relevant finding of the CIT(A) reads as follow:-
“5.4 I have considered the submissions in this case. The Assessing Officer has rightly held that any free tour enjoy by the appellant is the benefit or incentive in kind and has to be taxed. It is not a case of notional income but a case of monetary benefit or commission enjoyed by the appellant in 'Kind'. Therefore the decision cited by the appellant is of no -517/Coch/2019 5 Sri.P.S.Sreenivasan. relevance. However, as regards the amount taxed, the Assessing Officer has simply estimated the, figure to Rs.2 lakhs by observing that the cost involved in international tours is more than one lakh per tour which slightly vary depending on the destination. As per the appellant however he under took trip where the average cost was RS.1,30,000/- per passenger, though no evidence has been produced. Since neither the Assessing Officer has brought any material on record nor the appellant ha substantiated his claim by any supporting evidence, I deem it fit to restrict the addition to Rs.1,50,000/-. The grounds are, therefore, partly allowed.”
The learned AR submitted that the maximum income that could be assessed for assessment year 2009-2010 could be only fraction of Rs.1,30,000 being the benefit of free tour undertaken by the assessee, because the assessee had to incur incidental expenses for canvassing foreign travelers for the tour operator.
The learned Departmental Representative, on the other hand, strongly supported the orders of the Income-tax authorities.
We have heard the rival submissions and perused the material on record. The Assessing Officer had rightly held that free tour enjoyed by the assessee is a benefit / incentive in kind and the same has to be brought to tax. Before us, the assessee did not have a case that the value of free tour enjoyed by the assessee cannot be brought to tax. His only limited plea was that he had incurred incidental expenses for canvassing tourists on behalf of the tour operator and this -517/Coch/2019 6 Sri.P.S.Sreenivasan. incidental expense has to be allowed as a deduction in arriving at the value of free tour enjoyed by the assessee. This submission of the assessee has been accepted by the CIT(A) and he has reduced the addition from Rs.2 lakh made by the Assessing Officer to Rs.1.5 lakh. The assessee has made certain withdrawals from his bank account during the relevant assessment year and the same amounts to almost Rs.70,000. In the interest of justice and equity, we deem it appropriate to reduce the addition to Rs.1,30,000 instead of Rs.1,50,000 sustained by the CIT(A). It is ordered accordingly.
In the result, the appeal in is partly allowed. : Asst. Year 2010-2011
In the relevant assessment year the assessee had undertaken free tour to USA and South Africa. Consequent to the free tour, the Assessing Officer estimated the benefit in kind to the assessee amounting to Rs.2,95,000. On further appeal, the CIT(A) reduced it to Rs.2,50,000.
We have heard the rival submissions and perused the material on record. Like the earlier assessment year, the assessee had incurred incidental expenses in connection with the canvassing of tourists on behalf of the tour operator. This incidental expenses necessarily need to be reduced from the benefit accrued to the assessee on account of free travel made by him. We are of the view that a sum of Rs.2 lakh is to be -517/Coch/2019 7 Sri.P.S.Sreenivasan. sustained, in the facts and circumstances of the case, instead of Rs.2,50,000 sustained by the CIT(A). It is ordered accordingly.
In the result, the appeal in is partly allowed.
Order pronounced on this 14th day of November, 2019.