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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
अपीलाथ� �वारा/ Appellant by : Shri Himanshu Gandhi ��तवाद� �वारा/Respondent by : Shri Sanjay J. Sethi सुनवाई क� �त�थ/ Date of hearing : 04/01/2021 घोषणा क� �त�थ/ Date of pronouncement : 01 /04/2021 आदेश/ ORDER
This Appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) -17, Mumbai [in short ‘the CIT(A)] dated 20/05/2019 for the assessment year 2015-16.
Shri Himanshu Gandhi appearing on behalf of the assessee submitted that the assessee is engaged in the business of health club and fitness services. The assessee filed its return of income for the impugned assessment year on 29/09/2015 declaring total income of Rs.3,56,370/-. In scrutiny assessment proceedings, the Assessing Officer disallowed payment of professional fees
आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16 Rs.6,35,656/- paid to the Directors and donations of Rs.6,000/- paid during Ganesh Utsav. The ld. Authorized Representative of the assessee submitted that the assessee entered into a Memorandum of Understanding with Khar Gymkhana on 14/05/2014 for providing professional physical fitness programme of Crossfit Inc., a global brand for fitness services (page 9 to 14 of paper book). The ld.Authorized Representative of the assessee submitted that Dheepesh Bhatt, Director of assessee company is a certified Crossfit Level -1 trainer (page 17 of paper book) and Ms. Payal Goel is MBA from University for Wales (page 21 of paper book) and is managing affairs of the business and Gym. The assessee provided equipment and specialised professional training at Khar Gymkhana. The appellant vide Board Meeting held on 10/03/2014 resolved to pay Rs.20,000/- per month to each of the directors w.e.f. 01/05/2014 for the professional services. Further, the assessee paid Rs.97,828/- to both the directors towards personal training programme. The Assessing Officer and the CIT(A) have wrongly observed that no documents were placed on record to substantiate that there was an agreement between the assessee and Khar Gymkhana for providing and managing Gym at the said club. The ld. Authorized Representative of the assessee submitted that the remuneration paid to both the directors have been offered to tax and has been reflected in three respective return of income for assessment years 2015-16. The ld. Authorized Representative of the assessee referred to the return of income filed by the Dheepesh Bhatt at pages 18-20 and the return of income of Payal Goel at pages 22-23 of the Paper Book. The ld. Authorized Representative of the assessee asserted that the same income cannot be taxed twice, i.e. once in the hands of the directors and again in the hands of the आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16 assessee. To support his contentions the ld. AR placed reliance on following decisions: 1. Laxmipat Singhania vs. CIT , 71 ITR 291(SC) 2. ITO vs. Bachulal Kapur , 60 ITR 74 (SC)
2.1. The ld.Authorized Representative of the assessee further submitted that in the immediate succeeding assessment year i.e. assessment year 2016-17, the professional fees paid to the directors for professional services rendered at Khar Gymkhana was allowed by the Assessing Officer in assessment order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) at page 27 to 29 of the paper book.
2.2. In respect of disallowance of donation Rs.6000/-, the ld.AR submitted that the donation was made during Ganesh Utsav on account of commercial expediency. The name of assessee was displayed in the list of donors in Ganesh Pandal. The display of asssessee’s name was a sort of advertisement.
Per contra, Shri Sanjay J. Sethi representing the Department vehemently defended the impugned order and prayed for dismissing the appeal by assessee. The ld. Departmental Representative submitted that the Accounts Manager of Khar Gymkhana expressly stated that Shri Kirnay Ashwin Bhatt is head trainer at Khar Gymkhan and professional fees is paid to him for the services offered by him. The assessee failed to provide any documentary evidence before the Assessing Officer or the CIT(A) regarding agreement with Khar Gymkhana. The ld. Departmental Representative further submitted that the assessee failed to provide any documentary evidence with respect to donation of Rs.6000/-. In the absence of any documentary evidence, the आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16 Assessing Officer made disallowance of professional fees paid to the directors and the donation.
Both sides heard, orders of authorities below examined. The assessee in appeal has raised two grounds. The first ground is in respect of disallowance of Rs.6,35,656/- allegedly paid as professional fees to the directors of the assessee company. The assessee has paid professional fee to its directors as under:-
S.No. Name of the director Share of Revenue share Total Revenue for with the Khar Gymkhana Trainers 1. Deepesh Bhatt 2,20,000 97,828 3,17,828 2. Payal Shahidadpury (Goel) 2,20,000 97,828 3,17,828 Total 4,40,000 1,95,656 6,35,656
A perusal of the impugned order shows that the payment of professional fee has been disallowed primarily for the reason that the assessee has not supported his contentions with documentary evidence. The assessee has field Memorandum of Understanding (MOU) with Khar Gymkhana at page 9 to 14 of the Paper Book. An examination of MOU reveals that the assessee was to extend professional physical fitness programme of ‘CrossFit Inc.’ for the benefit of Khar Gymkhana Members. The assessee was responsible for establishing and operating fitness programme, provide qualified experienced professionals for fitness services, liable for payment of wages and compensation to staff/trainers deployed at Khar Gymkhana fitness centre, source necessary materials, products & equipment for training programme, etc. For the services rendered, the assessee was entitled to receive 70% share in charges (excluding service tax) collected by Khar Gymkhana from its members and 80% of charges
आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16 collected from non-members. The said MOU clearly indicates that the assessee was to extend professional fitness services to Khar Gymkhana. The assessee has also furnished a copy of Board Resolution dated 10/03/2014 (at page 15 of the Paper Book ) allowing payment of Rs.20,000/- per month to each of the directors of the assessee company i.e. Dheepesh Ashvin Bhatt and Payal Gaurav Goel for the services rendered at Khar Gymkhana. The ld. AR of the assessee has certified that the documents filed before the Tribunal in paper book were available before the Assessing Officer/CIT(A).
The documents on record clearly indicate that the assessee was to provide fitness services at Khar Gymkhana, the payments were made to the directors in accordance with the Board Resolution for professional services rendered at Khar Gymkhana. The assessee has filed sufficient evidence in the form of educational/professional qualification certificates of the directors to show that the directors were professionally qualified to provide the services. The ld. Authorized Representative of the assessee has pointed that in the subsequent assessment year the professional fee paid to the directors has been allowed by the Assessing Officer in scrutiny assessment proceedings on same set of documents. It is not the case of Revenue that the professional fees paid to the directors is in excess of the market rate. I find merit in the contentions raised by the assessee. The disallowance of payment of professional fee to the directors is unjustified, hence, the same is directed to be deleted. It would be relevant to mention here that both the directors in their respective return of income has offered professional fee received from the assessee to tax. Consequently, ground No.1 of the appeal is allowed.
आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16
In ground No.2 of the appeal, the assessee has assailed disallowance of donation Rs.6,000/-. The Assessing Officer made disallowance as no documentary evidence was filed by the assessee in the form of receipt, etc. to substantiate the donation made. Even before the Tribunal no evidence is produced by the assessee. In the absence of any evidence ground No.2 of the appeal is dismissed.
In the result, appeal of the assessee is partly allowed in the terms aforesaid.
Order pronounced in the open Court on Thursday , the 01st day of April, 2021.
Sd./-
(VIKAS AWASTHY) �या�यक सद�य/JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated: 01/04/2021 Vm, Sr. PS (O/S)
आअसं. 4456/मुं/2019 (�न.व.2015-16.) (A.Y.2015-16