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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI SUCHITRA KAMBLE
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the Revenue is preferred against the order of the CIT(A)-5, Delhi, dated 10/08/2015, pertaining to Assessment Year 2011-12.
The first grievance of the Revenue is that the CIT(A) erred in deleting the additions of Rs.1,27,58,058/- made under the head consultancy charges. 3. The second grievance of the Revenue relates to the deletion of the addition of Rs.50,22,139/- made by the AO on account of prior period legal and professional charges.
The assessee company is in the business of mining, raising, refining, dressing, processing, cutting, crushing, trading, importing and exporting and otherwise deal in all types of coal, marble, granite, slate sand stone and other stones chips. During the course of assessment proceedings, the AO asked the assessee to furnish the details of consultancy expenses. The AO noticed that the assessee has claimed consultancy expenses of Rs.1,27,58,085/- to M/s Moser Baer Projects Pvt. Ltd. (in short MBPPL) The detail of the expenditure incurred by MBPPL is summarized as under:-
Date Particulars Net Paid S. Consultancy No. Charges TDS u/s 194-J 4-08-08 Crisil risk & Infrastructure Solutions 4,21,350 43,399 3,77,951 1 Ltd. 2. 4-08-08 -do- 4,21,350 43,399 3,77,951 3. 3-09-08 Axykno Capital services Ltd. 28,09,000 3,18,260 24,90,740 4. 18-09-08 Axykno Capital services Ltd. 6,74,160 76,382 5,97,778 5. 15-10-08 Crisil risk & Infrastructure Solutions 14,04,500 1,59,130 12,45,370 Ltd. 14-11-08 Axykno Capital services Ltd. 28,09,000 3,18,260 24,90,740 6. 7. 21-11-08 Crisil risk & Infrastructure Solutions 16,85,400 1,90,956 14,94,44 Ltd. 21-11-08 16,85,400 1,90,956 14,94,44 Crisil risk & Infrastructure Solutions 8 Ltd. 9. 11-12-08 Desai & Diwanji 8,47,927 96,070 7,51,857 1,27,58,087 14,36,812 1,13,21,275
The AO was of the opinion that all the expenses incurred on this count relates to prior period and since the assessee is following mercantile system of accounting, the AO disallowed the entire expenditure and made addition of Rs.1.27 crores.
Proceeding further, the AO noticed that the assessee has paid legal professional charges to M/s Luthra & Luthra amounting to Rs.50,22,139/-. The AO was of the opinion that the entire expenditure pertains to earlier year and since the assessee is following mercantile system of accounting disallowed the entire amount and made addition of Rs.50,22,139/-.
The assessee carried the matter before the CIT(A) and explained that the consultancy expenses of Rs.1.27 crores paid to MBPPL related to the outsource work which was carried out by MBPPL through various agencies. It was brought to the notice of the CIT(A) that the details of expenditure considered by the AO relate to the details submitted by various persons who did work for MBPPL. It was further explained that MBPPL by way of a debit note claimed the amount from the assessee and the amount was adjusted against share application money.
After considering the facts and submissions, the CIT(A) was convinced that the debit note was raised on 31/03/2011 which pertains to the year under consideration and since the liability of the assessee was crystallized during the year under consideration, the CIT(A) deleted the disallowance of Rs.1.27 crores.
In so far as, the legal and consultancy fees of Rs.50.22 lakhs is concerned, the CIT(A) found that the bills were under dispute and the liability crystallized during the year under consideration and the assessee has deducted tax at source before discharging its liability and hence the expenditure pertains to year under consideration and deleted the same.
Before us, the Ld. DR strongly relied upon the findings of the Assessing Officer and the Ld. Counsel reiterated what has been stated before the First Appellate Authority.
We have given a thoughtful consideration to the order of the authorities below.
There is no dispute that the assessee company is a subsidiary company of MBPPL. It is also not in dispute that certain works were outsourced by the assessee to its holding company to MBPPL. The holding company MBPPL carried out the work through three different agencies as per the details furnished elsewhere. These three agencies submitted their bills to MBPPL which the AO misconstrued as submitted to the assessee and came to the conclusion that they belong to the prior period. The fact of the matter is that the bills were submitted by the agencies to MBPPL and the MBPPL raised debit note on 31/03/2011 to the assessee. This means that so far as the assessee is concerned the liability crystallized during the year under consideration and therefore, we do not find any error or infirmity in the findings of the CIT(A). Ground no.1 is accordingly dismissed.
Coming to the legal and consultancy charges of Rs.50.22 lakhs, we find that the bills raised by Luthra & Luthra were under dispute and therefore the assessee did not make any payment. However, when the dispute was settled, the assessee made the payment after deducting tax at source. This clearly shows that the liability crystallized during the year under consideration and we do not find any error or infirmity in the findings of the CIT(A). Ground no. 2 is accordingly dismissed.
The appeal filed by the Revenue is dismissed. The order is pronounced in the open court on 16/09/2019