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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI DUVVURU R.L. REDDY & SHRI S. JAYARAMAN
आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, in dated 28.12.2017 for the AY 2013-14.
On scrutiny of M/s. Emerge Learning Services Pvt. Ltd, the assessee’s case, for the assessment year 2013-14, the AO found in the P&L account that the assessee claimed Rs.1,04,72,771/- as affiliation expenses to three persons viz., Bharathiyar University, International Centre for Culinary Arts and American Hospitality Academy, on which the assessee had not deducted TDS. Therefore, invoking section 40(a)(ia), the AO disallowed the expenditure in the assessment order. Against that order, the assessee filed an appeal before the CIT(A). Before the Ld. CIT(A), the assessee conceded that Rs.5,10,799/- is paid as license fee to American Hospitality Academy for which TDS was not made. Therefore, the disallowance made by the AO to this extent may be sustained.
However, in respect of other two sums, the assessee explained the nature of transactions and pleaded, inter alia, that the impugned sum was not at all due to the assessee, but the course fee directly remitted by the students as Demand Drafts (DDs) to the Bharathiyar University (University) with whom the assessee is a Technical Collaborator (TC). The assessee was not connected with the collection and actual expenses of the impugned sum. In this regard, the assessee furnished certain materials before the Ld. CIT(A) also. The Ld. CIT(A) dismissed the appeal primarily for the reason that the assessee did not produce any confirmation from the University in support of its contentions. Aggrieved against that order, the assessee filed this appeal before this tribunal.
The case was heard through video conferencing. The Ld. AR explained that the assessee entered into an agreement with Bharathiyar University as a Technical Collaborator (TC) for the University’s courses (BSc & Diploma in Hospitality) through one of its division and to manage the Sport Admission cum Learning Centers (SALC’s) . As a TC, the assessee is to manage admission of the SALC’s, develop content for subject matter in hospitality/hotel catering management etc. The SALCs will admit students and forward complete documents to the TC, the assessee, and it will verify them and then forward them to the University for the admissions. Thus, the assessee will act as a bridge between the SALCs and Bharathiyar University (University). The University shall circulate the structure of the fees to be collected from the students, indicating the fees payable to the University, the shares of the SALCs and the TC. The SALCs shall collect the money from the students, retain its share, take DDs in favour of the University for its due and a separate DD towards the Technical Collaborator’s share i.e., the assessee’s share.
Since, the assessee being a TC and managing all the process, although, it has not received the total cash, however, for control purposes, it has recognized the revenue’s of the University fee and SALC’s share in its accounts and therefore accounted the amount due to them as expenses.
The revenue portions of the University and the SALCs never reached it.
The assessee also does not have any authority to collect University fees as well as the SALCs fees. This being the fact, the question of tax deduction on the money not due to the assessee does not arise at all. The Ld. CIT(A) without appreciating the facts and the circumstances of the case, dismissed the appeal holding, primarily for the reason that the assessee has not submitted any confirmation from the University to the effect that the expenditure claimed by the assessee was directly received by the University from the students to the extent debited in the P&L account and the assessee is not able to demonstrate as to whether the payments were offered by the payee as their income or receipts in the books and offered for tax if liable or claimed exemption on the said receipts. In this regard, the Ld. AR invited our attention to the copy of assessee’s letter dated 28.01.2020 and its enclosures, wherein, a copy of the certificate issued by the Director for School of Distance Education, Bharathiyar University, in Ref No.BU/SDE/Emerge Learning/DST/2019-20 dated 24.01.2020 as attached and relied on it. Per contra, the Ld. DR supported the orders of the lower authorities.
We have heard the rival submissions and gone through the relevant material. The copy of certificate relied on by the Ld. AR specifies, inter alia, that the assessee has handed over the DDs remitted by the students of the University. The University is exempted from income tax, no TDS has to be deducted on the impugned sum and all the fees remitted through the assessee have been duly accounted as a receipt in the books of account of the University. This certificate is relevant material on the core issue of this appeal. It is clear from the order of the Ld. CIT(A) that the assessee made an attempt to explain the transactions and furnished certain material before him. In our considered view, the nature of the impugned transactions has not been properly examined by the lower authorities. First of all, it is essential to determine the nature of transaction, i.e. whether the impugned sum was due to the assessee at all and then whether it falls within the scope of the TDS or not. In the facts and circumstances, we deem it fit to remit the issues back to the AO for a fresh examination. The assessee shall place all material in support of its contention before the AO and comply with the requirements of the AO in accordance with law. The AO on due examination as well as on appropriate enquiry, as deemed fit, and after affording specific opportunity on the issue, if any, on which the Assessing Officer needs clarification etc., shall pass the order in accordance with law.
In the result, the assessee’s appeal is treated as allowed for statistical purposes.