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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI
Before: SMT. BEENA A PILLAI & SHRI PRASHANT MAHARISHI
(Appellant) (Respondent) Revenue by : Sh. Surender Pal, Sr. DR Assessee by : Sh. Binod Gupta, Accountant Date of Hearing : 06/11/2018 Date of Pronouncement: 14/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by revenue against order dated 21/02/18 passed by Ld. CIT (A)-1, Gurgaon, for assessment year 2014-15 on following grounds of appeal: 1. “The CIT(A) has erred on facts and in law in deleting the addition of Rs. 72,82,724/- made by the Assessing Officer on expenditure in foreign currency to related parties.
2. The Ld. CIT(A) has erred in not considering the fact that regardless of the mark up system followed by the assessee to compute its revenue, the assessee has failed to prove the genuineness in the expenses claimed by it for the period under consideration.
3. That the appellant craves for the permission to add, delete or amend grounds of appeal before or at the time of hearing of appeal.”
Kellog Brown & Roof Engineering & Construction 2. Brief facts of the case are as under: Assessee filed its return of income on 27/11/14 declaring total income of Rs.7,15,18,720/-. Return was processed under section 143 (1) of the Act and was picked up for scrutiny. Accordingly, notice under section 143(2) of the Act along with questionnaire and notice under section 142(1) was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld. AO and filed requisite details as called for.
2.1 Ld. AO observed that assessee is in business of providing engineering services with respect to offshore and underwater construction activities, for offshore oil and gas businesses India.
2.2 Ld. AO noted that assessee claimed expenditure on account of foreign currency payment amounting to Rs.72,82,724/-. Assessee was called upon to furnish details like invoice/debit note raised by parties on account of reimbursement along with relevant bills/vouchers, explanation of each expenses which was reimbursed, including type of services provided by related party, applicability of TDS under section 195 of the Act, if any, and to furnish copy of Form 15 CA/15 CB.
2.3 In response to query raised by Ld. AO assessee vide reply dated 10/11/16 submitted that assessee incurred expenditure in foreign currency pertaining to travel expenses, communication expenses and other expenses, which was evidenced from Note No. 26 of audited financial statements. Assessee submitted that these expenses are already included in relevant heads appearing in Note no. 20, being other expenses. It was also submitted that Kellog Brown & Roof Engineering & Construction applicable tax on same has already been withheld by assessee and has filed Form 27Q in respect of the same.
Ld. AO, however, after considering submissions was not satisfied and observed that assessee did not furnish any agreement with regard to the aforesaid payments made to the associated enterprises. He, accordingly, disallowed the sum of Rs.72,82,724/-.
Aggrieved by addition made by Ld. AO, assessee preferred appeal before Ld.CIT (A). Before Ld. CIT (A) assessee filed detailed submission based upon which said addition was deleted.
4.1 Aggrieved by order of Ld. CIT (A) Revenue is in appeal before us now.
Ld. Sr. DR placed reliance upon order of Ld. AO.
Ld. AR placing reliance upon order of Ld. CIT (A) submitted that service agreement between assessee and group company was furnished before Ld. CIT (A). He submitted that Ld. CIT (A) on detailed analysis of clauses in service agreement pertaining to “Payments”, has held that, assessee has been reimbursed for entire cost incurred under engineering service with its AE. He also submitted that certain expenses on which provisions of TDS were applicable has been applied and amount has been deposited.
We have perused submissions advanced by both sides in the light of records placed before us. Article 4 of Agreement which has been reproduced in order passed by Ld. CIT (A), deals
Kellog Brown & Roof Engineering & Construction with ‘Payments’. Ld.CIT(A) observed that assessee has been reimbursed the cost with 12% of actual cost, in the form of service fee. He further observed that in the event said disallowance is not deleted, it would lead to further reduction in Revenue. Further assessee has been applying cost plus method for purposes of determining Revenue. There is no allegation that has been pointed by Ld. AO regarding expenditure claimed by assessee, received in foreign currency. The only reason for disallowance was that assessee did not file agreement in support of its claim. Ld.AO on the sole reason treated expenditure to be non-genuine.
Before Ld. CIT (A) assessee filed the Agreement which has been analysed by Ld. CIT (A) threadbare. We, therefore, do not find any infirmity in observations of Ld. CIT (A) and the same is upheld.
Accordingly the grounds raised by revenue stands dismissed.
In the result order appeal filed by revenue stands dismissed.