EZEEGO ONE TRAVEL & TOURS LTD,MUMBAI vs. DCIT 2(1), MUMBAI

At the outset, the learned Counsel for the assessee Shri Rajan Vora, submitted that this is a recall matter and Tribunal in MA No. 719/Mum/2017 dated 31.05.2018 has recalled the matter regarding grounds No. 5 to 7 which is not been adjudicated. Hence, now only grounds No. 5 to 7 are to be adjudicated.

The only issue in these ground Nos. 5 to 6 of the assessee’s appeal is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of payments made to M/s Cox and Kings amounting to ₹ 8,24,13,778/-. For this assessee has raised the following ground Nos. 5 & 6 as under: -

Briefly stated facts are that the assessee made certain payment to M/s Cox and Kings India Ltd. (CKIL) and claimed that it is reimbursement of expenses amounting to ₹ 8,24,13,778/- under an agreement for utilization of common facilities and other expenses. The details of expenditure read as under: - According to AO, the assessee has made these payments to CKIL and not deducted any TDS under section 144C, 194J, 194I and 194H of the Act. Accordingly, the AO invoked the provisions of section 40a(ia) of the Act and disallowed this amount of ₹ 8,24,13,778/-. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed action of the Assessing Officer. Aggrieved, now assessee is in second appeal before Tribunal on this issue.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that assessee was in the initial phase of its business. Being in the initial phase of business the assessee was required to incur certain expenses in order to make its footprint in the tour and travel industry. Accordingly, the Assessee incurred expenses and overheads amounting to ₹ 8,24,13,778/- such as advertisement expenses, bandwidth charges, professional charges, consultancy charges, salaries, rent expenses, etc. Such expenses were directly related to the business of the Assessee and were required to be incurred by the assessee for running its business and making a place for itself in the tour and travel industry. CKL, being a sister concern of the assessee and being in the same line of business, extended assistance to the assessee on its initial phase by providing access to its infrastructure, allowing utilization of common facilities, providing staff on deputation, etc. This arrangement between CKL and the assessee was mutually agreed by way of MOU entered between them. That the obligation of being compliant with the withholding tax provisions is cast by the legislature of expenses on behalf of the Assessee, CKL had duly fulfilled the TDS compliances and deposited the appropriate taxes in the Government treasury. Thus, any further deduction made by the assessee on the same payments would tantamount to double deduction of taxes. In this regard, it was claimed that since the appropriate taxes have been duly deposited in the Government treasury, the internal arrangement between the parties becomes irrelevant. Further, it is claimed that the said expenses paid by CKL were not claimed by CKL as a deduction in the return of income.

The learned Counsel for the assessee relied on the Tribunal’s decision in assessee’s own case for AY 2012-13 in order dated 11.09.2017, wherein Tribunal on exactly similar facts deleted the disallowance by observing in Para 4 as under: -

As the issue is squarely covered in favour of assessee, respectfully following the tribunal’s decision in assessee’s own case and the facts of the case, we delete the addition and allow this issue of assessee’s appeal.

In the result, the appeal of the assessee is allowed.