Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI N.K. SAINI & SHRI K.N. CHARRY
PER SHRI K.N. CHARY, JUDICIAL MEMBER
This is an appeal challenging the order dated 14.03.2014 in appeal no. 91/13-14 passed by the Ld. Commissioner of Income Tax (Appeals)-XXIII, New Delhi (hereinafter for short called as “Ld.
CIT (A)”).
Brief facts are that during the AY 2010-11 the assessee organized and conducted the men’s Hockey World Cup, 2010 and for that purpose created an AOP. On 13.10.2010 the assessee filed the return of income declaring an income of Rs. 15,07,970/-.
The total receipts were shown at Rs. 8,38,46,493/- as against the expenditure of Rs. 10,46,70,522/- resulting in a net loss of Rs. 2,08,24,030/-. However, after adjusting the grant of Rs. 2,23,32,000/- received from OCCWG, 2010 and FIH, the assessee had shown the income of Rs. 15,07,970/-. During the scrutiny, AO made an addition on several counts and reached the taxable income of the assessee at Rs. 5,30,04,790/-.
In appeal the Ld. CIT (A) deleted the addition of Rs. 5,50,000/- on account of the income received from M/s Sail, a sum of Rs. 8,09,545/- and Rs. 4,17,63,525/- u/s 40(a)(ia), Rs. 66,50,763/- made on account of bogus creditors, Rs. 63,635/- addition made on account of prior period expenses and Rs. 15,04,848/- being 10% of the total expenses. Challenging the deletion of the additions under these counts, the Revenue is in appeal before us on the following grounds:
1. “On the facts and on the circumstances of the case the Ld.CIT (A) has erred in deleting the addition of Rs. 5,50,000/- made by the AO being the income received from M/s Sail, which was not declared to the department by the assessee.
2. On the facts and in the circumstances of the case whether the Ld. CIT (A) has erred in deleting the addition of Rs. 8,09,545/- and Rs. 4,17,63,525/- made by the AO u/s 40(a)(ia) for not deducting TDS on these payments.
3. On the facts and in the circumstances of the case whether the Ld. CIT (A) has erred in deleting the addition of Rs. 66,50,763/- made by the AO on account of bogus creditors. 4. On the facts and in the circumstances of the case whether the Ld.CIT (A) has erred in deleting the addition of Rs. 63,635/- made by the AO on account of prior period expenses debited to P&L account. 5. On the facts and in the circumstances of the case whether the Ld. CIT (A) has erred in deleting the ad-hoc disallowance of Rs. 15,04,848/- made by the AO being 10% of the total expenses claimed of Rs. 1,50,48,488/- in absence of production of bills & vouchers. 6. On the facts and in the circumstances of the case impugned order passed by the Ld. CIT (A) is perverse both in facts and law. 7. On the facts and in the circumstances of the case whether the Ld. CIT (A) has erred in admitting additional evidence in violation of Rule 46A of the Income Tax Rules, 1961. 8. The appellant craves leave to add, alter or amend any of the ground of appeal
before or during the course of hearing of the appeal.”
4. Ground nos. 6 & 8 are general in nature and do not require any special adjudication. In so far as the addition of Rs. 5,50,000/- is concerned, vide paragraph no. 5 of the assessment order AO observed that the assessee had claimed credit of TDS of Rs. 11,000/- in the books of accounts against the receipt of Rs. 5,50,000/- from SAIL but such receipt was not disclosed in the books of accounts. It is further recorded by the AO that on the show cause notice issued to the assessee, the assessee denied to have received such sum of Rs. 5,50,000/- from SAIL. AO rejected the said contention of the assessee but made an addition of Rs. 5,50,000/-. On this aspect, Ld. CIT (A) found that though initially the assessee claimed the credit of TDS as per 26AS statement, later on the assessee brought to the notice of the AO that such claim was by mistake and since they did not provide any service to SAIL nor did they receive Rs. 5,50,000/- they reconciled their books of accounts. Ld. CIT (A) basing on CIT vs. Dinesh Kumar Goel (2010) 331 ITR 10 (HC) held that the Revenue is recognized only when the services are actually rendered and since no service was rendered and no payment was received the addition of Rs. 5,50,000/- cannot be sustained.
5. On this aspect, it is the submission of the Ld. AR that Ld. CIT (A) is right in deleting the addition, whereas Ld. DR submits that it is a verifiable fact as to whether there is any service rendered and whether any amount was received. We, therefore, hold that this is a verifiable fact at the end of the AO and set aside this ground to the file of the AO with a direction to verify whether any service was rendered and any amount was received.
6. Now turning to the deletion of 8,09,545/- & 4,17,63,525/-, AO’s observation was that the assessee had accounted for commission of Rs. 1,17,97,206/-, whereas the assessee has paid commission of sponsorship Rs. 1,26,06,751/- to M/s Commune Market & Events Pvt. Ltd. sponsorship in its books of account, and deducted TDS only on Rs. 1,17,97,206/- as against 1,26,06,751/-, as such, AO added Rs. 8,09,545/- to the income of the assessee.
So also AO further held that during the year a sum of Rs. 4,17,63,525/- was credited in the account of FIH by the assessee but no TDS was deducted as such this amount of Rs. 4,17,63,525/- was also added.
On this aspect, it is the observation of the Ld. CIT (A) that in respect of 8,09,545/-, the said amount was paid to M/s Commune Market & Events Pvt. Ltd. directly by M/s FIH on behalf of the assessee and later on at the request of M/s FIH the assessee reimbursed the same to FIH, as such, since the assessee did not make any payment to M/s Commune Market & Events Pvt. Ltd. and transaction took place outside India and the amount was paid by M/s FIH on behalf of the assessee to the said company was merely reimbursed by the assessee, it does not come within the purview of Section 40(a)(ia) of the Act. In the same way, the Ld. CIT (A) held that the FIH made several transactions on behalf of the assessee and raised credit note, which the assessee booked in their books of accounts and debit the various heads of expenditure, these expenses were made out of India. Ld. CIT (A) held that since the AO has accepted the fact that the expenses were incurred by M/s FIH on behalf of the assessee and the assessee reimbursed these expenses to M/s FIH during the course of year, the question of these amounts of Rs. 8,09,545/- and 4,17,63,525/- partaking the nature of income in the hands of M/s FIH does not arise and consequently the disallowance made by the AO is wrong. For this principle Ld. CIT (A) relied upon the decisions reported in GE India Technology Centre Pvt. Ltd. vs. CIT (2010) 327 ITR 446 (SC), ITO vs. Dr. Willmar Schwabe India Ltd. (2005) 95 TTJ 53 (Del) and also M/s C U Inspections India Pvt. Ltd. vs. DCIT (2013) 142 ITD 761 (Mum)(Trib). There is no denial of fact from the Revenue as to the nature of the payments by the assessee to M/s Commune Market & Events Pvt. Ltd. and M/s FIH. M/s FIH made the payment of Rs. 8,09,545/- directly to M/s Commune Market & Events Pvt. Ltd. outside India and for that matter M/s FIH incurred so much of expenditure which the assessee reimbursed to them. In the circumstances, we find it difficult to agree with the Ld. DR that these payments partake the nature of income in the hands of M/s FIH and consequently, we hold that the assessee was not obliged to deduct TDS on the same.
We, therefore, uphold the findings of the Ld. CIT (A) to delete the addition of these two amounts u/s 40(a)(ia) of the Act. Hence, the ground no. 2 is dismissed.
Now turning to ground no. 3, the AO made these additions on the ground that the assessee had not furnished the confirmations in respect of M/s Clea Public Relations India Pvt. Ltd. totaling Rs. 66,50,763/-. Ld.AR argued that the total payments made during the year are accepted by the AO and only such outstanding balance at the end of the financial year was suspected and added back. Ld. CIT (A) also noticed the same and observed that the addition was purely because three parties did not respond to notice u/s 133(6)of the Act and the payments were partly in the previous year and partly in the succeeding year. Having considered the copy of the bank accounts and the cheque numbers with amounts and dates placed on record by the assessee, the Ld. CIT (A) deleted this addition. When there is no denial of the factual position, the findings of the Ld. CIT (A) do not seem to be pervasive requiring any interference. The observations of the Ld. CIT (A) are based on solid facts. Hence, we do not propose to disturb the same. We uphold the findings of the Ld. CIT (A) on this aspect and dismiss ground no. 3.
Now adverting to ground no. 4 the so called prior period expenses, Ld. CIT (A) found merit in the argument of the assessee that an amount of Rs. 63,635/- was paid on account of technical table expenses, and since the AOP was formed only during the assessment year 2010-11, there were no prior period expenses since all the expenses are subsequent to 01.04.2009. We confirm this finding of Ld. CIT (A) and dismissed the ground no. 4.
Now coming to the adhoc disallowance of Rs. 1,50,48,488/- made by the AO towards 10% of the total expenses of Rs. 1,50,48,488/- on the ground that the bills and vouchers were not produced by the assessee, Ld. CIT (A) recorded that the assessee had placed on record the copies of bills of all the four parties along with copies of their ledger accounts. Ld. DR seriously disputed this stating that the Assessing Officer should have been given an opportunity on this aspect to verify the veracity and genuineness of the material produced by the assessee. We are in agreement with the submission of the Ld. DR and find that the material produced by the assessee has to be verified by the AO. We, therefore, set aside this ground also to the file of the AO. Ground no. 5 and 7 are answered accordingly.
In the result, the appeal of the assessee is allowed in part for statistical purpose.
Order pronounced in the open court on 19.09.2017