DCIT, CIR-12(1), KOLKATA, KOLKATA vs. M/S. ORGANON (INDIA) PVT. LIMITED, MUMBAI

O R D E R

PER S.S.Godara, Judicial Member:

DCIT Cir-12(1) Kol. Vs. M/s Oganon (India) Pvt. Ltd. Page 2 “4.2 I have considered the submission of the AR of the appellant in the backdrop of the assessment order. I have also considered the materials on record as well as the citations submitted by the AR pertaining to the issue at hand. The short issue for my consideration in the matter is whether the payment of the impugned amount of ₹4,77,67,393/- by the appellant to M/s FCM Travel Solutions (India) Private Limited could invite the provision of section 40(a)(ia) r.w. section 194C or not. I find that the appellant has explained that it had inadvertently reported a higher amount of ₹5,83,79,857/- in respect of transaction with FCM Travels. The AR of the appellant has explained that this sum included a sum of ₹1,92,61,607/- representing reversal entries and were not routed through the profit & loss a/c of the appellant thus provisions of section 40(a)(ia) were not applicable on the sum of ₹1,92,61,607/-. In respect of remaining sum ₹3,91,18,250/- represented expenses transactions. The appellant has submitted the break up ₹3,91,18,250/- which included ₹1,06,12,464/- paid to FCM on account of services provided for arranging hotels on which TDS of ₹2,12,256/- has been stated to be deducted. For rest of the sum of ₹2,85,05,786/- which related to payments for ticket bookings, it was explained that vide CBDT Circular No.715 dated 08.08.1995 when payment is made to a travel agent for purchase of ticket for travel, the same would not be subjected to tax deduction at source as the privity of contract is between the individual passenger and the airline/travel agent. The AR also relied upon another Circular No.713 dated 02.08.1996 in this regard. I find that the AO did not consider the principles laid down in the CBDT Circulars which has explained that payment to travel agent for purchase of tickets for air travel of individuals is not liable to tax deduction. The appellant has taken an alternate argument as well. It was contended on behalf of the appellant that provision of section 40(a)(ia) is attracted only on the amount which are outstanding as on last day of the financial year and not on the amounts which were paid during the year. In this regard, the ape relied upon the decision of ITAT Speecial Bench in the case of Merilyn Shipping & Transports -vs.-Addl. CIT (2012) reported in 136 ITD 23 (Vishakhapatnam). The AR also relied upon the decision of Allahabad High Court in the case of CIT –vs-Vector Shipping Services (P) Ltd. (2013) 357 ITR 642 (All) wherein it was held that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year. It was also explained that the Apex Court as since dismissed the SLP filed by the Department against the said order of ho Allahabad High Court (Ref – CC No.80668/2014 dated 2nd July (2014) the contention of the appellant should be accepted. I find that there is no merit on the alternate argument of the AR of the appellant since the Calcutta High Court in the case of Cresent Export Syndicate reported in 33 Taxmaann.com 250 has specifically examined the correctness of decision of Special Bench in the case of Merilyn Shipping and had disapproved the same. I find that the AR has not even uttered a single line in this regard. However, it is held that disallowance has to be made irrespective of the fact that payment has been made or not made as at the end of the financial year. Thus the appellant fails on this alternate argument. However, I find that the case of the appellant is clearly covered by the CBDT circulars mentioned supra and respectfully following the said circular the AO is directed to delete the addition to the extent of ₹2,85,05,786 which relates to