DEPUTY COMMISSIONER OF INCOME TAX, SURAT vs. HAYWOOD HOSPITALITY(INDIA) PVT. LTD, SURAT

The assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) partly allowed the appeal of the assessee.

The Ld.DR submitted that the Ld.CIT(A) erred in deleting the addition of Rs.5,13,33,549/- made on account of disallowance of salary expenses even Asst. Year : 2014-15 - 3– though the disallowance was made after detailed verification of profit and loss accounts which was the disproportionate quantum of salary and in the absence of cost allocation or justification linking employee salaries directly to income earned. The Ld.DR submitted that the assessee failed to prove the entire salary expenses which were incurred for its business purposes. As regard to ground no.2 the Ld.DR submitted the addition of Rs.64,19,433/- made u/s.40(a)(i) of the Act as the expenses are falling within the scope of “fees for technical services” and failed to deduct TDS on the same. The Ld.DR as relates to ground no.3 submitted the Ld.CIT(A), erred in deleting addition of Rs.62,80,779/- made on account of undisclosed receipt even though the assessee claimed credits for TDS on the receipt when taking into consideration computation of total income for the year.

The Ld AR relied on the order of the Ld.CIT(A)

We have heard both the parties and perused the material available on record. Regarding ground no.1, the Ld.CIT(A) has categorically mentioned that assessee provide details related to salary expenses including employee-wise breakdown designation and location. In para 3.3.13 of the order of the Ld.CIT(A) it was categorically observed that there was no allegation or evidence presented by the AO to suggest that salary payment were not genuine or any diversion of funds. From the perusal of the records it is evident that the assessee has given the details of the employee-wise breakdown, designation and their location including their salary expenditure. Thus, the contention of the Ld.DR that the assessee has incurred disproportionate quantum salary expenses is not right and therefore ground no.1 of Revenue’s Appeal is dismissed.

As regards to ground no.2 related to addition of Rs.64,19,433/-. The assessee before the AO has categorically mentioned that the expenses related to foreign expenses are approved outside India and has demonstrated that the AO’s own description reveals that interstate USA was a mere mediator and Asst. Year : 2014-15 - 4– categorically support its characterization as pure reimbursement for facilitating the USA company. Therefore the Ld.CIT(A) has rightly held that these reimbursements do not attract TDS. As related to legal and professional expenses, re-location and travelling expenses as well as computer and IT funds expenses/BI platform charges, the assessee has given all the details and has categorically indicated that the characterization of these expenses/payment as reimbursement of foreign expenses will not attract TDS u/s.195 and non deduction of TDS cannot be the sole criteria for making disallowance u/s.40(a)(i) of the Act. The Ld.DR could not point out that these expenses were never incurred by the assessee at any point of time. Thus, there is no need to interfere with the findings of the Ld.CIT(A). Hence, the ground no.2 of the Revenue’s appeal is dismissed. As relates to ground no.3, regarding addition of undisclosed receipts. The assessee has given all the evidences related to 4 parties also receipt and the corresponding TDS amount of Rs.6,28,122/-. In the present assessment year i.e AY 2014-15, it was totally ignored by the Assessing Officer. Thus, the details findings given by the Ld.CIT(A) while deleting the addition are justifiable. Hence, ground no.3 of the revenue’s appeal is dismissed.

In the result, the appeal of the Revenue is dismissed.