BRIGHT ENTERPRISES PVT LTD, DELHI,DELHI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 5(1), DELHI, DELHI

That the above addition has been confirmed against the facts and circumstances of the case.”

Brief facts relating to the grounds raised before us, assessee filed its return of income on 30.09.2016 declaring total income of Rs.7,78,29,110/-. The case was selected for scrutiny through CASS and notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee through e-portal. In response, ld.AR of the assessee attended and submitted the relevant information as called for. During assessment proceedings, the AO observed from the financial statement that a perusal of the chart of payments made to persons specified u/s 4OA(2)(b) reveals that the assessee has made a payment of Rs.1,31,11,135/- to a sister concern, M/s. Oxbridge International Pvt. Ltd. on account of consultancy charges. The assessee was asked to submit a detailed note on payment to the entity. The assessee submitted reply vide its submission dated 15.12.2018 which was considered but not found satisfactory as assessee has merely supplied sample bills as asked by the assessee.

The assessee concern has paid an amount of Rs.1,31,11,135/- to its sister concern M/s. Oxbridge International Pvt. Ltd. on account of consultancy charges. However, other than giving a general reply that the M/s. Oxbridge International Pvt. Ltd. provides the consultancy on day to day basis for all types of repair/ renovations for entire civil as well as engineering and mechanical work, no specific details of the recommendations made by M/s. Oxbridge International Pvt. Ltd. to the assessee have been furnished. Perusal of the ITR and financials of M/s Oxbridge International Pvt. Ltd or justified with proof what kind of consultancy has been given by the company to the assessee company. The assessee has also not provided any details regarding the actual recommendations or services rendered by the team of M/s. Oxbridge International Pvt. Ltd. No report or recommendation has been put on record. However the facts of current year are differentiated from prior years partly because, the sister concern has shown profits in FY 2015-16 and only some other contract receipts of Rs 57 lakhs has been received from other parties, as per the P&L account. Hence to avoid double burden of taxation the disallowance is restricted to 50% which works out to be Rs.65,55,568/-.

Further during assessment proceedings, AO observed that there has been an increase in interest paid on vehicle loan with no corresponding increase in addition to the fixed asset. When the assessee was asked to substantiate and not convinced with the submissions of the assessee, he proceeded to allow the interest expenses restricted to last year and additional interest claimed to the extent of Rs.10,49,848/- was disallowed.

With regard to interest payment of vehicle loan, ld. CIT (A) after considering the submissions of the assessee, dismissed the ground raised by the assessee by observing as under :-

At the time of hearing, ld. AR of the assessee brought to our notice page 4 of the assessment order and pages 7 to 32 of the first appellate order where the submissions of the assessee were considered. He brought to our notice detailed submissions made by the assessee before the ld. CIT (A). He submitted that Oxbridge International Pvt. Ltd. is a competent and qualified professional company to provide advice and consultancy services for repairs/maintenance/installation work. The expenditure incurred by the assessee on account of service charges paid to Oxbridge International Pvt. Ltd. is genuine business expenditure on which TDS was deducted and deposited by the assessee and also service-tax has been charged on the abovesaid invoices. He further brought to our notice page 3 of the synopsis and submitted the history of expenditure allowed by the ITAT in the earlier assessment years i.e. AY 2013-14 and 2014-15 and in subsequent assessment years, the same was allowed and the relevant finding is as under:- AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 60,42,481 1,01,12,400 72,00,000 1,31,11,135 72,00,000 45,00,000 ITAT confirmed ITAT confirmed Assessed u/s Year under Assessed u/s Assessed u/s the disallowance the disallowance 143(1) and no consideration 143(3) of the Act 143(3) of the Act to the extent of to the extent of disallowance is and no and no 10% of total 10% of total made. disallowance is disallowance is expenditure expenditure made. made. Refer Page 52 – Refer Page 52 – Refer Page 64 – Refer Page 66 – 63 63 65 68

He prayed that the issue under consideration is squarely covered in favour of the assessee.

With regard to interest on car purchased, he submitted that in the previous assessment year, the assessee has paid interest only for three months. In this year, assessee has paid interest for full year. He brought to our notice pages 36 and 37 of the first appellate order and further he brought to our notice page 14 of the paper book which is the fixed asset schedule for year ending 31.03.2016 wherein assessee has disclosed the detail of purchase in the previous assessment year. He submitted that the asset which was purchased for the fag end of the previous year and assessee has claimed full interest during the year, therefore, the interest paid by the assessee should not be disallowed.

On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.

Considered the rival submissions and material placed on record. With regard to disallowance of Rs.65,55,568/- being charges incurred for consultancy paid to sister concern, namely, Oxbridge International Pvt. Ltd., we observed that the assessee has entered into 3 agreements with its sister concern namely, M/s Oxbridge international Pvt. Ltd. and M/s Oxbridge international Pvt. Ltd. provides day to day advice and consultancy services with regard to all types of repairing work relating to civil as well engineering work under their supervision and monitoring for the five star hotel of the assessee namely "Radisson Blu MBD Hotel Sector 18 Noida". We observed that for these services in the year under consideration, total payment made is Rs.1,31,11,135/-. Further we observed that all the details were submitted during the course of assessment proceedings, viz., consultancy agreements and sample copies of bill issued by M/s Oxbridge International Pvt. Ltd. and TDS on these expenses has also been deducted and deposited and service tax charged on these invoices has also been deposited to the credit of Government on timely basis. We observed that addition is made by alleging that no details of actual rendering of services by M/s Oxbridge international Pvt. Ltd. has been given by the assessee We further observed that merely because each and every service is not mentioned on the bills cannot doubt the actual rendering of services. Further we observed that when the scope of work is clear from the agreements and the necessity of such expenditure is also beyond doubts and sample evidences of such expenditure have also been brought on record, the genuineness of such expenditure cannot be doubted.

Further we observed that similar addition was also made by the Assessing Officer in AYs 2013-14 & 2014-15 and in both these years, the ITAT Amritsar had restricted the disallowance to only 10% of the complete expenditure. Further we observed that in the AYs 2015-16, 2017-18 & 2018-19, the case of the assessee was assessed u/s 143(1)/143(3) of the Act and no such disallowance was made therein. Further we observed that the AO has not doubted the identity of M/s Oxbridge International Pvt. Ltd. and neither any evidence of comparable of fair market value of the services has been brought on record. We also observed that such expenditure has been duly verified by the Chartered Accountant as is evident from the audit report for the year under consideration. We observed that M/s Oxbridge international Pvt. Ltd. is a professional firm engaged in this business and a list of its employees along with their qualification is also filed by the assessee in the paper book at page 33.

Further we observed that Ld. CIT(A) concluded that the actual expenses incurred of Rs.1,31,11,135/- were in excess of the agreed amount of Rs.82,80,000/-, and accordingly confirmed the ad-hoc addition of Rs.65,55,568/- @ 50% of the total expenditure of 1,31,11,135 as made by the Assessing Officer. However, we find that the above conclusion is factually incorrect as the assessee filed all the contracts entered into between the assessee and M/s Oxbridge International Pvt. Ltd., which are placed at pages 31-40, which clearly shows that the total contractual value was Rs.1,33,30,000 and not Rs.82,80,000. Accordingly, we are of the considered opinion that the scope of work and the nature of services has been duly defined in the agreements and in the earlier years also, on the basis of similar agreements, the assessee had claimed deduction of the same expenditure and, therefore, the observation of the lower authorities that no services have actually been rendered by the assessee, as the same is not mentioned on the bills, is incorrect and bad in law. Accordingly, with our above observation, we delete the disallowance made by the lower authorities.

With regard to disallowance of Rs.10,49,848/- on account of increase in interest on vehicle loan, we observed that in the previous FY 2014-15, the assessee had purchased 4 cars out of which one car was purchased in the month of January 2015. Further we observed that a summary of cars purchased and the bill of car purchased in the month of January 2015 is placed in the paper book. We further observed that this car was purchased through loan from HDFC bank and as evident from bill of car purchased, since the car was purchased in January 2015 only, the interest cost on this car was claimed in the Profit & Loss Account for 3 months only, Further we observed that during the course of assessment proceedings, the assessee filed a chart of comparative interest expenses of 3 years including the year under consideration, as mentioned in the assessment order itself. We further observed that from a perusal of chart, it is noticed that in AY 2015-16, the assessee has claimed interest on various cars purchased through loan out of which only 4 cars were purchased in that year and rest of the cars were purchased in earlier years and such interest was allowed in the assessment proceedings of earlier years. Further we observed that the increase in interest cost is due to that fact that interest on cars purchased in the AY 2015-16 was claimed for the part of the year, however, the interest cost in AY 2016-17 was claimed resulting in a total increase in interest cost to the tune of Rs.10,49,848/-. Accordingly, we observed that the claim of interest of Rs.20,96,759 is a genuine business expenditure on loans taken from banks and therefore, merely because there is no purchase of vehicles in the year under consideration, it does not mean that the interest claimed by the assessee is excessive as it was claimed on the assets purchased in the earlier years, for which the loan is outstanding in the year under consideration. Hence, in view of our above observations, we observed that the assessee has claimed the genuine business expenditure and therefore, the same is allowed and the disallowance made by the lower authorities is deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 15th day of April, 2026.