Income Tax Officer, Ward-17(2), Hyderabad V. Fusol Advisory Services Private Limited , Secunderabad

ITA 1581/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2979 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 07-02-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 20-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: TDS

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE S MT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1 5 8 1 /H YD/201 8 ASSESSMENT YEAR: 20 13 - 14 INCOME - TAX OFFICER, WARD 17(2), H YDERABAD. VS. FUSOL ADVISORY SERVICES PVT. LTD., SECUNDERABAD. PAN A ABCF1490M (APPELLANT) (RESPONDENT) REVENUE BY : SHRI PHANI RAJU ASSESSEE BY : S HRI M.V. ANIL KUMAR DATE OF HEARING : 0 7 - 0 2 - 201 9 DATE OF PRONOUNCEMENT : 20 - 0 2 - 201 9 O R D E R PER S . RIFAUR RAHMAN, A .M.: TH IS APPEAL FILED BY REVENUE IS DIRECTED AGAINST THE ORDER O F CIT(A) 5 , HYDERABAD, DATED 11 / 05 /201 8 FOR AY 20 13 - 14 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT{ A) HAS ERRED BOTH IN LAW ON FACTS OF THE CASE. 2. THE LEARNED CIT{A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE HOLDING THAT THE AMOUNT OF RS 72,73,534/ - IS NOT LIABLE FOR T D S IGNORING CB D T CIRCULAR NO.715 DATED 08.08.1995 ACCORDING TO WHICH, T D S SHOULD BE DEDUCTED ON TOTAL PAYMENT INCLUDING REIMBURSEMENT OF EXPENSES. 3. THE LEARNED CIT ( A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT CONSIDERING THE JUDGMENT OF D ELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS D R.WILMAR SCHWABE INDIA (P) LTD [20 05] 95T T J 53 (D EL) WHEREIN IT WAS HELD THAT T D S NEED NOT TO BE DEDUCTED IN RESPECT OF REIMBURSEMENT OF EXPENSES WHERE THE CONSULTANT HAD RAISED A SEPARATE BILL FOR SUCH EXPENSES. HOWEVER, IN THE PRESENT CASE, NO SEPARATE BILL WAS RAISED FOR SUCH EXPENSES, H ENCE LIABLE FOR T D S. 2 ITA NO . 1 581 /HYD/201 8 FUSOL ADVISORY SERVICES PVT. LTD., SECBAD . 4. ANY OTHER GROUND{S) THAT MAY BE URGED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT T HE A SSESSEE A COMPANY DEALING IN MAN POWER SUPPLY TO SOFTWARE COMPANIES, FILED ITS RETURN OF INCOME FOR THE A.Y. 2013 - 14 ON 30.09.2013 ADMITTING TOTAL INCOME OF RS. 1,25,620 / - . THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY UNDER CASS . THE ASSESSING OFFICER, DURING THE COURSE OF VERIFICATION OF EXPENDITURE, OBSERVED THAT THE A SSESSEE COMPANY MADE PAYMENT OF RS. 81,58,808/ - UNDER THE HEAD 'OPERATING EXPENSES' TO ONE M / S. ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD., WITHOUT EFFECTING TDS ON THE SAID PAYMENT. AS THE ASSESSEE DID NOT PRODUCE FORM NO 26A AS PER RULE 31ACB OF THE INCOME TAX RULES, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 72,53,534 / - PAID TO M / S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT(A). 4. THE CIT(A) FOLLOWING HIS PREDECESSORS DECISION IN ASSESSEES OWN CASE FOR AY 2011 - 12, (WHICH WAS UPHELD BY THE ITAT IN ITA NO. 369/HYD/2017 DATED 16/02/2018), ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF CIT(A), T HE REVENUE IS IN APPEAL BEFORE US. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2011 - 12, WHEREIN THE COORDINATE BENCH HAS HELD AS UNDER: 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE AMOUNT OF RS. 1,43,36, 108/ - PAID BY THE ASSESSEE CONSTITUTES 'REIMBURSEMENT OF EXPENSES' OR 'SALARIES'. ACCORDING TO THE ASSESSEE, THERE IS AN AGREEMENT BETWEEN THE ASSESSEE - COMPANY AND M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD. THE SAID COMPANY, M/S. ADECCO FLEXIONE WOR KFORCE SOLUTIONS PVT LTD., AGREED TO SUPPLY EMPLOYEES TO THE ASSESSEE AND THE ASSESSEE - COMPANY HAS TO REIMBURSE THE SALARIES AND PAY THE SERVICE 3 ITA NO . 1 581 /HYD/201 8 FUSOL ADVISORY SERVICES PVT. LTD., SECBAD . FEES TO M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., APART FROM STATUTORY DUES LIKE SERVICE TAX. THE LD. CIT(A) EXAMINED THE SAID AGREEMENT AT LENGTH AND GAVE A FINDING THAT ACCORDING TO CLAUSE - (B) OF THE AGREEMENT, THE AMOUNT PAID BY THE ASSESSEE TO M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., IS 'REIMBURSEMENT OF EXPENSES' AND NOT 'SALARIES'. IN SO FA R AS THE CASE LAW RELIED UPON BY THE LD. CIT(A) I.E., THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTONOGESELLSCHAFT (SUPRA) IS RELEVANT FOR THE PROPOSITION THAT PAYMENT BY WAY OF REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF PAYER IS NOT INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. IN THE CASE OF CIT VS. INDUSTRIAL ENGINEERING PRODUCTS (P) LTD (SUPRA), HON'BLE DELHI HIGH COURT HELD THAT REIMBURSEMENT OF EXPENSES CAN, UNDER NO CIRCUMSTANCES, BE REGARDED AS REVENUE RECEIPT. AS WELL, IN THE CASE OF CIT VS. DLF COMMERCIAL PROJECT CORP (SUPRA), HON'BLE DELHI HIGH COURT OBSERVED THAT THE REIMBURSEMENT OF EXPENSES DO NOT HAVE THE CHARACTER OF INCOME, THERE IS NO OBLIGATION TO DEDUCT TDS. BY FOLLOWING THE RATIOS LAID DOWN BY VARIOUS HIGH COURTS (SUPRA), LD. CIT(A) HAS HELD THAT THE ASSESSEE IS NOT UNDER OBLIGATION TO DEDUCT TDS. RELEVANT PARA FROM THE CIT (A)'S ORDER IS EXTRACTED AS UNDER: - 'IN THE CASE OF ASSESSEE, PERUSAL OF INVOICES SHOW THAT THE SALARIES, SERVICE FEE, SERVICE TAX AND EDUCATION FEES ARE RAISED IN A CONSOLIDATED INVOICE. O UT OF THE TOTAL EXPENDITURE OF RS. 1,48,58,752/ - , THE SERVICE FEES CONSTITUTES RS. 5,22,644/ - AND IS THEREFORE, LIABLE FOR DEDUCTION OF TAX. THE REMAINING AMOUNT IS THE REIMBURSEMENT OF SALARY AND STATUTORY PAYMENT. IN THE INSTANT CASE, WHICH WAS REIMBURSE MENT BY THE ASSESSEE, WAS THE ACTUAL SALARY OF THE DEPUTED PERSONNEL. THEREFORE, FOR EACH DEPUTED PERSONNEL, THE AMOUNT RECEIVED BY IT WAS INCOME CHARGEABLE UNDER THE HEAD SALARY. IN THE CASE OF ASK WEALTH ADVISORIES PVT LTD., IT WAS HELD THAT WHERE NO TAX WOULD BE DEDUCTED AT SOURCE IN RESPECT OF EXPENDITURE INCURRED BY HOLDING COMPANY AND NO DISALLOWANCE COULD BE MADE WITH REFERENCE TO SUCH EXPENDITURE IN HANDS OF SUBSIDIARY COMPANY WHILE REIMBURSING SAME TO HOLDING COMPANY.' 8. THUS, CONSIDERING THE FACT S AND CIRCUMSTANCES OF THE CASE AS WELL AS BY FOLLOWING THE RATIOS LAID DOWN BY THE VARIOUS HIGH COURTS (SUPRA), LD. CIT(A) HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE SA ME DOES NOT CALL FOR INTERFERENCE. AS THE ISSUE IN THIS AY IS SIMILAR TO AY 2011 - 12, FOLLOWING THE DECISION THEREIN, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 4 ITA NO . 1 581 /HYD/201 8 FUSOL ADVISORY SERVICES PVT. LTD., SECBAD . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUN CED IN THE OPEN COURT ON 20 TH FEBRUARY , 201 9. SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 20 TH FEBRUARY, 2 01 9. KV COPY TO: - 1) THE ITO, WARD 17(2), 9 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYDERABAD 500 084 2) M/S FUSOL ADVISORY SERVICES PVT. LTD., 78, P&T COLONY, VIKRAMPURI, SECUNDERABAD 500 009. 3) CIT(A) 5 , HYDERABAD. 4) PR. CIT - 5 , HYD . 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE