DCIT, Circle- 2(1), Gurgaon V. Kellog Brown & Roof Engineering & Construction India Pvt. Ltd., Gurgaon

ITA 3007/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2445 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: BINOD GUPTA ACCOUNTANT
• Keywords: Transfer pricing
• Section: 142(1)

Judgement Text

ITA NO. 3007/DEL/2018 A.Y. 2014-15 KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F, NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL ME MBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBE R ITA NO. 3007/DEL/2018 AY: 2014-15 DCIT CIRCLE 2(1) GURGAON VS . KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION INDIA PVT. LTD. 16 TH FLOOR, TOWER-A, DLF BUILDING, NOS. 5, DLF CYBER TERRACES, DLF PHASE-III, GURGAON AAACB2553J (APPELLANT) (RESPONDE NT) REVENUE BY : SH. SURENDER PAL, SR. DR ASSESSEE BY : SH. BINOD GUPTA, ACCOUNTANT DATE OF HEARING : 06/11/2018 DATE OF PRONOUNCEMENT : 14/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST OR DER DATED 21/02/18 PASSED BY LD. CIT (A)-1, GURGAON, FOR ASSE SSMENT YEAR 2014-15 ON FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETI NG THE ADDITION OF RS. 72,82,724/- MADE BY THE ASSESSING O FFICER ON EXPENDITURE IN FOREIGN CURRENCY TO RELATED PARTI ES. 2. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FAC T THAT REGARDLESS OF THE MARK UP SYSTEM FOLLOWED BY THE ASSESSEE TO COMPUTE ITS REVENUE, THE ASSESSEE HAS F AILED TO PROVE THE GENUINENESS IN THE EXPENSES CLAIMED BY IT FOR THE PERIOD UNDER CONSIDERATION. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD , DELETE OR AMEND GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. ITA NO. 3007/DEL/2018 A.Y. 2014-15 KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION 2 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE FILED ITS RETURN OF INCOME ON 27/11/14 DEC LARING TOTAL INCOME OF RS.7,15,18,720/-. RETURN WAS PROCESSED UN DER SECTION 143 (1) OF THE ACT AND WAS PICKED UP FOR SCRUTINY. ACCORDINGLY, NOTICE UNDER SECTION 143(2) OF THE ACT ALONG WITH Q UESTIONNAIRE AND NOTICE UNDER SECTION 142(1) WAS ISSUED TO ASSES SEE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF AS SESSEE APPEARED BEFORE LD. AO AND FILED REQUISITE DETAILS AS CALLED FOR. 2.1 LD. AO OBSERVED THAT ASSESSEE IS IN BUSINESS OF PROVIDING ENGINEERING SERVICES WITH RESPECT TO OFFSHORE AND U NDERWATER CONSTRUCTION ACTIVITIES, FOR OFFSHORE OIL AND GAS B USINESSES INDIA. 2.2 LD. AO NOTED THAT ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF FOREIGN CURRENCY PAYMENT AMOUNTING TO RS.72,82,7 24/-. ASSESSEE WAS CALLED UPON TO FURNISH DETAILS LIKE IN VOICE/DEBIT NOTE RAISED BY PARTIES ON ACCOUNT OF REIMBURSEMENT ALONG WITH RELEVANT BILLS/VOUCHERS, EXPLANATION OF EACH EXPENS ES WHICH WAS REIMBURSED, INCLUDING TYPE OF SERVICES PROVIDED BY RELATED PARTY, APPLICABILITY OF TDS UNDER SECTION 195 OF THE ACT, IF ANY, AND TO FURNISH COPY OF FORM 15 CA/15 CB. 2.3 IN RESPONSE TO QUERY RAISED BY LD. AO ASSESSEE VIDE REPLY DATED 10/11/16 SUBMITTED THAT ASSESSEE INCURRED EXP ENDITURE IN FOREIGN CURRENCY PERTAINING TO TRAVEL EXPENSES, COM MUNICATION EXPENSES AND OTHER EXPENSES, WHICH WAS EVIDENCED FR OM NOTE NO. 26 OF AUDITED FINANCIAL STATEMENTS. ASSESSEE SUBMIT TED THAT THESE EXPENSES ARE ALREADY INCLUDED IN RELEVANT HEADS APP EARING IN NOTE NO. 20, BEING OTHER EXPENSES. IT WAS ALSO SUBM ITTED THAT ITA NO. 3007/DEL/2018 A.Y. 2014-15 KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION 3 APPLICABLE TAX ON SAME HAS ALREADY BEEN WITHHELD BY ASSESSEE AND HAS FILED FORM 27Q IN RESPECT OF THE SAME. 3. LD. AO, HOWEVER, AFTER CONSIDERING SUBMISSIONS W AS NOT SATISFIED AND OBSERVED THAT ASSESSEE DID NOT FURNIS H ANY AGREEMENT WITH REGARD TO THE AFORESAID PAYMENTS MAD E TO THE ASSOCIATED ENTERPRISES. HE, ACCORDINGLY, DISALLOWED THE SUM OF RS.72,82,724/-. 4. AGGRIEVED BY ADDITION MADE BY LD. AO, ASSESSEE P REFERRED APPEAL BEFORE LD.CIT (A). BEFORE LD. CIT (A) ASSESS EE FILED DETAILED SUBMISSION BASED UPON WHICH SAID ADDITION WAS DELET ED. 4.1 AGGRIEVED BY ORDER OF LD. CIT (A) REVENUE IS IN APPEAL BEFORE US NOW. 5. LD. SR. DR PLACED RELIANCE UPON ORDER OF LD. AO. 6. LD. AR PLACING RELIANCE UPON ORDER OF LD. CIT (A ) SUBMITTED THAT SERVICE AGREEMENT BETWEEN ASSESSEE AND GROUP C OMPANY WAS FURNISHED BEFORE LD. CIT (A). HE SUBMITTED THAT LD. CIT (A) ON DETAILED ANALYSIS OF CLAUSES IN SERVICE AGREEMENT P ERTAINING TO PAYMENTS, HAS HELD THAT, ASSESSEE HAS BEEN REIMBU RSED FOR ENTIRE COST INCURRED UNDER ENGINEERING SERVICE WITH ITS AE. HE ALSO SUBMITTED THAT CERTAIN EXPENSES ON WHICH PROVI SIONS OF TDS WERE APPLICABLE HAS BEEN APPLIED AND AMOUNT HAS BEE N DEPOSITED. 7. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN THE LIGHT OF RECORDS PLACED BEFORE US. ARTICLE 4 O F AGREEMENT WHICH HAS BEEN REPRODUCED IN ORDER PASSED BY LD. CI T (A), DEALS ITA NO. 3007/DEL/2018 A.Y. 2014-15 KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION 4 WITH PAYMENTS. LD.CIT(A) OBSERVED THAT ASSESSEE H AS BEEN REIMBURSED THE COST WITH 12% OF ACTUAL COST, IN THE FORM OF SERVICE FEE. HE FURTHER OBSERVED THAT IN THE EVENT SAID DISALLOWANCE IS NOT DELETED, IT WOULD LEAD TO FURTH ER REDUCTION IN REVENUE. FURTHER ASSESSEE HAS BEEN APPLYING COST P LUS METHOD FOR PURPOSES OF DETERMINING REVENUE. THERE IS NO A LLEGATION THAT HAS BEEN POINTED BY LD. AO REGARDING EXPENDITURE CL AIMED BY ASSESSEE, RECEIVED IN FOREIGN CURRENCY. THE ONLY RE ASON FOR DISALLOWANCE WAS THAT ASSESSEE DID NOT FILE AGREEME NT IN SUPPORT OF ITS CLAIM. LD.AO ON THE SOLE REASON TREATED EXPE NDITURE TO BE NON-GENUINE. 8. BEFORE LD. CIT (A) ASSESSEE FILED THE AGREEMENT WHICH HAS BEEN ANALYSED BY LD. CIT (A) THREADBARE. WE, THERE FORE, DO NOT FIND ANY INFIRMITY IN OBSERVATIONS OF LD. CIT (A) A ND THE SAME IS UPHELD. ACCORDINGLY THE GROUNDS RAISED BY REVENUE STANDS DI SMISSED. IN THE RESULT ORDER APPEAL FILED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/11/2018 SD/- SD/- (PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JU DICIAL MEMBER DT. 14 TH NOVEMBER,2018 *KAVITA ARORA ITA NO. 3007/DEL/2018 A.Y. 2014-15 KELLOG BROWN & ROOF ENGINEERING & CONSTRUCTION 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES DATE DRAFT DICTATED ON 13.11.2018 DRAFT PLACED BEFORE AUTHOR 13.11.2018 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 14.11.2018 KEPT FOR PRONOUNCEMENT ON & ORDER UPLOADED ON : 14.11.2018 FILE SENT TO THE BENCH CLERK 14.11.2018 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.