Jetways Travels Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3529/DEL/2010

• Counselvise Citation: 352920114 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: V MOHAN ARS
• Keywords: Permanent establishment; Capital expenditure
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO. 3447/DEL/2010 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF IT, VS. JETWAYS TRAVELS PVT. LTD., CIRCLE 4(1), UGF 5, INDRAPRAKASH BULDG. NEW DELHI. 21-BARAKHAMBA ROAD, NEW DELHI. (PAN: AAACJ0054A) (APPELLANT) (RESPONDENT) ITA NO. 3529/DEL/2010 ASSESSMENT YEAR: 2007-08 JETWAYS TRAVELS PVT. LTD., VS. ASSISTANT COMMISSIO NER OF IT, UGF 5, INDRAPRAKASH BULDG. CIRCLE 4(1), 21-BARAKHAMBA ROAD, NEW DELHI. NEW DELHI. (PAN: AAACJ0054A) (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. Y. KA KKAR, DR ASSESSEE BY: SHRI VED J AIN & V. MOHAN, ARS ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE AND ASSESSEE ARE IN CROSS APPEALS AGAI NST THE ORDER OF LEARNED CIT(APPEALS) DATED 24.05.2010 PASSED FOR AS SESSMENT YEAR 2007- 08. 2. THE FIRST GRIEVANCE OF THE REVENUE IS THAT LEARN ED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.1,41,13,320 AD DED BY THE ASSESSING 2 OFFICER BY MAKING A DISALLOWANCE UNDER SEC. 40(A)(I A) OF THE INCOME-TAX ACT, 1961 ON THE GROUND THAT WHILE REMITTING THE PA YMENT TO THE FOREIGN COMPANY/PARTIES, ASSESSEE FAILED TO DEDUCT THE TAX AT SOURCE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIAN COMPANY ENGAGED IN THE BUSINESS OF PROVIDING INTERNATIONAL AND DOMESTIC AIR- TICKETING, TOUR PACKAGES, VISA SERVICES AND ARRANGI NG HOTEL BOOKING WITHIN AND OUTSIDE INDIA FOR ITS CUSTOMERS. IT IS AN IATA APPROVED TRAVEL AGENCY. IT HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2007 DECLARING AN INCOME OF RS.92,14,158. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT WAS SERVE D UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE, MISS PUJA SURI, CFO APPEARE D BEFORE THE ASSESSING OFFICER ON BEHALF OF THE ASSESSEE. SHE SUBMITTED TH E REQUISITE DETAILS. ON AN ANALYSIS OF THE RECORD, IT REVEALED TO THE ASSESSIN G OFFICER THAT ASSESSEE HAS MAINLY SHOWN COMMISSION FROM TICKETING AT RS.6,44,0 5,340 AND HOTEL RESERVATION AT RS.38,00,740. A NET PROFIT OF RS.77, 53,539 HAS BEEN DECLARED BY THE ASSESSEE IN THE P & L ACCOUNT. HE DIRECTED T HE ASSESSEE TO SUBMIT LEDGER ACCOUNT OF HOTEL COMMISSION ALONG WITH NAME AND ADDRESSES OF HOTELS FROM WHOM COMMISSION WAS RECEIVED. IN RESPONSE TO T HE QUERY OF THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS ARRANGING HOTEL 3 BOOKING IN FOREIGN COUNTRIES FOR ITS THOSE INDIAN C USTOMERS WHO WISH TO GO ABROAD. FOR MAKING SUCH BOOKING, IT HAS TO REMIT FO REIGN EXCHANGE ON BEHALF OF ITS CUSTOMERS TO THOSE HOTELS IN WHICH BOOKING A RE MADE. SUCH FOREIGN EXCHANGE IS OBTAINED BY THE ASSESSEE COMPANY FROM A UTHORIZED DEALER OF FOREIGN EXCHANGE ON BEHALF OF THOSE CUSTOMERS OUT O F THEIR BASIC TRAVEL QUOTA (BTQ) AS PER RULES OF RBI AND FEMA. AFTER MAK ING THE REMITTANCE, THE ASSESSEE COMPANY RAISES AN INVOICE ON ITS CUSTO MERS TO RECOVER THE EQUIVALENT AMOUNT IN INDIAN RUPEES AND ALSO ITS CHA RGES FOR PROVIDING SUCH SERVICES. SUCH CHARGES ARE DECLARED AS INCOME FROM HOTEL BOOKINGS IN ITS PROFIT AND LOSS ACCOUNT. DURING THE ACCOUNTING PERI OD RELEVANT TO THIS ASSESSMENT YEAR, ASSESSEE HAS REMITTED A TOTAL AMOU NT OF RS.1,41,13,320 FOR MAKING SUCH HOTEL RESERVATION IN FOREIGN COUNTRIES AND COLLECTED A TOTAL AMOUNT OF RS.1,60,66,291 FROM ITS CUSTOMERS. THE DI FFERENCE BETWEEN THE TWO I.E. RS.19,52,971 HAS BEEN DECLARED AS INCOME F ROM HOTEL RESERVATION IN THE BOOKS OF ACCOUNT. THE ASSESSEE THEREAFTER PRODU CED THE NECESSARY DETAILS BEFORE THE ASSESSING OFFICER. ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS NOT MADE ANY APPLICATION UNDER SEC. 195(2) OF T HE ACT TO THE ASSESSING OFFICER FOR PERMISSION TO MAKE THE PAYMENT TO A NON -RESIDENT/FOREIGN COMPANY WITHOUT DEDUCTING TDS. HE WAS OF THE OPINIO N THAT ASSESSEE HAS MADE PAYMENT TO NON-RESIDENT WITHOUT DEDUCTING THE TAX AND, THEREFORE, THE 4 EXPENSES SO CLAIMED BY THE ASSESSEE DESERVE TO BE D ISALLOWED. HE MADE REFERENCE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION OF A.P. LTD. VS. CIT REPOR TED IN 239 ITR 587. IN THIS WAY, ASSESSING OFFICER CONSIDERED THE AMOUNT O F RS.1,41,13,320 AS AN EXPENDITURE OF ASSESSEE WHICH WAS PAID BY IT IN HOT EL BOOKING. HE DISALLOWED THE CLAIM OF THIS AMOUNT ON THE GROUND T HAT ASSESSEE FAILED TO DEDUCT THE TDS. HE EMPHASIZED THAT CLAIM OF SUCH EX PENDITURE WOULD NOT BE ADMISSIBLE TO THE ASSESSEE UNDER SEC. 40(A)(AI) OF THE ACT IF THE TDS WAS NOT DEDUCTED. 4. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ). IT SUBMITTED THAT ASSESSING OFFICER FAILED TO CONSTRUE THE TRUE TRANS ACTION. ACCORDING TO THE ASSESSEE, ASSESSING OFFICER HAS DRAWN WRONG INFEREN CES THAT ASSESSEE SHOULD SHOW THE FOREIGN EXCHANGE REMITTED OUTSIDE INDIA AS EXPENDITURE. IT POINTED OUT BEFORE THE LEARNED FIRST APPELLATE AUTHORITY TH AT AMOUNT OF RS.1,41,13,320 IS NOT AN EXPENDITURE OF ASSESSEE. T HE ASSESSEE IS MERELY ACTING ON BEHALF OF A CUSTOMER TO BOOK HOTEL ACCOMM ODATION FOR HIM. IT WAS NOT ACTING AS AN AGENT OF THE HOTEL. THE FOREIGN EX CHANGE REMITTED OUTSIDE INDIA IS DRAWN FROM THE BASIC TRAVEL QUOTA OF THAT CUSTOMER. THE HOTELS 5 OUTSIDE INDIA DID MAKE BOOKING IN THE NAME OF THE C USTOMERS ONLY AND NOT IN THE NAME OF THE ASSESSEE COMPANY. IT FURTHER SUBMIT TED THAT A CUSTOMER CAN ALSO BOOK A HOTEL ACCOMMODATION BY SENDING FOREIGN EXCHANGE HIMSELF TO THE FOREIGN HOTEL. INSTEAD OF INVOLVING HIMSELF IN PROCEDURAL HASSLE, HE TOOK THE SERVICES OF ASSESSEE COMPANY AS A TRAVEL AGENCY , WHICH IS BETTER EQUIPPED, BY WAY OF HAVING COMPLETE DETAILS OF ALL TYPES OF HOTELS AVAILABLE IN FOREIGN COUNTRIES. THUS, THE TRAVEL AGENCY HAS J UST ACTED ON BEHALF OF THE CUSTOMER, THE AMOUNT OF FOREIGN EXCHANGE REMITTED B Y THE ASSESSEE IS OUT OF BTQ ALLOWED BY RBI TO THAT CUSTOMER. IT CAN ONLY BE TREATED AS REIMBURSEMENT AND NOT INCOME BY ANY STRETCH OF IMAG INATION. THE AMOUNT RECOVERED BY THE ASSESSEE OVER AND ABOVE FOREIGN EX CHANGE REMITTANCE HAS BEEN SHOWN AS AN INCOME FOR PROVIDING TRAVEL AGENCY SERVICES. THIS METHOD OF ACCOUNTING IS BEING FOLLOWED BY THE ASSESSEE CON SISTENTLY OVER THE LAST MANY YEARS AND HAS BEEN ACCEPTED BY THE DEPARTMENT EVEN IN THE SCRUTINY ASSESSMENT. THE EMPHASIS OF THE ASSESSEE WAS THAT ASSESSING OFFICER HAD ARRIVED AT WRONG CONCLUSION BY MIS-INTERPRETING THE TRANSACTION. THE ASSESSEE EXPLAINED THE OUTCOME OF SEC. 195 AS WELL AS SEC. 195(2) OF THE ACT. IT ALSO APPRAISED THE LEARNED FIRST APPELLATE AUTHO RITY, ABOUT THE SCOPE OF SEC. 9(1)(I) READ WITH SEC. 5(2)(1) OF THE ACT AND POINTED OUT THAT THERE IS NO BUSINESS CONNECTION OF THOSE HOTELS IN INDIA. THE F OREIGN HOTELS ARE NOT 6 HAVING ANY PERMANENT ESTABLISHMENT IN INDIA. LEARNE D FIRST APPELLATE AUTHORITY HAS REPRODUCED THE BRIEF SUBMISSIONS MADE BY THE ASSESSEE ON PAGE NOS. 3 TO 6 OF THE IMPUGNED ORDER. 5. LEARNED CIT(APPEALS) ON AN APPRECIATION OF THE F ACTS AND CIRCUMSTANCES OBSERVED THAT HON'BLE DELHI HIGH COUR T IN THE CASE OF VAN OORD ACZ (I) PVT. LTD. VS. CIT REPORTED IN 230 CTR (DEL.) 365 HAS OBSERVED THAT LIABILITY TO DEDUCT TAX AT SOURCE ARI SES ONLY WHEN THE SUM PAYABLE TO THE NON-RESIDENT IS CHARGEABLE TO TAX. A CCORDING TO THE LEARNED CIT(APPEALS), THE REMITTANCE MADE BY THE ASSESSEE T O THE FOREIGN HOTELS WAS NOT CHARGEABLE TO TAX IN INDIA BECAUSE FOREIGN HOTE LS HAVE NO P.E. OR A BUSINESS CONNECTION IN INDIA. IN THIS WAY, LEARNED FIRST APPELLATE AUTHORITY HAS DELETED THE DISALLOWANCE. 6. LEARNED DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AS WELL AS THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF TRANSMISSION CORPORATION OF A.P. LTD. VS. CIT(SUPRA). ON THE OTH ER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUT E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT PAS SED IN THE CASE OF ADDITIONAL DIRECTOR OF INCOME-TAX VS. STAR CREWS IN DIA TRAVEL SERVICES (P) 7 LTD. RENDERED BY THE ITAT, MUMBAI BENCH IN ITA NO.3 941/MUM/2010. HE PLACED ON RECORD COPIES OF THE ITATS ORDER DATED 2 2 ND JULY 2011. HE POINTED OUT THAT IN THIS CASE, THE ISSUE BEFORE THE ITAT WAS THAT STAR ISLE OF MAN IS A COMPANY REGISTERED IN ISLE OF MAN AND IS P ROVIDING SALES, MARKETING AND PROMOTIONAL SERVICES FOR THE CREWS VE SSELS OWNED, MANAGED, OPERATED OR CHARTERED THROUGH THE STAR CREWS GROUP OF COMPANIES. STAR ISLE OF MAN HAS APPOINTED STAR INDIA AS ITS CANVASSER IN INDIA, MAINLY TO CANVASS BUSINESS FOR ITS OPERATION AND FOR MARKETING ITS CR EWS PACKAGES AND SHORE EXCURSIONS. ASSESSING OFFICER WAS OF THE VIEW THAT STAR CREWS INDIA TRAVEL SERVICES WAS AN AGENT OF STAR ISLE OF MAN. THE DISP UTE BEFORE THE ITAT WAS WHETHER STAR CRUSIE MANAGEMENT LTD. WAS LIABLE TO I NCOME TAX IN INDIA IN RESPECT OF THE PAYMENT RECEIVED BY IT THROUGH STAR INDIA. IF IT IS HELD THAT STAR CRUISE MANAGEMENT LTD. IS LIABLE TO TAX THEN STAR I NDIA WOULD BE LIABLE TO WITHHOLD THE TAX I.E. IT OUGHT TO HAVE DEDUCTED THE TAX AND ON FAILURE CONSEQUENCE WOULD FOLLOW. THE ITAT HAS CONSIDERED T HE SOURCE RULE OF TAXATION, ORIGINATES IN DOMESTIC TAX LAW. THE TRIBU NAL HAS MADE LUCID ENUNCIATION OF LAW FLOWING FROM THE CONSTRUCTION OF SECTION 9(1)(I) READ WITH SECTION 5(2) OF THE ACT. THE ITAT ARRIVED AT CONCLU SION THAT STAR ISLE OF MAN DID NOT HAVE ANY PRINCIPAL TAX LIABILITY. CONSEQUEN TLY, STAR INDIA WOULD ALSO BE EXONERATED FROM ITS VICARIOUS TAX WITHHOLDING LI ABILITY. 8 7. HE FURTHER CONTENDED THAT HON'BLE DELHI HIGH COU RT IN THE CASE OF VAN OORD ACZ (INDIA) PVT. LTD. VS. CIT (SUPRA) HAS HELD THAT LIABILITY TO DEDUCT TAX AT SOURCE ARISES ONLY WHEN THE SUM PAYAB LE TO THE NON-RESIDENT IS CHARGEABLE TO TAX. THE LEARNED COUNSEL FOR THE ASSE SSEE THEREAFTER REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F G.E. INDIA TECHNOLOGY CENTRE (P) LTD. VS. CIT REPORTED IN 327 ITR 456. HE POINTED OUT THAT IN THIS CASE, HON'BLE SUPREME COURT HAS CONSIDERED THE CASE OF TRANSMISSION CORPORATION OF A.P. AND HAS OBSERVED THAT EXPRESSIO N CHARGEABLE UNDER THE PROVISIONS OF THE ACT PROVIDED IN SEC. 195(1) CONTE MPLATES THAT REMITTANCE SHOULD BE OF A TRADING RECEIPT EITHER WHOLLY OR PAR T WHICH IS LIABLE TO TAX IN INDIA, IF TAX IS NOT ASSESSABLE THEN THERE IS NO QU ESTION OF TAX AT SOURCE TO BE DEDUCTED. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THIS LATEST DECISION OF HON'BLE SUPREME COURT HAS SILENCED ON A LL CONTROVERSIES ON THIS ISSUE. 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. AS PER THE LATEST DECISION OF HON 'BLE DELHI HIGH COURT AS WELL AS OF HON'BLE SUPREME COURT IN THE CASE OF VEN OORD ACZ (INDIA) PVT. LTD., G.E. INDIA TECHNOLOGY (SUPRA), THE AMOUNT PAY ABLE BY AN ASSESSEE TO ANY NON-RESIDENT CONTEMPLATES IN SECTION 195 OUGHT TO BE SUM CHARGEABLE 9 UNDER THE PROVISIONS OF THIS ACT. IF IT IS ESTABLIS HED THAT SUCH AMOUNT IS NOT CHARGEABLE TO TAX THEN THERE IS NO REQUIREMENT TO D EDUCT THE TDS. IN THE PRESENT CASE, ASSESSEE HAS SUBMITTED ALL THE DETAIL S OF FOREIGN TRANSACTIONS, SUMMARY OF FOREIGN REMITTANCE, P & L ACCOUNT, THE D ETAILS OF THE ENTITIES TO WHOM AMOUNTS HAVE BEEN REMITTED, THE DETAILS OF CUS TOMERS FROM WHOM IT HAS RECEIVED MONEY EQUIVALENT TO FOREIGN EXCHANGE R EMITTANCE IN INDIAN RUPEES. IT HAS ALSO SUBMITTED AS TO HOW IT TOOK THE FOREIGN EXCHANGE FROM THE AUTHORIZED DEALERS ON BEHALF OF THOSE CUSTOMERS OUT OF THEIR BASIC TRAVEL QUOTA WHICH IS PROVIDED UNDER RBI/FEMA REGULATIONS. THE CASE OF THE ASSESSEE IS THAT IT HAS RECEIVED CHARGES FROM THE C USTOMERS FOR PROVIDING HOTEL BOOKING SERVICES AND NOT RECEIVED ANY COMMISS ION FROM THE HOTELS. IT HAS POINTED OUT TO THE ASSESSING OFFICER THAT IT IS NOT WORKING AS AN AGENT OF THE HOTELS. THE CONTROVERSY CAN BE APPRECIATED BY S IMPLE EXAMPLE, NAMELY, A & B ARE TWO RESIDENT INDIANS WANT TO TRAVEL SINGA PORE. A MADE A BOOKING DIRECTLY AND REMITTED THE FOREIGN EXCHANGE ON HIS O WN BEHALF. B TOOK THE HELP OF ASSESSEE WHO BOOKED THE HOTEL ON HIS BEHALF AND COLLECTED THE BOOKING AMOUNT REMITTED BY THE ASSESSEE IN FOREIGN EXCHANGE PLUS SERVICES CHARGES. CAN THE ASSESSING OFFICER SAY THAT A OUGHT TO HAVE DEDUCTED THE TAX WHILE BOOKING THE HOTEL BECAUSE THE AMOUNT PAID TO THE HOTEL IS TAXABLE IN INDIA. IN OUR OPINION, THE REPLY TO THIS QUESTION WOULD BE NO BECAUSE THE 10 FOREIGN HOTELS WERE NOT PROVIDING ANY SERVICES TO A IN INDIA OR IT HAS NO BUSINESS CONNECTION WITHIN THE TERRITORY OF INDIA A ND IT IS A A WHO WANTS TO AVAIL THE HOTEL FACILITY OUTSIDE THE INDIAN TERRITO RY. IF FOR THE SAKE OF ARGUMENT, WE ACCEPT THE CASE OF THE ASSESSING OFFIC ER THEN ALL FACILITIES AVAILED BY INDIAN RESIDENTS OUTSIDE INDIA OUGHT TO BE BROUGHT IN THE TAX NET. 9. ASSESSING OFFICER HAS MADE REFERENCE TO THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATI ON (SUPRA). THE FACTS IN THIS CASE ARE THAT M/S. TRANSMISSION CORPORATION IS A NON-RESIDENT, IT HAD ENTERED INTO A COMPOSITE CONTRACT WITH THE RESIDENT PARTIES. THE SAID COMPOSITE CONTRACT WAS FOR SUPPLY OF PLANT AND MACH INERY AND EQUIPMENT IN INDIA AS WELL AS ALSO INSTALLATION AND COMMISSIONIN G OF THE SAME IN INDIA. IT WAS ADMITTED THAT ERRECTION AND COMMISSIONING OF PL ANT AND MACHINERY IN INDIA GAVE RISE TO INCOME TAXABLE IN INDIA. THUS, I T WAS CLEAR EVEN TO THE PAYER THAT PAYMENTS REQUIRED TO BE MADE BY HIM TO T HE NON-RESIDENT INCLUDED AN ELEMENT OF INCOME WHICH WAS CHARGEABLE TO TAX IN INDIA. THE ONLY ISSUE WAS WHETHER TDS WAS APPLICABLE ONLY TO THE PURE INC OME PAYMENTS OR IT WILL BE APPLICABLE TO COMPOSITE PAYMENT WHICH HAD AN ELE MENT OF INCOME INCORPORATED IN THEM. IN SUCH SITUATION, IT WAS HEL D THAT IF THE PAYER WANTED TO DEDUCT TAX NOT ON THE GROSS AMOUNT BUT ON LESSER AMOUNT I.E. ONLY INCOME 11 COMPONENT OF THE NON-RESIDENT THEN IT WAS NECESSARY FOR THE PAYER TO MAKE AN APPLICATION UNDER SEC. 195(2) OF THE ACT TO THE ITO AND OBTAIN HIS PERMISSION FOR DEDUCTING THE TAX AT A LESSER AMOUNT . HON'BLE SUPREME COURT IN THE CASE OF G.E. INDIA TECHNOLOGY WHILE CONSIDER ING THIS JUDGMENT HAS OBSERVED THAT IF THE PAYER HAD A DOUBT AS TO THE AM OUNT TO BE DEDUCTED AS A TAX, HE COULD APPROACH THE ITO(TDS) TO COMPUTE THE AMOUNT WHICH WAS LIABLE TO BE DEDUCTED AT SOURCE. ACCORDING TO THE H ON'BLE SUPREME COURT, SECTION 195(2) IS BASED ON THE PRINCIPLE OF PROPORT IONATELY. THE SAID SUB- SECTION GETS ATTRACTED ONLY IN CASES WHERE PAYMENT MADE IS A COMPOSITE PAYMENT IN WHICH CERTAIN PORTION OF PAYMENT HAS AN ELEMENT OF INCOME CHARGEABLE TO TAX IN INDIA. HON'BLE SUPREME COURT H AS OBSERVED THAT UNDER SECTION 195, A LIABILITY TO DEDUCT TAX WOULD COME I F THE SUM PAID OR CREDITED BY AN ASSESSEE TO A NON-RESIDENT AND SUCH AMOUNT IS CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE INCOME-TAX ACT, 1961 THEN TDS HAS TO BE DEDUCTED. IN OTHER WORDS, IF TAX IS NOT SO ASSESSABLE THEN NO TD S OUGHT TO BE DEDUCTED. IN THE PRESENT CASE, ON AN ANALYSIS OF THE REMITTANCE MADE BY THE ASSESSEE TOWARDS HOTEL BOOKING, LEARNED CIT(APPEALS) HAS ARR IVED AT A CONCLUSION THAT REMITTANCE DO NOT REPRESENT SUM CHARGEABLE TO TAX IN INDIA, IN THE HANDS OF THOSE HOTELS, THEREFORE, ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT THE TAX. THE ITAT IN THE CASE OF STAR CRUISE INDIA TRAV EL SERVICES HAS ANALYZED 12 THIS ISSUE IN DETAIL. IN VIEW OF THE ABOVE DISCUSSI ON AND RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF G.E. INDIA TECHNOLOGY CENTRE (P) LTD., WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE GROUND RAISED BY THE REVENUE. LEARNED FIRST APPELLA TE AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PE RSPECTIVE. HENCE, GROUND NO.2 IS REJECTED. 10. THE NEXT GROUND RAISED BY THE REVENUE IS INTER- CONNECTED WITH THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL . ASSESSING OFFICER HAS DISALLOWED A SUM OF RS.15,49,057 OUT OF REPAIR AND MAINTENANCE EXPENSES ON THE GROUND THAT IT IS CAPITAL IN NATURE. ON APPE AL, LEARNED CIT(APPEALS) PARTLY DELETED THE ADDITION TO THE EXTENT RS.7,36,2 37. THE REVENUE IS IMPUGNING THE PART DELETION OF THE DISALLOWANCE WHE RE ASSESSEE IS IMPUGNING CONFIRMATION OF THE DISALLOWANCE. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE HAS DEBITED A SUM OF RS.22,11,810 UNDER THE HEAD REPAIR AND MAINTENANCE OF BUILDING. IT HAS FURTHER DEBITED A SUM OF RS.11,08,318 UNDER THE HEA D REPAIR AND MAINTENANCE CLAIM OTHERS. ASSESSING OFFICER ON AN ANALYSIS OF THE DETAILS 13 DISALLOWED A SUM OF RS.15 LACS. HE RECORDED THE FOL LOWING FINDINGS ON THIS ISSUE: ASSESSEE COMPANY, VIDE LETTER DATED 10 TH NOV 2009, HAS CLAIMED THAT THE SAID EXPENSES WERE INCURRED FOR THE REPAIRS AND RENOVATION OF OUR VARIOUS OFFICES DURING THE YEAR AND RENOVATION OF T HEIR MAIN OFFICES IS VERY MUCH ESSENTIAL DUE TO THE NATURE OF THEIR TRAD E. SEVERAL CASE LAWS WERE CITED WHICH WERE EXAMINED AND CONSIDERED. THES E CASE LAWS ARE DISTINGUISHABLE ON FACTS AND THEY DONT APPLY TO TH E PRESENT CASE AT ALL. IN THIS CASE, THE ASSESSEES MAIN BUSINESS IS PROVI DING SERVICES RELATED TO TRAVEL. THE EXPENSES DEBITED IN THE REPAIR AND M AINTENANCE ARE RELATED TO CIVIL CONSTRUCTION AND INTERIOR WORK OF OFFICE AT UGF- 9, FLAT NO. 108, MB-5 AND MUMBAI OFFICE. IT IS IMPORTANT TO NOTE THAT NONE OF THESE ADDRESSES FIGURE IN THE LIST OF ADDRESSES OF OFFICES USED BY THE ASSESSEE SUBMITTED BY ASSESSEE ON 21 ST APRIL, 1009. THIS LIST ONLY MENTIONS THE ADDRESSES AT 1. UGF 5, INDRAPRAKASH BU ILDING, 2. 402, DLF GALLERIA AND 3. 304, A WING, MANGALAYA BUILDING , MUMBAI. THUS, THESE EXPENSES ARE RELATED TO OFFICE WHICH WE RE NOT IN USE BY THE ASSESSEE DURING THE YEAR. THUS, THESE EXPENSES RELA TE TO NEW OFFICES OF ASSESSEE WHICH WERE REQUIRED TO BE CAPITALIZED, AS IT PROVIDES ENDURING BENEFIT TO THE ASSESSEE OVER A LONG PERIOD OF TIME. THUS, A SUM OF RS.15,49,057, WHICH IS CAPITAL EXPENDITURE DEBITED IN THE REPAIR AND MAINTENANCE ACCOUNT IS DISALLOWED. SATISFACTION TO INITIATE PENALTY PROCEEDINGS UNDER SEC. 271(1)(C) FOR FURNISHING INA CCURATE PARTICULARS OF INCOME IS HEREBY RECORDED. 14 12. ON APPEAL, LEARNED CIT(APPEALS) HELD THAT EXPEN DITURE TO THE EXTENT OF RS.8,12,820 IS CAPITAL IN NATURE AND EXPENDITURE AMOUNTING TO RS.7,36,237 IS OF REVENUE NATURE. 13. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPU GNING THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT ASSESSEE COMPANY I S RUNNING ITS BUSINESS FROM THREE DIFFERENT PLACES, NAMELY, INDRAPRAKASH B UILDING IN CANNAUGHT PLACE, 402 DLF GALLERIA IN GURGAON AND MANGLIA BUIL DING IN ANDHERI, MUMBAI. THE MAIN PLACE IS INDRAPRAKASH BUILDING IN NEW DELHI WHERE THE ASSESSEE IS OCCUPYING A NUMBER OF SMALL ROOMS WHICH BEAR DIFFERENT NUMBERS. ALL THESE ROOMS ARE ADJACENT TO EACH OTHER EITHER HORIZONTALLY OR VERTICALLY. THEY ARE USED FOR SALES OFFICE, ACCOUNT S OFFICE, CONFERENCE ROOM AND STORE ROOM. THE ASSESSEE HAD INCURRED EXPENDITU RE ON THEIR UPKEEP AND MAINTENANCE. HE DREW OUR ATTENTION TOWARDS DETAILS OF MAINTENANCE EXPENSES COMPILED AT PAGE NOS. 64 TO 78 OF THE PAPER BOOK. H E POINTED OUT THAT FLAT NO.108 IN INDRAPRAKASH BUILDING, BARAKHAMBA ROAD, N EW DELHI WAS ACQUIRED BY THE ASSESSEE ON 15.2.1997. IT HAS INCUR RED A SUM OF RS.1,23,283 ON THE MAINTENANCE OF THIS SPACE. SIMILARLY, UGF-9 INTRAPKARAKASH BUILDING WAS ACQUIRED ON 2 ND OF DECEMBER 1992, IT HAS SPENT RS.66,850. THE MIDD LE BASEMENT NO.5 OF THIS BUILDING WAS ACQUIRED ON 11.1 0.2006, A SUM OF RS.1 15 LAC WAS SPENT. AT GURGAON FLAT NO. 402, DLF GALLERI A, DLF CITI, PHASE-IV WAS ACQUIRED ON 21.8.2002. IT HAS SPENT FOR RENOVAT ION RS.5,12,950. THE OFFICE SPACE AT MUMBAI COMPRISED AT 304 MANGLIA WIN G A, MAROL MAROSHI ROAD, ANDHERI(E), MUMBAI WAS ACQUIRED ON 23.2.2005. IT HAS SPENT RS.5,45,975. THE BAKE-UP OF THE BILLS PERTAINING TO ALL THESE EXPENSES HAVE ALSO BEEN PLACED ON RECORD. ON THE STRENGTH OF THES E DETAILS, HE POINTED OUT THAT LEARNED REVENUE AUTHORITIES HAVE ERRED IN HOLD ING THAT THESE EXPENSES WERE INCURRED BY THE ASSESSEE WHICH WOULD GIVE AN A DVANTAGE OF ENDURING BENEFIT. THESE ARE INCURRED FOR WOODEN PARTITION, L AMINATION, WHITEWASHING , UPLIFTMENT OF ELECTRICAL FITTINGS. THERE IS NO MAJ OR WORK OF RENOVATION CARRIED OUT BY THE ASSESSEE. 14. LEARNED DR ON THE OTHER HAND DREW OUR ATTENTION TOWARDS PAGE NO.72 OF THE PAPER BOOK. HE POINTED OUT THAT A SUM OF RS. 23,400 WAS INCURRED FOR BREAKING EXISTING BRICK WALL AND FOR CONSTRUCTING F OUR INCHES THICK WALL. ALL THESE EXPENSES ARE TO BE CONSIDERED AS INCURRED IN CAPITAL FIELD. HE FURTHER RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFI CER. 15. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. IN ORDER TO CLAIM ANY EXPENDITURE , THE ASSESSEE HAS TO 16 DEMONSTRATE THAT (A) THE EXPENDITURE MUST NOT BE GO VERNED BY THE PROVISIONS OF SECTIONS 30 TO 36; (B) EXPENDITURE MUST HAVE BEE N PAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE; (C) THE EXPENDITURE MUST NOT BE PERSONAL IN NATURE; (D) THE EXPENDITURE MUST NOT BE CAPITAL IN NATURE. LEARNED FIRST APPELLATE AUTHORIT Y HAS MADE A LUCID ENUNCIATION OF THE POSITION OF LAW ON THIS ISSUE. H E CULLED OUT THE PRINCIPLE IN PARAGRAPH NO.5.4. ACCORDING TO SUCH PROPOSITION, IF THE EXPENDITURE INCURRED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, IT WOULD BE ON CAPITAL ACCOUNT. THEREAFTER, LEARNED CIT(APPEALS) HAS BIFUR CATED THE EXPENDITURE AND CONFIRMED THE DISALLOWANCE PARTLY. THE IMPORTAN T QUESTION FOR OUR ADJUDICATION IS WHETHER EXPENSES INCURRED BY THE AS SESSEE ENABLED IT TO ACQUIRE ANY NEW ASSET IN THE CAPITAL FIELD OR INCUR RENCE OF SUCH EXPENSES WOULD GIVE IT ENDURING BENEFIT. ASSESSING OFFICER H AS NOT MADE ANY DISCUSSION ON THIS ASPECT. HE SIMPLY DISALLOWED TH E EXPENSES ON THE GROUND THAT ADDRESSES OF CERTAIN PREMISES WAS NOT MENTIONE D BY THE ASSESSEE AT THE FIRST INSTANCE. HE PRESUMED THAT THESE ARE THE NEW OFFICES AND EXPENSES INCURRED ON NEW ASSETS REQUIRED TO BE CAPITALIZED, BUT THIS CONCLUSION WAS NOT UPHELD BY THE LEARNED CIT(APPEALS) AND ASSESSEE HAS ALSO DEMONSTRATED THAT THESE PREMISES WERE NOT ACQUIRED IN THE ACCOUN TING YEAR RELEVANT FOR THIS ASSESSMENT YEAR. WE HAVE ALREADY TAKEN NOTE OF THE DATES ON WHICH PREMISES 17 WERE ACQUIRED. FROM PERUSAL OF THE DETAILS OF EXPEN SES, WE FIND THAT THESE ARE IN RESPECT OF WHITEWASHING, WOODEN PARTITION, DECOR ATIVE LAMINATION AND FAVICOL ETC. SMALL AMOUNT OF R.23,400 WAS INCURRE D BY THE ASSESSEE FOR CIVIL CONSTRUCTION BUT IT HAS REPLACED THE EXISTING WALL WHICH WAS PART OF RENOVATION. THERE IS NO MAJOR STRUCTURAL CHANGES CA RRIED OUT BY THE ASSESSEE, THEREFORE, IN OUR OPINION, LEARNED CIT(APPEALS) HAS ERRED IN PARTLY CONFIRMING THE DISALLOWANCE. WE ALLOW THE GROUND OF APPEAL RAISED BY THE ASSESSEE AND DELETE THE DISALLOWANCE OF RS.8,12,820 CONFIRMED BY THE LEARNED CIT(APPEALS). CONSEQUENTLY, THE GROUND APPE AL OF THE REVENUE IS REJECTED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. 17. DECISION PRONOUNCED IN THE OPEN COURT ON 25.10 .2011 SD/- SD/- ( G.E. VEERABHADRAPPA) ( RAJPAL YAD AV ) PRESIDENT JUDI CIAL MEMBER DATED: 25/10/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR