ITO, Ward-17(2), Hyderabad, Hyderabad V. Fusol Advisory Pvt.Ltd., Sec'bad, Secunderabad

ITA 369/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2509 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D PRASADA RAO
• Assessee Lawyers: M V ANIL KUMAR
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA. NO.369/HYD/2016 ASSESSMENT YEAR:2011 - 2012 INCOME TAX OFFICER, WARD - 17(2), HYDERABAD. VS. M/S. FUSOL ADVISORY PVT LTD., 79, BEHIND APOLLO HOSPITAL, VIKRAMPURI, SECUNDERABAD. PAN: AABCF 1490 M (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI M.V. ANIL KUMAR FOR REVENUE : SHRI D. PRASADA RAO DATE OF HEARING : 13.02.2018 DATE OF PRONOUNCEMENT : 16 .02.2018 ORDER PER V. DURGA RAO, JM . THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 5, HYDERABAD AND IT PERTAINS TO A.Y. 2011 - 2012. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN LAW AND NOT JUSTIFIED IN HOLDING THAT THE PAYMENT MADE BY THE ASSESSEE TO M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD OF RS. 1,43,36,108/ - (AFTER REDUCING SERVICE FEE OF RS. 5,22,444/ - ) AMOUNTS TO REIMBURSEMENT OF EXPENSES AND NO TAX IS DEDUCTIBLE ON THIS PAYMENT, WITHOUT APPRECIATING THAT THE PAYMENT WAS A CONTRACTUAL OBLIGATION ARISING OUT OF THE MOU ENTERED BY THE ASSESSEE WITH M/S. ADECCO FLEXIONE WOR KFORCE SOLUTIONS PVT LTD. 2. THE LD. CIT(A) ERRED IN HOLDING THAT PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED IN RESPECT OF PAYMENT OF RS. 1,43,36,108/ - WHICH ACTUALLY PAID DURING THE FINANCIAL YEAR, WITHOUT APPRECIATING THAT IN THE CONTEXT OF SECTIO N 40(A)(IA) OF THE ACT THE TERM PAYABLE WOULD INCLUDE AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR . 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF ADVISORY SERVICES. ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. NIL. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. DURING THE SCRUTINY PROCEEDINGS, A.O NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF R S. 1,48,62,567/ - TOWARDS OUTLET OUTSOURCED EXPENDITURE WHICH CONSTITUTES RS. 1,43,36,108/ - SALARY REIMBURSEMENTS AND AN AMOUNT OF RS. 5,22,644/ - AS SERVICE FEE . WHEN THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE REASON FOR NON - DEDUCTION OF TDS ON THE ABOVE AMOUNT, ASSESSEE SUBMITTED THAT THE ASSESSEE - COMPANY HAS ENTERED INTO AN AGREEMENT WITH M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., WHEREIN THE LATER HAS AGREED TO SUPPLY EMPLOYEES TO THE ASSESSEE. AS PER THE AGREEMENT, THE ASSESSEE HAS TO RE IMBURSE THE SALARIES AND PAY THE SERVICE FEE TO M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., APART FROM STATUTORY DUES LIKE SERVICE TAX ETC. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, A.O WAS OF THE OPINION THAT THE PAYMENT OF RS. 1,48,62,56 7/ - IS NOTHING BUT SALARIES PAID TO THE EMPLOYEES OF M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., AND THEREFORE, CONSIDERING THE ASSESSEES FAILURE TO DEDUCT TDS AS PER THE PROVISIONS OF SECTION 194C OF THE ACT, A.O DISALLOWED AN AMOUNT OF RS. 1,43,3 6,108/ - AND SERVICE FEE OF RS. 5,22,644/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE LD. CIT(A), ASSESSEE SUBMITTED THAT THE AMOUNT OF RS. 1,43,36,108/ - CONSTITUTES SALARY REIMBURSEMENTS PAID BY THE ASSESSEE AS PER THE AGREEMENT ENTERED INTO WITH M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., AND HENCE NO TDS IS REQUIRED TO BE DEDUCTED. BEFORE LD. CIT(A) , ASSESSEE RELIED ON CERTAIN CASE LAW VIZ., (1) THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDUSTRIAL ENGINEERING PROJECTS (P) LTD (203 ITR 1014) (DEL.); (2) THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE 3 OF CIT VS. SIEMENS AKTINGESELLSCHAFT (310 ITR 320) (BOM.) AND (3) CIT VS. DLF COMME RCIAL PROJECT CORP IN ITA NO . 627/2012 AND ITA 507/2013 (DEL .) DATED 15.07.2017 . THE LD. CIT(A) CONSIDERED THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD., AND GAVE A CATEGORICAL FINDING THAT ACCORDING TO THE SAID AGREEMENT THE PAYMENT OF RS. 1,43,36,108/ - WAS MADE BY THE ASSESSEE ON ACCOUNT OF REIMBURSEMENT OF EXPENSES AND NOT AS SALARIES. FURTHER, LD. CIT(A) BY FOLLOWING THE DECISIONS OF HONBLE DELHI HIG H COURT (SUPRA) AS WELL AS THE DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA) ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE GROUNDS. 5. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O. 6. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISIONS OF THE VARIOUS HIGH COURTS AN D STRONGLY RELIED ON THE ORDER PASSED BY THE LD. CIT(A). 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 WORKFORCE SOLUTIONS PVT LTD ., AGREED TO SUPPLY EMPLOYEES TO THE ASSESSEE AND THE ASSESSEE - COMPANY HAS TO REIMBURSE THE SALARIES AND PAY THE SERVICE FEES TO M/S. ADECCO FLEXIONE WORKFORCE SOLUTIONS PVT LTD., APART FROM STATUTORY DUES LIKE SERVICE TAX. THE LD. 4 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 FAR AS THE CASE LAW RELIED UPON BY THE LD. CIT(A) I.E., THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTONOGESELLSCHAFT (SUPRA) IS RELEVANT FOR THE PRO POSITION 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), HONBLE DELHI HIGH COURT HELD THAT REIMBURSEMENT OF EXPENSES CAN, UNDER NO CIRCUMSTANCES, BE REGARDED AS REVENUE RECEIPT. AS WE LL, I N THE CASE OF CIT VS. DLF COMMERCIAL PROJECT CORP (SUPRA), HONBLE 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 HI GH 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. OUT 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 REMAIN ING AMOUNT IS THE REIMBURSEMENT OF SALARY AND STATUTORY PAYMENT. IN THE INSTANT CASE, WHICH WAS REIMBURSEMENT BY THE ASSESSEE, WAS THE ACTUAL SALARY OF THE DEPUTED PERSONNEL. THEREFORE, FOR EACH DEPUTED PERSONNEL, THE AMOUNT RECEIVED BY IT WAS INCOME CHA RGEABLE 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 EXPENDIT URE IN HANDS OF SUBSIDIARY COMPANY WHILE REIMBURSING SAME TO HOLDING COMPANY. 8. THUS, CONSIDERING THE FACTS 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, 5 WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE SAME DOES NOT CALL FOR INTERFERENCE . 9. IN SO FAR AS THE SERVICE FEE COMPONENT OF RS. 5,22,444/ - IS CONCERNED, THE ASSESSEE HAS ACCEPTED BEFORE TH E A.O. TO DISALLOW THE SAME AND THEREFORE, THIS ISSUE DEMANDS NO SEPARATE FINDING. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 T H FEBRUARY, 2018 S D / - S D / - (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 1 6 T H FEBRUARY, 2018. OKK, SR.PS COPY TO 1. M/S. FUSOL ADVISORY PVT LTD., 79, BEHIND APOLLO HOSPITAL, P&T COLONY, VIKRAMPURI, SECUNDERABAD. 2. ITO, WARD 17(2), 6 TH FLOOR, B BLOCK, AC GUARDS, HYDERABAD. 3. CIT (A) - 5 , HYDERABAD. 4. PR. CIT - 5 , HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE