M/s. Aegis BPO Services (Gurgaon) Ltd., New Delhi V. ACIT, New Delhi

ITA 4477/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3779 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4477/DEL/2014 (ASSESSMENT YEAR: 2004 - 05 ) M/S. AEGIS BPO SERVICES (GURGAON) LTD, (FORMERLY TELETECH SERVICES (INDIA) LTD, C/O/ JC BHALLA & CO. B - 17, MAHARANI BAGH, NEW DELHI PAN:AABCT8103B VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 6(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, CA REVENUE BY: SHRI ARUN KUMAR YADAV, SR. DR DATE OF HEARING 15/11 /2017 DATE OF PRONOUNCEMENT 0 7 / 0 2 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT( A) - IV, NEW DELHI DATED 02.05.2014 FOR THE ASSESSMENT YEAR 2004 - 05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LD ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 27222740/ - ON ACCOUNT OF TECHNICAL FEES PAYABLE AS PER AGREEMENT WITH THE JOINT VENTURE COLLABORATORS. 3. THAT ASSESSEE IS A COMPANY WHO FILED ITS RETURN OF INCOME ON 1/11 2004 DECLARING A LOSS OF RS. 92604760/ . DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE HAS CLAIMED THAT IT IS DERIV ING INCOME FROM RENDERING VARIOUS SERVICES BY TAKING OVER THE EXISTING CALL CENTRE BUSINESS OF M/S BHARTI INFOTRACK LTD WHICH WAS UNDER THE SAME MANAGEMENT. THE ASSESSEE ACQUIRED THE ABOVE BUSINESS BY BU SINESS TRANSFER AGREEMENT DATED 17/7/2003 THROUGH SLUMP SALE. M/S. AEGIS BPO SERVICES (GURGAON) LTD VS ITA NO. 4477/DEL/2014 (ASSESSMENT YEAR: 2004 - 05) PAGE | 2 4. THE LD. ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED TO HAVE INCURRED THE SUM OF RS. 27222740/ AS TECHNICAL FEES PAYABLE TO ITS OVERSEAS EQUITY SHARE HOLDER. THE ABOVE SUM INCL UDED MANPOWER COST REIMBURSEMENT OF RS. 1.92 CRORES AND OUT OF POCKET TRAVELLING EXPENSES OF RS. 79.97 LACS. THEREFORE THE LD. ASSESSING OFFICER PROCEEDED TO EXAMINE THE ALLOWABILITY OF SUCH EXPENSES AS DEDUCTION UNDER SECTION 37 OF THE INCOME TAX ACT. THE JUSTIFICATION FOR ALLOWABILITY WAS ALSO ASKED FROM THE ASSESSEE ABOUT SUCH CLAIM. THE ASSESSEE SUBMITTED THAT FOREIGN PARTY IS IN POSSESSION OF THE KNOW - HOW CONCERNING THE SETTING UP AND OPERATION OF THE CUSTOMER MANAGEMENTS CALL CENTRE AND HAS TECHNICAL AND NON - TECHNICAL SKILLS. IT WAS FURTHER STATED THAT THE SERVICES WERE IN THE NATURE OF CONSULTING, ADVISORY, OPERATING AND ASSESSMENT SERVICES FOR SETTING UP AND OPERATING THE CUSTOMER MANAGEMENT AND CALL CENTRES. IT WAS FURTHER STATED THAT THE ASSESSEE IS IN INITIAL YEARS OF ITS OPERATION AND THEREFORE FOR TRANSFERRING THE BEST PRACTICES IN IMPORTING APPROPRIATE ADVISES IN SUPPORT IN RENDERING OF THE SERVICES , ASSESSEE DID NOT POSS ESS THE REQUISITE QUALIFICATION. THEREFORE, THE SERVICES WERE RENDERED BY THE EQUITY SHARE HOLDER WHICH IS AN EXPERT IN THIS LINE. THE LD. ASSESSING OFFICER CONSIDERED THE EXPLANATION OF THE ASSESSEE BUT REJECTED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE LD. AO WAS OF THE VIEW THAT MERE CREDITING OF THE ACCOUNT OF THE FO REIGN EQUITY SHAREHOLDER IN THE NAME OF TECHNICAL FEES WITHOUT FILING THE RELEVANT COPY OF AGREEMENT AND ALSO WITHOUT BRINGING ON RECORD EVIDENCE OF THE ACTUAL RENDERING OF SERVICES AGAINST THESE PAYMENTS DOES NOT ENTITLED THE ASSESSEE TO CLAIM THEM AS DED UCT IBLE EXPENSES UNDER SECTION 37 OF THE INCOME TAX ACT. THEREFORE THE ABOVE SUM WAS DISALLOWED. 5. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) ON THIS GROUND WHO AGREED WITH THE VIEWS OF THE LD. ASSESSING OFFICER. THE LD. CIT (A) WAS OF THE VIEW THA T NO EVIDENCES WERE PRODUCED BEFORE THE LD. ASSESSING OFFICER REGARDING THE RENDERING OF THE SERVICES BY THE OVERSEAS SERVICE PROVIDER. IT WAS FURTHER HELD BY HIM THAT THE BURDEN OF PROVING THAT THIS EXPENSES ARE DEDUCTIBLE IS ON THE ASSESSEE. THEREFORE HE UPHELD THE DISALLOWANCE. M/S. AEGIS BPO SERVICES (GURGAON) LTD VS ITA NO. 4477/DEL/2014 (ASSESSMENT YEAR: 2004 - 05) PAGE | 3 6. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT ASSESSEE HAS FILED THE COMPLETE DETAILS BEFORE THE LD. CIT(A) REGARDING DISALLOWANCE OF TECHNICAL FEES V IDE PAGE NO. 52 TO 69 OF THE PAPER BOOK . HE SUBMITTED THAT THIS INFORMATION W AS NOT CONSIDERED BY THE LD. CIT (A) WHILE DECIDING THE ISSUE. HE SUBMITTED THE DETAILS OF THE NATURE OF THE TECHNICAL FEES PAID. HE FURTHER STATED THAT IN FACT THE JOINT - VENTURE PARTNER DEBITED MANPOWER COST DETAILS OF WHICH ARE GIVEN IN THE ANNEXURE THER EBY PROVING THE NATURE OF THE SERVICES RENDERED . HE FURTHER SUBMITTED THE BREAKUP OF THE DETAILS OF SUCH TECHNICAL FEES. HE FURTHER REFERRED TO THE NAME OF THE PERSONS SHOWING THEIR FUNCTIONS AND THEIR ACTUAL COST. HE FURTHER SUBMITTED THAT THE NATURE OF WORK DONE BY THESE INDIVIDUAL PERSONS WERE ALSO EXPLAINED BEFORE THE LD. CIT (A). IN VIEW OF THIS HE SUBMITTED THAT THE LD. CIT (A) HAS MISCONSTRUED THE CLAIM OF THE ASSESSEE. IN VIEW OF THIS HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS JUSTIFIABLE AND T HE ASSESSEE HAS SUBSTANTIATED THE MANNER OF PROVIDING THE SERVICES AND ACTUAL RENDITION OF THE SERVICES , THEREFORE, IT IS ALLOWABLE UNDER SECTION 37 (1) OF THE INCOME TAX ACT. 7. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITY AND SUBMITTED THAT ASSESSEE HAS MISERABLY FAILED TO SUBSTANTIATE THE RENDITION OF THE SERVICES BY THE FOREIGN AE. HE SUBMITTED THAT THE ASSESSEE HAS NOT SUPPORTED THE CLAIM BY SUBMITTING THE AGREEMENTS AS WELL AS THE ACTUAL PROOF OF THE SERVICES RENDERED BY THE FOREIGN PARTY. HE SUBMITTED THAT MERE DEDUCTION OF TAX DOES NOT DECIDE THE CLAIM OF THE ALLOWABILITY OF AN EXPENDITURE UNDER SECTION 37 (1) OF THE INCOME TAX ACT. HE THEREFORE SUBMITTED THAT ASSESSEE HAS FAILED TO PROVE THE ALLOWABILITY OF SUCH CLAIM. THEREFORE, HE SUBMITTED THAT ORDERS OF THE LOWER AUTHORITIES MAY BE SUSTAINED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ASSESSEE HAS SUBMITTED THE TECHNICAL SERVICES AGREEMENT DATED 17/ 7/2003 BETWEEN CUSTOMER SOLUTIONS, MAURITIUS AND ASSESSEE. SUCH AGREEMENTS ARE PLACED AT PAGE NO. 1 - 33 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO SUBMITTED THE DETAILS OF ACTUAL SERVICES M/S. AEGIS BPO SERVICES (GURGAON) LTD VS ITA NO. 4477/DEL/2014 (ASSESSMENT YEAR: 2004 - 05) PAGE | 4 RENDERED BY THE FOREIGN PARTY TO THE ASSESSEE IN TERMS OF THAT AGREEMEN T. ASSESSEE SUBMITTED THE LIST OF THE PERSONS WHO WERE ENGAGED IN PROVIDING THE SERVICES TO THE ASSESSEE AND THEIR MANPOWER COST INVOLVED IN PROVISION OF THESE SERVICES. ASSESSEE HAS ALSO GIVEN THE COMPLETE DETAILS ABOUT THE NATURE OF WORK DONE BY EACH OF THE PERSON , WHEN HE IS DEPUTED FOR THE SERVICES TO THE ASSESSEE. HOWEVER ALL THESE DETAILS HAVE NOT BEEN REFERRED BY THE LD. CIT (A) IN HIS ORDER. FURTHERMORE THE CLAIM OF ALLOWABILITY OF A PARTICULAR EXPENDITURE AS DEDUCTION IS REQUIRED TO BE PROVED BY TH E ASSESSEE BEFORE THE LOWER AUTHORITIES. IN THE PRESENT CASE THE ASSESSEE IS REQUIRED TO PROVE ABOUT THE ACTUAL RENDITION OF THE SERVICES BY THE FOREIGN AE TO THE ASSESSEE BY ADEQUATE EVIDENCES. IT MUST ALSO BE SUPPORTED BY THE EVIDENCE OF THOSE PERSONS PR ESENT IN INDIA FOR THE RELEVANT PERIOD FOR PROVISION OF THE SERVICES BASED ON DOCUMENTATION FOR ACTUAL SERVICES RENDERED SHOWING THE NATURE OF SERVICES AND HOW THEY HAVE BEEN RENDERED. NOT ALL THESE DETAILS HAVE BEEN FORTHCOMING FROM THE ORDERS OF THE LOWE R AUTHORITIES AS WELL AS FROM THE SUBMISSION OF THE ASSESSEE. IN VIEW OF THIS WE SET ASIDE THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE BACK TO THE FILE OF THE LD. ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO PROVE THE RENDITION OF THE SERVICES I N APPROPRIATE MANNER BY THE FOREIGN ENTITY. NEEDLESS TO SAY THAT THE LD. ASSESSING OFFICER WILL EXAMINE SUCH DETAILS AND DECIDE THE CLAIM OF THE ASSESSEE THE ALLOWABILITY OF SUCH EXPENDITURE UNDER SECTION 37 (1) OF THE INCOME TAX ACT. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 / 0 2 / 2018 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 / 02 / 2018 A K KEOT COPY FORWARDED TO M/S. AEGIS BPO SERVICES (GURGAON) LTD VS ITA NO. 4477/DEL/2014 (ASSESSMENT YEAR: 2004 - 05) PAGE | 5 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI