ACIT, New Delhi V. M/s. True Developers Pvt. Ltd., Chennai

ITA 5319/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8336 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Business expenditure; Search and seizure
• Section: 142(1); 37(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G , NEW DELHI BEFORE SHRI O.P. KANT , ACCOUNTANT MEMBER AND SHRI K.N. CHARY , JUDICIAL MEMBER ITA NO .5319 /DEL/ 2015 ASSESSMENT YEAR: 2011 - 12 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 26, NEW DELHI VS. M/S. TRUE DEVELOPERS PVT. LTD., 1 ST FLOOR, PINNACL E BUILDING, INTERNATIONAL TECH P ARK, TATA MANI ROAD, CHENNAI PAN : AACCT4871F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.S. RANA, CIT(DR) RESPONDENT BY NONE ORDER PER O.P. KANT, A.M.: THE PRESENT APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 05.06.2015 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 29, NEW DELHI, [IN SHORT THE CIT(A) ]. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE BEING 50% OF THE GENERAL MANAGEMENT F EES AMOUNTING TO RS.52,20,000/ - PAID TO M/S ASCENDAS SERVICES (INDIA) PVT. LTD BY THE ASSESSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT( A) HAS ERRED IN DELETING ME ABOVE ADDITION WITHOUT APPRECIATING THE FACT THAT THE ONUS IS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF BUSINESS EXPENSES U/S 37(1) AND IN THIS CASE THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE HUGE PAYMENTS MADE TO M/S ASCEND AS SERVICES (INDIA) PVT. LTD. DATE OF HEARING 08.07.2019 DATE OF PRONOUNCEMENT 10.07.2019 2 ITA NO .5319/DEL/2015 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEFLY ST ATED FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) WAS CONDUCTED ON 19.10.2010 IN THE CASE OF IREO GROUP OF CASES, DURING WHICH, DOCUMENTS AND DATA STORAGE DEVICES ETC. BELONGING TO THE ASSESSEE COMPANY WERE FOUND AND SEIZED. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING NIL INCOME. STATUTORY NOTICES U/S 142(1) OF THE ACT WAS ISSUED AND SERVICED UPON THE ASSESSEE. 2.1 THE ASSESSEE HAS DECLARED INCOME FROM INTEREST ON FI XED DEPOSIT OF RS 36,48,892/ - AND A SUM OF RS 14,55,389/ - BEING EXCESS PROVISIONS WRITTEN BACK. THE ASSESSEE COMPANY HAS DEBITED ADMINISTRATIVE AND OTHER EXPENSES OF RS . 1,47,63,636/ - AND THE MAJOR PART OF THIS EXPEN DITURE (A SUM OF RS.1,04,40,000/ - ) WAS DEBITED ON ACCOUNT OF GENERAL MANAGEMENT FEES. DURING THE YEAR , THE GENERAL MANAGEMENT FEES WAS PAID TO ASCENDAS SERVICES (INDIA) PVT . LTD . BY THE ASSESSEE COMPANY IN RESPECT OF PROVIDING THE MANAGEMENT SERVICES. THE ASSESSEE COMPANY VIDE LETTER DT . 12.03.2013 STATED THAT IT WAS HAVING NO SKILLED AND MANAGEMENT PERSONNEL OF HIGH CALIBER, THEREFORE , IT TOOK THE MANAGEMENT SERVICES FROM ASCENDAS SERVICES (INDIA) PVT . L TD FOR PROVIDING OVERALL MANAGEMENT LEADERSHIP AND ADVICE TO THE OWNER; SUPERVISING OP ERA TIONS AND OTHER COMPANY MATTERS ETC . 2.2 THE AO HELD THAT LEGAL AND PROFESSIONAL CHARGES ARE ITSELF A FEES PROVIDED BY THE ASSESSEE COMPANY TO CARRY OUT ITS WORK OR TO SEEK THE ADVICE/OPINION ETC. SEZ RELATED FEES AND LEASE RENT (THAT 3 ITA NO .5319/DEL/2015 TOO PAID TO GROUP COMPANIES) DON T REQUIRE ANY SKILLED PERSON. CONTRACTUAL WORK IS THE ONLY ACTIVITY WHICH REQUIRES SOME SKILLED MANAGEMENT STAFF BUT LOOKING TO THE VOLUME OF WORK DONE , VIS - A - VIS FEES PAID IT APPEARS THAT THE AMOUNT PAID AS GENERAL MANAGEMENT FEES IS NOT C OMMENSURATE TO THE WORK DONE FOR THE COMPANY. HE FURTHER HELD THAT THE AMOUNT PAID TO ASCENDAS SERVICES (INDIA) PVT. LTD . WAS NOT WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSINESS , THEREFORE, HE DISALLOWED 50% OF THE GENERAL MANAGEMENT FEES AND MADE ADDITION OF RS. 52,20,000/ - . AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO DELETED THE ADDITION. 2.3 AGGRIEVED FROM THE ORDER OF CIT(A), THE REVENUE IS BEFORE THE ITAT. 3. NONE PRESENT FOR THE ASSESSEE. 4. WE HAVE HEARD LEARNED SR. DR AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE SOLE ISSUE INVOLVED IN THIS CASE IS RELATED TO DISALLOWANCE OF RS. 52,20,000/ - FOR GENERAL MANAGEMENT FEES. O N PERUSAL, WE FIND THAT THE ISSUE IN DISPUTE HAS BEEN ADJUDICATED BY THE ITAT, DELHI BENCH IN ASSESSEE S OWN CASE PASSED ON 03.10.2018 IN ITA NO. 5318/DEL/2015 FOR ASSESSMENT YEAR 2010 - 11 , THE RELEVANT PARAGRAPHS ARE REPRODUCED AS UNDER: 4. WE HAVE HEARD THE ID. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, THE ASSESSEE IS DEVELOPING A SPECIAL ECONOMIC ZONE (SEZ) PROJECT AT COIMBATORE FOR WHICH IT HAS CLAIMED TO HAVE AVAILED THE SERVICES OF ASCENDAS SERVICES (INDIA) PVT. LTD.. IT IS ALSO NOT IN DISPUTE THAT ASCENDAS SERVICES (INDIA) PVT. LTD. IS A SINGAPORE GOVERNMENT COMPANY HAVING SPECIALIZED IN ERECTING IT PARKS, INDUSTRIAL AND LOGISTIC PARKS, ETC. 4 ITA NO .5319/DEL/2015 6. FROM THE PERUSAL OF IMPUGNED ORDER PASSED BY THE ID. CIT (A), IT GOES TO PROVE THAT THE EVIDENCE WAS THERE ON RECORD TO PROVE THAT 8 SKILLED PERSONNEL WERE AT THE DISPOSAL OF THE ASSESSEE TO LOOK AFTER THE WORK OF THE ASSESSEE S COMPANY FOR SEZ IN COIMBATORE. FURTHERMORE, FROM THE EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE, CIT (A) NOTICED THAT ASCENDAS SERVICES (INDIA) PVT. LTD. TEAM INVITED TENDERS FILED BY M/S. AHLUWALIA CONTRACTORS INDIA P. LTD. AND L & W CONSTRUCTION PRIVATE LIMITED TO DEVELOP TOTAL AREA OF 893,447.99 SQ.FT. AND 872,005.84 SQ.FIT RESPECTIVELY. THE ENTIRE TENDER RECORD HAS BEEN PERUSED AND SCRUTINIZED BY THE ID. CIT (A) HAV ING CONTRACT OF RS. 185 CRORES. 7. MOREOVER, AO HAS NOT DISPUTED THE FUNCTIONS PERFORMED BY THE SKILLED PERSONNEL HIRED BY THE ASSESSEE NOR HAS DISPUTED DOCUMENTS RELIED UPON BY THE ASSESSEE AS WELL AS BOOKS OF ACCOUNTS RATHER PROCEEDED TO DISALLOW 50% OF THE EXPENSES MERELY ON CONJECTURES AND SURMISES. MOREOVER, REVENUE AUTHORITIES ARE NOT PERMITTED TO COMPLETE THE ASSESSMENT BY SITTING ON THE ARM CHAIR OF BUSINESSMAN/ASSESSEE AND IT IS FOR THE ASSESSEE TO DECIDE WHICH OF THE SERVICES ARE NECESSARY FOR CA RRYING OUT ITS BUSINESS ACTIVITIES. 8. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE ID. CIT (A), PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. 5. IN VIEW OF ABOVE DECISION, WE DO NOT FIND ANY ILLEGALITY AND PERVERSITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 0 T H JULY , 2019. S D / - S D / - [ K.N. CHARY ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 T H JULY , 2019. RK/ - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI