Appeal Details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 9473 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 6 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-08-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Assessment Year
2013-2014
Appeal Filed On
15-02-2018
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . , . , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.549/CHNY/2018 ! ! /ASSESSMENT YEAR: 2013-14 M/S. EMERGE LEARNING SERVICES- PVT. LTD., NO.60 (OLD NO.165), LUZ CHURCH ROAD, OPP. NAGESWARARAO PARK, MYLAPORE, CHENNAI-600 004. VS. THE INCOME TAX OFFICER, CORPORATE WARD-2(1), CHENNAI-600 034. [PAN: AACCE 1785 B] ( $ /APPELLANT) ( %&$ /RESPONDENT) $ ' / APPELLANT BY : MR.M.VISHWANATHAN, CA %&$ ' /RESPONDENT BY : MS. VIJAYAPRABHA, ADDL.CIT ' /DATE OF HEARING : 13.08.2020 ' /DT. OF PRONOUNCEMENT : 21.08.2020 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, IN ITA NO.54/CI T(A)-6/2016-17 DATED 28.12.2017 FOR THE AY 2013-14. 2. ON SCRUTINY OF M/S. EMERGE LEARNING SERVICES PVT . LTD, THE ASSESSEES CASE, FOR THE ASSESSMENT YEAR 2013-14, T HE AO FOUND IN THE P&L ACCOUNT THAT THE ASSESSEE CLAIMED RS.1,04,72,77 1/- AS AFFILIATION EXPENSES TO THREE PERSONS VIZ., BHARATHIYAR UNIVERS ITY, INTERNATIONAL ITA NO.549/CHNY/2018 :- 2 -: CENTRE FOR CULINARY ARTS AND AMERICAN HOSPITALITY A CADEMY, ON WHICH THE ASSESSEE HAD NOT DEDUCTED TDS. THEREFORE, INVOKING SECTION 40(A)(IA), THE AO DISALLOWED THE EXPENDITURE IN THE ASSESSMENT ORDER. AGAINST THAT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT( A). BEFORE THE LD. CIT(A), THE ASSESSEE CONCEDED THAT RS.5,10,799/- IS PAID AS LICENSE FEE TO AMERICAN HOSPITALITY ACADEMY FOR WHICH TDS WAS NOT MADE. THEREFORE, THE DISALLOWANCE MADE BY THE AO TO THIS EXTENT MAY BE SUSTAINED. HOWEVER, IN RESPECT OF OTHER TWO SUMS, THE ASSESSEE EXPLAINED THE NATURE OF TRANSACTIONS AND PLEADED, INTER ALIA, THAT THE I MPUGNED SUM WAS NOT AT ALL DUE TO THE ASSESSEE, BUT THE COURSE FEE DIRECTL Y REMITTED BY THE STUDENTS AS DEMAND DRAFTS (DDS) TO THE BHARATHIYAR UNIVERSITY (UNIVERSITY) WITH WHOM THE ASSESSEE IS A TECHNICAL COLLABORATOR (TC). THE ASSESSEE WAS NOT CONNECTED WITH THE COLLECTION AND ACTUAL EXPENSES OF THE IMPUGNED SUM. IN THIS REGARD, THE ASSESSEE FURNISH ED CERTAIN MATERIALS BEFORE THE LD. CIT(A) ALSO. THE LD. CIT(A) DISMISS ED THE APPEAL PRIMARILY FOR THE REASON THAT THE ASSESSEE DID NOT PRODUCE AN Y CONFIRMATION FROM THE UNIVERSITY IN SUPPORT OF ITS CONTENTIONS. AGGR IEVED AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPEAL BEFORE THIS TRIBUNAL . 3. THE CASE WAS HEARD THROUGH VIDEO CONFERENCING. THE LD. AR EXPLAINED THAT THE ASSESSEE ENTERED INTO AN AGREEME NT WITH BHARATHIYAR UNIVERSITY AS A TECHNICAL COLLABORATOR (TC) FOR THE UNIVERSITYS COURSES (BSC & DIPLOMA IN HOSPITALITY) THROUGH ONE OF ITS D IVISION AND TO MANAGE THE SPORT ADMISSION CUM LEARNING CENTERS (SALCS) . AS A TC, THE ITA NO.549/CHNY/2018 :- 3 -: ASSESSEE IS TO MANAGE ADMISSION OF THE SALCS, DEVE LOP CONTENT FOR SUBJECT MATTER IN HOSPITALITY/HOTEL CATERING MANAGE MENT ETC. THE SALCS WILL ADMIT STUDENTS AND FORWARD COMPLETE DOCUMENTS TO THE TC, THE ASSESSEE, AND IT WILL VERIFY THEM AND THEN FORWARD THEM TO THE UNIVERSITY FOR THE ADMISSIONS. THUS, THE ASSESSEE WILL ACT AS A BRIDGE BETWEEN THE SALCS AND BHARATHIYAR UNIVERSITY (UNIVERSITY). THE UNIVERSITY SHALL CIRCULATE THE STRUCTURE OF THE FEES TO BE COLLECTED FROM THE STUDENTS, INDICATING THE FEES PAYABLE TO THE UNIVERSITY, THE SHARES OF THE SALCS AND THE TC. THE SALCS SHALL COLLECT THE MONEY FROM THE STUDENTS, RETAIN ITS SHARE, TAKE DDS IN FAVOUR OF THE UNIVERSITY FOR ITS DUE AND A SEPARATE DD TOWARDS THE TECHNICAL COLLABORATORS SHARE I.E., TH E ASSESSEES SHARE. SINCE, THE ASSESSEE BEING A TC AND MANAGING ALL THE PROCESS, ALTHOUGH, IT HAS NOT RECEIVED THE TOTAL CASH, HOWEVER, FOR CONTR OL PURPOSES, IT HAS RECOGNIZED THE REVENUES OF THE UNIVERSITY FEE AND SALCS SHARE IN ITS ACCOUNTS AND THEREFORE ACCOUNTED THE AMOUNT DUE TO THEM AS EXPENSES. THE REVENUE PORTIONS OF THE UNIVERSITY AND THE SALC S NEVER REACHED IT. THE ASSESSEE ALSO DOES NOT HAVE ANY AUTHORITY TO CO LLECT UNIVERSITY FEES AS WELL AS THE SALCS FEES. THIS BEING THE FACT, THE Q UESTION OF TAX DEDUCTION ON THE MONEY NOT DUE TO THE ASSESSEE DOES NOT ARISE AT ALL. THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS AND THE CIRCU MSTANCES OF THE CASE, DISMISSED THE APPEAL HOLDING, PRIMARILY FOR THE REA SON THAT THE ASSESSEE HAS NOT SUBMITTED ANY CONFIRMATION FROM THE UNIVERS ITY TO THE EFFECT THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS DIRECTL Y RECEIVED BY THE UNIVERSITY FROM THE STUDENTS TO THE EXTENT DEBITED IN THE P&L ACCOUNT AND ITA NO.549/CHNY/2018 :- 4 -: THE ASSESSEE IS NOT ABLE TO DEMONSTRATE AS TO WHETH ER THE PAYMENTS WERE OFFERED BY THE PAYEE AS THEIR INCOME OR RECEIPTS IN THE BOOKS AND OFFERED FOR TAX IF LIABLE OR CLAIMED EXEMPTION ON THE SAID RECEIPTS. IN THIS REGARD, THE LD. AR INVITED OUR ATTENTION TO THE COPY OF ASS ESSEES LETTER DATED 28.01.2020 AND ITS ENCLOSURES, WHEREIN, A COPY OF T HE CERTIFICATE ISSUED BY THE DIRECTOR FOR SCHOOL OF DISTANCE EDUCATION, BHAR ATHIYAR UNIVERSITY, IN REF NO.BU/SDE/EMERGE LEARNING/DST/2019-20 DATED 24. 01.2020 AS ATTACHED AND RELIED ON IT. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE RELEVANT MATERIAL. THE COPY OF CERTIFICATE RELIED ON BY THE LD. AR SPECIFIES, INTER ALIA, THAT THE ASSESSEE HAS HANDED OVER THE DDS REM ITTED BY THE STUDENTS OF THE UNIVERSITY. THE UNIVERSITY IS EXEMPTED FROM INCOME TAX, NO TDS HAS TO BE DEDUCTED ON THE IMPUGNED SUM AND ALL THE FEES REMITTED THROUGH THE ASSESSEE HAVE BEEN DULY ACCOUNTED AS A RECEIPT IN THE BOOKS OF ACCOUNT OF THE UNIVERSITY. THIS CERTIFICATE IS REL EVANT MATERIAL ON THE CORE ISSUE OF THIS APPEAL. IT IS CLEAR FROM THE ORDER O F THE LD. CIT(A) THAT THE ASSESSEE MADE AN ATTEMPT TO EXPLAIN THE TRANSACTION S AND FURNISHED CERTAIN MATERIAL BEFORE HIM. IN OUR CONSIDERED VIE W, THE NATURE OF THE IMPUGNED TRANSACTIONS HAS NOT BEEN PROPERLY EXAMINE D BY THE LOWER AUTHORITIES. FIRST OF ALL, IT IS ESSENTIAL TO DETE RMINE THE NATURE OF TRANSACTION, I.E. WHETHER THE IMPUGNED SUM WAS DUE TO THE ASSESSEE AT ALL AND THEN WHETHER IT FALLS WITHIN THE SCOPE OF THE T DS OR NOT. IN THE FACTS ITA NO.549/CHNY/2018 :- 5 -: AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THE ISSU ES BACK TO THE AO FOR A FRESH EXAMINATION. THE ASSESSEE SHALL PLACE ALL MA TERIAL IN SUPPORT OF ITS CONTENTION BEFORE THE AO AND COMPLY WITH THE REQUIR EMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO ON DUE EXAMINATION AS WELL AS ON APPROPRIATE ENQUIRY, AS DEEMED FIT, AND AFTER AFFOR DING SPECIFIC OPPORTUNITY ON THE ISSUE, IF ANY, ON WHICH THE ASSESSING OFFIC ER NEEDS CLARIFICATION ETC., SHALL PASS THE ORDER IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 21 ST DAY OF AUGUST, 2020, IN CHENNAI. SD/- SD/- ( . / . . 0 ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED:21 ST AUGUST, 2020. TLN ' % 23 43 /COPY TO: 1. $ /APPELLANT 4. 5 /CIT 2. %&$ /RESPONDENT 5. 3 % /DR 3. 5 ( ) /CIT(A) 6. ! /GF
Other Referred Cases
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Laws Referred To
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Expert Summary
The AO observed that the assessee claimed ₹1,04,72,771/- as affiliation expenses paid to three entities—Bharathiyar University, International Centre for Culinary Arts, and American Hospitality Academy—without deducting TDS. Invoking section 40(a)(ia), the AO disallowed the expenditure.
The assessee submitted that ₹5,10,799/- was paid as licence fee to American Hospitality Academy, on which TDS had indeed not been deducted; therefore, disallowance to that extent was admitted and sustained.
With respect to the remaining amount, the assessee explained that it had entered into an agreement with Bharathiyar University as a Technical Collaborator (TC) for conducting the University’s B.Sc. and Diploma courses in Hospitality through its division, and for managing the Sport Admission-cum-Learning Centres (SALCs). Under the arrangement, SALCs collected fees from students, retained their share, and remitted the University’s share and the assessee’s share by separate demand drafts. Although the assessee did not physically receive the entire amount, it recognised the University’s fee and the SALCs’ share in its books and recorded the corresponding amounts as expenditure.
The Tribunal observed that Bharathiyar University is exempt from income tax, and therefore, no TDS was required to be deducted on payments made to it. However, the Tribunal also noted that the true nature of the transactions had not been properly examined by the lower authorities.
Accordingly, the matter was remitted back to the AO for fresh examination in accordance with law.
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