Intrepid Travel Pty. Ltd., New Delhi V. ADIT, New Delhi

ITA 5566/DEL/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6689 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA
• Assessee Lawyers: MANONEET DALAL; SIDDHARTH NAUTIYAL
• Keywords: Double taxation relief
• Section: 143(3); 234B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 5566/DEL/2010 ASSTT. YRS: 2007-08 INTREPID TRAVEL PTY. LTD., VS. ASSTT. DIT CIRCLE 1(2), 23/2, EAST PATEL NAGAR, NEW DELHI. NEW DELHI-110008. PAN: AACFI 1289 F ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI MANONEET DALAL ADV. & SH. YISHU GOEL ADV. & SH. SIDDHARTH NAUTIYAL CA RESPONDENT BY : SHRI ANUJ ARORA CIT(DR) DATE OF HEARING : 25/07/2016. DATE OF ORDER : 29/07/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ASSESSMENT ORDER DATED 01.10.2010 PASSED U/S 143(3) R.W.S. 144C(1) OF THE I.T ACT, 1961. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UND ER: 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPUTING THE INCOME OF THE APPELLANT FOR THE RE LEVANT ASSESSMENT YEAR AT RS.92,15,592/- AS AGAINST INCOME OF RS.64,56,352/- RETURNED BY THE APPELLANT. 2 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN RESTRICTING THE CLAIM OF DEDUCTION ON ACCOUNT OF FEES PAID TO TRAVEL GUIDES TO RS. 1,00,,65,288/- AS AGAI NST RS. 1,05,95,040/- CLAIMED BY THE APPELLANT, ALLEGING TH AT THE APPELLANT FAILED TO SUBSTANTIATE THE AFORESAID CLAI M. 3. THAT THE ASSESSING OFFICER ERRED IN DISALLOWIN G DEDUCTION OF RS.22,29,488/-, BEING SALARY PAID TO EMPLOYEES OF THE HEAD OFFICE, ALLEGING THAT THE APP ELLANT FAILED TO SUBSTANTIATE THE AFORESAID CLAIM. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN CHARGING INTEREST UNDER SECTION 234B OF THE ACT. 2. BRIEF FACTS OF THE CASE, AS OBTAINING FROM THE A SSESSMENT ORDER, ARE AS UNDER:- 2.1. INTREPID INDIA BRANCH STARTED OPERATION IN AUG UST 2006, AFTER APPROVAL FROM THE RESERVE BANK OF INDIA, WITH THE OBJECTIVE OF PROVIDING TRAVEL AND TOURISM RELATED SERVICES IN INDIA. AS PART OF ITS S ERVICES, INTREPID INDIA BRANCH OFFICE PROVIDES COORDINATION AND SUPPORT SER VICES TO ITS HEAD OFFICE, INTREPID AUSTRALIA, IN RESPECT OF THE TOURS OPERATE D BY IT FOR CUSTOMERS OF INTREPID AUSTRALIA. 2.2. THE SUPPORT SERVICES INCLUDE ATTENDING TO THE ADMINISTRATION AND COORDINATION OF THE TORUS BY ARRANGING FOR HOTEL AC COMMODATION, TRAVEL, TRANSPORT, TOUR GUIDES, AND OTHER SUCH TRAVEL RELAT ED ACTIVITIES, FOR THE ITINERARIES ORGANIZED BY INTREPID ILL INDIA. 2.3. INTREPID FOCUSES ON A NICHE STYLE OF TRAVELLIN G IN WHICH TRAVELERS EXPERIENCE THE LOCAL PUBLIC TRANSPORT FOR COMMUTING , SMALL-SCALE LOCALLY- 3 OWNED ESTABLISHMENTS FOR LODGING AND EATING, TRAVEL LING IN SMALL GROUPS WHILE STILL MAINTAINING HIGH 'TRAVELLING' STANDARDS . THUS, INTREPID IS APPOSITE FOR TRAVELERS WHO ARE GALLANT AND WANT TO BECOME A PART OF NEW DESTINATIONS RATHER THAN ONLY VISITING THEM. 2.4. INTREPID TRAVEL PTY LTD HAS TIE-UPS WITH VARIO US LOCAL CONTRACTORS WHO ASSIST INTREPID 'IN ORGANIZING THE TOURS FOR IT S TRAVELERS. INTREPID TRAVEL PTY LTD IS INCORPORATED IN AUSTRALIA AND IS RESIDEN T OF AUSTRALIA FOR TAX PURPOSES. INTREPID INDIA BRANCH OFFICE IS NOT CLAIM ING ANY BENEFIT UNDER DTAA. INTREPID TRAVEL PTY LTD DOES NOT HAVE LIAISON OFFICE IN INDIA. INTREPID TRAVEL PTY LTD AUSTRALIA, HAS 'A WHOLLY OW NED SUBSIDIARY COMPANY INCORPORATED IN INDIA 'INTREPID TOURS AND TRAVEL IN DIA PVT. LTD'. THE SUBSIDIARY DID NOT DO ANY BUSINESS IN AY 2007-08. 3. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARIN G INCOME OF RS. 64,56,352/-. THE AO NOTICED THAT ASSESSEE HAD CLAI MED AN EXPENDITURE OF RS. 25,47,913/- UNDER THE HEAD SALARY & WAGES IN THE MONTH OF MARCH 2007 OUT OF TOTAL SALARY OF RS. 45,41,986/-. IN RE SPONSE TO AOS SHOW CAUSE NOTICE, THE ASSESSEE REPLIED AS UNDER: THE SALARY OF RS. 2.547.913 BOOKED IN THE MONTH OF MARCH. 2007 INCLUDES A CROSS CHARGE OF RS. 2.229.48 8/- FROM INTREPID TRAVEL AUSTRALIA PTY LTD {'HEAD OFFIC E') AN ACCOUNT OF SALARY COST OF EMPLOYEES WORKING FOR THE ASSESSEE. IT IS SUBMITTED THAT THE SUBJECT YEAR BEI NG THE 4 FIRST YEAR OF INDIAN BRANCH OFFICE OPERATIONS. THE HEAD OFFICE HAD DEPUTED FEW OF ITS EMPLOYEES IN INDIA FO R PROVIDING ASSISTANCE FOR STARTING UP THE OPERATIONS IN INDIA. THE EMPLOYEES OF THE HEAD OFFICE HAD VISITED INDIA AND HAD PROVIDED TRAINING TO NEW RECRUITED EMPLOYEE S IN INDIA, ASSISTED IN MAKING THEM UNDERSTAND THE NORMS/POLICIES OF THE HEAD OFFICE. ETC. THE SALARY COST OF THESE EMPLOYEES WAS PAID BY THE HEAD OFFICE, WHICH WAS LATER CROSS CHARGED TO THE BRANCH OFFICE ON A COST- TO-COST BASIS IN THE MONTH OF MARCH. 2007 ... 3.1. THE AO NOTICED THAT THE ASSESSEE FURNISHED THE NAMES OF FIVE PERSONS TO WHOM THE PAYMENTS HAD BEEN MADE BUT NO DETAILS A S TO THEIR VISIT TO INDIA AND PERIOD OF THEIR STAY IN INDIA WAS GIVEN. THE A O DISALLOWED THE ASSESSEES CLAIM, INTER ALIA, OBSERVING AS UNDER: EVEN IF THE AMOUNT IS CHARGED BY HEAD OFFICE AND WH ICH WAS LATER CROSS CHARGED TO BRANCH OFFICE IN MONTH O F MARCH 2007, THESE DETAILS NEEDED TO BE FURNISHED BU T INSPITE OF OPPORTUNITY GIVEN THIS HAS NOT BEEN DONE . ASSESSEE HAS SIMPLY FURNISHED THAT IT HAS DEDUCTED TAX AT SOURCE AND DEPOSIT THE SAME BUT REQUISITE DETAILS/ EVIDENCE HAVE NOT BEEN FILED. AS SUCH IN THE ABSENC E OF ANY COGENT EVIDENCE IN THIS REGARD, THIS EXPENDITUR E CANNOT BE ALLOWED AND THIS WILL BE ADDED TO THE INC OME OF THE ASSESSEE . 3.2. THIS ORDER WAS PASSED IN PURSUANCE TO THE DIRE CTIONS OF LD. DRP VIDE ORDER DATED 27.9.2010, WHEREIN IN PARA 4, LD. DRP H AD OBSERVED AS UNDER: THE DETAILS FILED BY THE AR INCLUDES THE SCOPE OF W ORK CARRIED ON BY THE EMPLOYEES, THEIR NAMES, THE TDS CHALLAN O F RS. 5 7,03,643/- DATED: 30.10.2007. THE AR HAS SUBMITTED THAT THE HEAD OFFICE DEPUTED FIVE EMPLOYEES TO ASSIST THE BO FOR STARTING HIS OPERATION AS THIS WAS THE FIRST YEAR OF OPERATI ON. THE SCOPE OF WORK INCLUDED TRAINING TO THE EMPLOYEES OF THE B O, SHARING OF EXPERIENCE, APPRISING THEM OF COMPANY'S OBJECTS ETC. HOWEVER AS ~ MENTIONED BY THE AO IN THE DRAFT ORDER NO DETAILS REGARDING THE DATES, PERIOD OF THEIR STAY IN INDIA, THE BASIS OF ALLOCATION OF SALARY TO THE BO ETC. ARE FILED. IN T HE ABSENCE OF THESE DETAILS THE ACTION OF AO IN DISALLOWING THESE EXPENSES IS FOUND TO BE IN ORDER AND HENCE ASSESSEE'S OBJECTION IS REJECTED . 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE DEBITS THE SALARY IN ITS BOOKS OF A/C WHICH IS PAID TO EMPLOYEES AND THE SAME IS REIMBURSED TO ASSESSEE ON COST + 5% BASIS. THEREFORE, THE ASSESSE ES REVENUE PRIMARILY DEPENDS UPON THE SERVICES RENDERED BY IT AND, THERE FORE, REVENUE EARNED BY IT IS DIRECTLY PROPORTIONAL TO THE SERVICES RENDERED B Y IT. HE SUBMITTED THAT ALL THESE ASPECTS HAVE NOT BEEN EXAMINED BY AO. 5. LD. CIT(DR) SUBMITTED THAT ASSESSEE HAS NOT PROV IDED ANY DETAILS BEFORE THE LOWER REVENUE AUTHORITIES AND, THEREFORE , THE DISALLOWANCE WAS RIGHTLY CONFIRMED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE HAVE REPRODUCED EARLIER THE REPLIES OF ASSESSEE AND THE FINDINGS OF AO, INCLUDING THAT OF DRP FROM WHICH IT IS EVIDENT THAT THE DISALLOWANCE HAS BEEN MADE PRIMARI LY ON THE GROUND THAT DETAILS WERE NOT COMPLETELY FURNISHED BY ASSESSEE. FURTHER, THE ASSESSEES 6 PLEA OF OBTAINING MORE AND MORE REVENUE ON ACCOUNT OF RENDERING OF SERVICES, AS NOTED EARLIER, HAS NOT BEEN CONSIDERED BY LOWER REVENUE AUTHORITIES. UNDER SUCH CIRCUMSTANCES, WE SET ASIDE THE ORDER OF AO AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR PASSI NG DE NOVO ASSESSMENT ORDER, WITHOUT BEING INFLUENCED BY ANY OBSERVATIONS MADE BY US EARLIER. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCEMENT IN OPEN COURT ON 29/07/2016. SD/- SD/- ( C.M. GARG ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29/07/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.