Ramesh Babu Kuppilli, CHENNAI V. ACIT, CHENNAI

ITA 657/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5931 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIJIT RAKSHIT
• Assessee Lawyers: P K PARPIA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , , % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.657/MDS/2017 & & /ASSESSMENT YEAR: 2011-12 SHRI RAMESH BABU KUPPILLI, NO.5C, 1 ST MAIN ROAD, IA-3, K G GREEN MEADOWS, 1 ST MAIN ROAD, ANDAL NAGAR, ADAMBAKKAM, CHENNAI-600 088. [PAN: AWDPK 9160 G] VS. THE ASST. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-IV, CHENNAI. ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.P.K.PARPIA, CA *+) , /RESPONDENT BY : MR.AMIJIT RAKSHIT, JCIT , /DATE OF HEARING : 29.08.2017 , /DATE OF PRONOUNCEMENT : 31.10.2017 / O R D E R PER S. JAYARAMAN , ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNAI, IN ITA NO.668/CIT (A)-15/2013-14/AY 2011-12 DATED 21.12.2016 FOR THE AY 2011-12. ITA NO.657/MDS/2017 :- 2 -: 2. SHRI RAMESH BABU KUPPILLI, THE ASSESSEE, IS AN I NDEPENDENT SOFTWARE CONSULTANT AND US CITIZEN. HE WORKED AS A CONSULTAN T WITH ZHONE TECHNOLOGIES INC. (ZHONE) WHICH IS A HARDWARE/SOFTW ARE SOLUTION PROVIDER OF COMMUNICATION EQUIPMENT WITH CUSTOMERS ALL OVER THE WORLD. ZHONE HAD OFFSHORE DEVELOPMENT CENTRE WITH TECH MAHENDRA, CHENNAI. THE ASSESSEE WAS A CONSULTANT TO THE OFFSHORE DEVELOPME NT TEAM IN CHENNAI ON BEHALF OF THE ZHONE . AS PER THE AGREEMENT, HE WAS PAID A CONSULTANT FEE BASED ON THE INVOICES RAISED BY HIM. THE AGREE MENT ALSO PROVIDED FOR REIMBURSEMENT OF EXPENSES. HE ADMITTED INCOME OF R S.43,04,260/- AGAINST WHICH HE CLAIMED RS.8,55,650/- EXPENDITURE TOWARDS POSTAGE & TELEPHONE EXPENSES, TRAVEL, VEHICLE MAINTENANCE(IN EXCESS OF RS.2,828/-), SALARY , BUSINESS PROMOTION, OTHER MAINTENANCE, ELE CTRICITY CHARGES, PRINTING & STATIONERY, DONATION. IN THE ASSESSMENT MADE FOR THE A Y 2011-12, THE AO EXAMINED THE CONTENTS OF THE CONTRA CT OF THE AGREEMENT AND FOUND THAT AS PER THE AGREEMENT, THE ASSESSEE I S ELIGIBLE FOR THE REIMBURSEMENT OF EXPENDITURE INCURRED W.R.T. THE IN COME FROM ZHONE OTHER THAN THE PROFESSIONAL FEES. THE ASSESSEE HAS PRODUCED A CONFIRMATION LETTER FROM ZHONE TECHNOLOGY WHICH STA TE THAT THE REIMBURSEMENT FOR THE A Y 2011-12 IS NIL. HOWEVER, AS PER THE ORIGINAL AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE ZHON E , THE ASSESSEE IS ELIGIBLE TO AVAIL THE BENEFIT OF REIMBURSEMENT OF E XPENDITURE INCURRED. SO THE AO HAD ADDED RS.8,55,650/- UNDER THE HEAD SHORT AGES, FOR THE REASON THAT THE ASSESSEE HAS NOT ADMITTED THE BENEFIT OF R EIMBURSEMENT OF SUCH EXPENDITURE BUT CLAIMED THEM AS EXPENDITURE IE AS I F SUCH REIMBURSEMENTS ITA NO.657/MDS/2017 :- 3 -: HAVE ACCRUED BUT NOT ADMITTED . AGGRIEVED , THE A SSESSEE FILED AN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A) , THE ASSES SEE FILED A CONFIRMATION LETTER FROM ZHONE STATING THAT HE HAS RECEIVED ONLY CONSULTANCY CHARGES AND NO OTHER REIMBURSEMENT WAS PAID TO HIM. HE CL AIMED THAT THE IMPUGNED EXPENDITURE WERE RELATING TO HIS PROFESSIO N OR CONSULTANCY . THE CIT (A) REQUIRED THE ASSESSE TO PRODUCE THE RELEVAN T BILLS/VOUCHERS, ETC., AND THE ASSESSEE PLEADED THAT THE PAYMENTS WERE MAD E THROUGH CASH, BANK AND CREDIT CARD AND PRODUCED THE RELEVANT BAN K ACCOUNT AND CREDIT CARD STATEMENTS. IN THE ABSENCE OF RELEVANT BILLS AND VOUCHERS, THE CIT (A) DISMISSED THE ASSESSEES APPEAL. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL. 3. THE AR SUBMITTED THAT THE ASSESSEE IS AN INDEPE NDENT SOFTWARE CONSULTANT AND IS A US CITIZEN RESIDENT IN INDIA. H E WORKS AS A CONSULTANT WITH ZHONE TECHNOLOGIES INC (ZHONE), LOCATED AT 719 5, OAKPORT STREET, OAKLAND, CALIFORNIA 94621, USA. ZHONE IS A HARDWAR E/SOFTWARE SOLUTION PROVIDER OF COMMUNICATION EQUIPMENT WITH CUSTOMERS ALL OVER THE WORLD. AS PER THE AGREEMENT (EXHIBIT A) WITH ZHONE , THE A SESSEE WAS ENTITLED TO FLAT CONSULTING FEE OF USD 9896 EVERY MONTH AND THE SAME WAS CREDITED TO HIS CITIBANK FCNR ACCOUNT. THE AGREEMENT ALSO PROVI DED FOR REIMBURSEMENT OF EXPENSE WHICH IS MAINLY IN THE NAT URE OF OVERSEAS TRAVEL FOR THE COMPANY. DURING THE FINANCIAL YEAR 2011-12 , THE ASSESSEE DID NOT GET ANY REIMBURSEMENT OF EXPENSES AND THE EMPLOYER, ZHONE HAVE ALSO CONFIRMED VIDE THEIR LETTER DATED 20.08.2013 (EXHIB IT B) THAT DURING THE ITA NO.657/MDS/2017 :- 4 -: YEAR THERE WAS NO REIMBURSEMENT PAID. FURTHER, ZHON E HAVE GIVEN ANOTHER LETTER DATED 11TH DECEMBER, 2016 CONFIRMING THAT THEY HAVE NOT REIMBURSED ANY EXPENSES DURING THE YEAR AND THAT AL L LOCAL EXPENSES IN THE RESIDENT CITY ARE TO BE BORNE BY THE ASSESSEE ( EXHIBIT C) AND THE COPY OF THE SAME WAS SUBMITTED TO THE CIT APPEALS. THE F ACT IS THAT THE ASSESSEE HAS RENDERED HIS CONSULTANCY SERVICES AND HAD RECEIVED INCOME WHICH HAS BEEN DECLARED FULLY FOR TAX PURPOSES. WIT H REGARD TO EXPENSES, HE HAS CLAIMED THE FOLLOWING EXPENSES FOR THE PUR POSE OF CONSULTANCY BUSINESS: POSTAGES & TELEPHONES 42,919 TRAVEL 2,23,486 VEHICLE MAINTENANCE 1,04,140 SALARY 2,72,300 BUSINESS PROMOTION 1,54,216 OTHER MAINTENANCE 42,907 ELECTRICITY CHARGES 25,346 PRINTING AND STATIONERY 7,356 TOTAL 8,72,670 OUT OF THE ABOVE, THE ASSESSING OFFICER HAS DISALLO WED RS.8,55,650/- ON THE BASIS OF THE AGREEMENT ALONE AND IN SPITE OF A CONFIRMATION LETTER FILED FROM EMPLOYER THAT THERE HAS BEEN NO REIMBURSEMENT. THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS AN INDEPENDENT SOFTWARE CONSULTANT, WORKS AS A CONSULT ANT. AS PER THE AGREEMENT, HE IS ENTITLED FOR REIMBURSEMENTS THAT C AN BE MAINLY IN THE NATURE OF OVERSEAS TRAVEL FOR THE COMPANY AND HE IS NOT ENTITLED FOR ANY LOCAL EXPENSES. THE REQUIRED PROOF WERE ALSO FURNIS HED BEFORE THE LOWER AUTHORITIES ALSO. THE ASSESSEE WAS IN CHARGE OF CHE NNAI OPERATION OF ITA NO.657/MDS/2017 :- 5 -: ZHONE , RECEIVED CONSULTANCY FEE AND ADMITTED THE SAME . HE HAD TO VISIT CLIENT IN MAHINDRA CITY AND OTHER PLACES FOR TROUBL E SHOOTING TOWARDS WHICH HE HAD INCURRED THE EXPENSES TOWARDS CAR MAINTENANC E, PETROL, DRIVER SALARY AS AN ORDINARY PRUDENT MAN WOULD DO WHICH ARE VERY NOMINAL HAVING REGARD TO HIS INCOME. THE EXPENSES CLAIMED I S MINIMAL COMPARED TO THE INCOME AND THESE EXPENSES WERE INCURRED BY T HE ASSESSEE FOR THE PURPOSE OF EARNING CONSULTANCY INCOME. THE CIT (A) ERRED IN NOT CONSIDERING THE FACTS PROPERLY. FURTHER, HE HAS NOT CONSIDERED THE CLAIM ON THE BASIS OF REASONABLENESS AND HENCE PLEADED TO AL LOW THE CLAIM. PER CONTRA, THE DR RELIED ON THE ORDERS OF THE A O AND THE CIT (A). 4. WE HEARD THE RIVAL CONTENTIONS, GONE THROU GH THE ORDERS AND RELEVANT MATERIAL. THE FACTS REMAIN THAT THE ASSESS EE HAS RENDERED CONSULTANCY SERVICES DOMESTICALLY AT MAHINDRA CITY AND OTHER PLACES FOR TROUBLE SHOOTING TOWARDS WHICH HE CLAIMED TO HAVE I NCURRED EXPENSES TOWARDS CAR MAINTENANCE, PETROL, DRIVER SALARY AS A N ORDINARY PRUDENT MAN WOULD DO WHICH ARE VERY NOMINAL HAVING REGARD TO H IS INCOME. FOR EARNING SUCH INCOME, HE IS NEITHER ENTITLED FOR ANY REIMBURSEMENT NOR THERE IS ANY PROOF FOR RECEIPT OF ANY REIMBURSEMENT . THE CIT (A) REJECTED THE CLAIM FOR WANT OF PROPER EVIDENCES AND THE ASSESSEE PLEADS THAT THE CIT (A) WHILE DISPOSING THE APPEAL SHOULD HAVE APPLIED THE TEST OF REASONABLENESS. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO RESTORE THE MATTER TO THE AO. THE AO ON THE BASIS OF MATERI ALS THAT ARE LIKELY TO ITA NO.657/MDS/2017 :- 6 -: BE LAID BY THE ASSESSEE SHALL DECIDE THE CASE, AFTE R ALLOWING DUE OPPORTUNITY TO THE ASSESSEE, WHICH INCLUDES THE TES T OF REASONABLENESS. 5. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( S. JAYARAMAN ) /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: OCTOBER 31 ST , 2017. TLN , *34 54 /COPY TO: 1. ) /APPELLANT 4. 6 /CIT 2. *+) /RESPONDENT 5. 4 * /DR 3. 6 ( ) /CIT(A) 6. & /GF