D.C.I.T.-2(3), MUMBAI V. TAURUS CONTRACTORS PVT. LTD., MUMBAI

ITA 7485/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8298 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P R TOPRANI

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 7485/MUM/2011 / ASSESSMENT YEAR 2007-08 DCIT - 2(3) AAYAKAR BHAVAN, MUMBAI. VS. M/S. TAURUS CONTRACTORS PVT. LTD., 20/26, BHARUCHA MARG, KALAGHODA, MUMBAI-400 001. PAN: AABCT 4341 F ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI MOHIT JAIN ASSESSEE BY : SHRI P.R. TOPRANI ' #$% / DATE OF HEARING : 18-10-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 07-11-2012 () / O R D E R PER RAJENDRA, AM THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT .10.08.2011PASSED BY THE CIT(A)-6, MUMBAI. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSING OFFICER (AO): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CTT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 2. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2(A)ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 65,27,882/- & RS. 72, 62,183/- BEING THE TECHNICAL FEE PAID BY THE ASSESSEE TO M/S. BRUNEL FOR MUMBAI PRO JECT WITHOUT APPRECIATING THE ASSESSEE FAILED TO PRODUCE ANY POSSIBLE EVIDENCE TO ESTABLISH THE CLAIM. ITA NO. 7485/MUM/2011 M/S.TAURUS CONTRACTORS PVT. LTD. 2 (B)ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DRAWING THE CONCLUSION THAT M/S. BRUNEL RENDERED TE CHNICAL SERVICES TO THE ASSESSEE ON THE SAME SET OF DOCUMENTS AND WITHOUT ANY FURTHE R FINDING. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO R ESTORED. 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF PROVID ING MANPOWER AND LOGISTIC SERVICES, FILED ITS RETURN OF INCOME ON 24 .10.2007 DECLARING TOTAL INCOME OF RS. 2.02 CRORES. ASSESSMENT ORDER WAS FINALISED BY THE ASSESSING OFFICER (AO) ON 31.12.2009 U/S.143(3) OF THE INCOME-TAX ACT, 1961(A CT), DETERMINING THE TOTAL INCOME AT RS.7.37 CRORES. 3. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 72.62 LAKHS ON ACCOUNT OF TECHNICA L FEES DISALLOWED LAST YEAR UNDER SECTION 40 (A)(IA), AS THE ACT. THE ASSESSEE HAD CL AIMED THAT SAID PAYMENT WAS IN NATURE OF TECHNICAL FEES PAID TO AN OVERSEAS COMPAN Y BY NAME BRUNEL TECHNICAL SERVICES PVT. LTD., SINGAPORE (BRUNEL). IT WAS CLA IMED THAT BRUNEL WAS PROVIDING THEM NECESSARY PROFESSIONALS TO DEPLOY FOR CARRYING OUT VARIOUS PROJECTS. REFERRING TO THE ASSESSMENT PROCEEDINGS OF THE LAST AY.,AO HELD THAT IN THAT YEAR DISALLOWANCE FOR NON-DEDUCTION OF TDS WAS NOT MADE ON TECHNICAL GROU NDS, BUT SAME WAS ON MERITS. HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE FOR RS . 72.62 LAKHS. AO FURTHER FOUND THAT THE ASSESSEE HAD DEBITED A SU M OF RS. 65.27 LAKHS UNDER THE SUB-HEAD TECHNICAL FEES UNDER THE HEAD ADMINIS TRATION AND OTHER EXPENSES. HE DIRECTED THE ASSESSEE TO FURNISH DOCUMENTARY EVIDEN CES TO SHOW THAT SERVICES WERE RENDERED FOR THE SAID PAYMENT. AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE AND THE COPY OF THE TECHNICAL SERVICES AGREEMENT, HE HE LD THAT BRUNEL HAD OFFERED ITS SERVICES TO THE ASSESSEE FOR G1 AND GS 15 PROJECTS WITH ONGC IN INDIA, THAT THERE WAS NO MENTION OF ANY MUMBAI PROJECT IN THE AGREEMENT O R THE CORRESPONDENCE , THAT EXPENDITURE WAS CLAIMED TO HAVE BEEN INCURRED FOR M UMBAI PROJECT, THAT THE TAX INVOICES WERE OF CALENDAR YEAR 2005, THAT THERE WAS NO MENTION OF THE PERSONNEL RECRUITED AND/OR ATTENDED BY THE BRUNEL FOR THE ASS ESSEE COMPANY. HE HELD THAT ASSESSEE'S CLAIM THAT BRUNEL HAD RENDERED ANY SERVI CE TO IT WAS REMAINED UNPROVED. FINALLY, HE DISALLOWED TECHNICAL FEES, AMOUNTING T O RS. 65.27 LAKHS PAID TO BRUNEL. IN SHORT, AO DISALLOWED BOTH THE CLAIMS MADE BY THE AS SESSEE. 4. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA). AFTER CONSIDERING THE ORDE R OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE COMPANY AND THE VARIOUS DOCUMENT PR ODUCED BEFORE HIM HE HELD THAT BRUNEL HAD TAKEN INSURANCE COVER FOR MUMBAI PROJECT , THAT THE ASSESSEE COMPANY WAS A PARTY TO THE SAID INSURANCE, THAT SIMPLY BECAUSE MUMBAI WAS NOT MENTIONED IN THE LETTER OF BRUNEL DID NOT MEAN THAT SERVICES WERE N OT OBTAINED FROM BRUNEL. HE FURTHER HELD THAT AO HAD DERIVED AN ERRONEOUS CONCLUSION FR OM THE LETTER OF BRUNEL ADDRESSED TO THE ASSESSEE-COMPANY, THAT THE APPELLANT HAD GIV EN DETAILS OF NAME, NATIONALITY AND DATE OF JOINING OF EMPLOYEES OBTAINED THROUGH SINGA PORE COMPANY, THAT APPELLANT HAD OBTAINED SERVICES OF TECHNICAL PERSONNEL AND HAD MA DE PAYMENT TO BRUNEL FOR PROVIDING SERVICES, THAT ASSESSEE HAD ALSO DEDUCTED TDS PRIOR TO PAYMENT TO BRUNEL TREATING THE SAME AS TECHNICAL FEE. HE HELD THAT P AYMENT AMOUNTING TO RS. 65.27 LAKHS WAS AN ALLOWABLE EXPENDITURE. WITH REGARD TO DISALL OWANCE OF RS.72.628 LAKHS, HE ITA NO. 7485/MUM/2011 M/S.TAURUS CONTRACTORS PVT. LTD. 3 HELD THAT THE ASSESSEE HAD ESTABLISHED BUSINESS EXP EDIENCY OF THE PAYMENT. HE FURTHER HELD AS UNDER: AS THE ISSUE IS DISCUSSED WHILE DECIDING GROUND NO .2 AND IN VIEW OF THE SAME, IT IS HELD THAT THE BUSINESS EXPEDIENCY OF THE PAYMENT MADE HAS BEE N ESTABLISHED BY THE APPELLANT. GROUND NO 3 IS THEREFORE, ALLOWED. HE ALSO REFERRED TO THE ORDER PASSED BY THE FAA FO R THE AY 2006-07 WITH REGARD TO THE SAME DISALLOWANCE. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT THERE WAS NO PROOF OF RENDERING OF SERVICES BY BRUNEL, THAT AO H AD RIGHTLY DISALLOWED THE EXPENDITURE CLAIMED UNDER THE HEAD TECHNICAL FEES P AID. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ASSESSEE ITSELF HAD DISALLOWED RS.72.62 LAKHS WHILE COMPUTING THE INCOME FOR AY 2006-07, THAT ALL DETAILS WERE FI LED BEFORE THE FAA, THAT TDS WAS DEDUCTED BY THE ASSESSEE AS PER THE PROVISIONS OF T HE ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATTER AVAILABLE ON THE FILE. WHILE GOING THROUGH THE ASSESSMENT ORDER, WE FIND THAT THE AO HAD DISALLOWED RS. 65.27 LAKHS, BUT WHILE COMPUTING THE INCOME (PA RAGRAPH 9) OF THE ASSESSEE, HE HAD DISALLOWED RS.72.6 LAKHS ONLY. IN THE STATEMENTS O F FACTS SUBMITTED BY THE ASSESSEE- COMPANY BEFORE THE FAA, IT RAISED THE ISSUE OF DISA LLOWANCE OF RS.65.27 LAKHS AS WELL AS OF RS.72.62 LAKHS. IN THE APPELLATE PROCEE DINGS THE FAA ALSO GRANTED RELIEF FOR BOTH THE DISALLOWANCES . IN OUR OPINION, MATTER SHOULD BE RESTORED BACK TO T HE FILE OF THE AO, FOR VERIFYING THE POSITION OF DISALLOWAN CES MADE BY HIM. IT APPEARS THAT THE ASSESSEE AS WELL AS THE FAA DID NOT CONSIDER TH E COMPUTATION OF INCOME FINALISED BY THE AO. IT APPEARS THAT WHILE DECIDING THE ISSU E OF PAYMENT OF RS.72.62 LAKHS. AO HAD NOT CONSIDERED THE MATERIAL PRODUCED BY THE ASSESSEE COMPANY AND REFERRED TO EXTENSIVELY BY THE FAA IN HIS APPELLATE ORDER DTD.1 0.08.2011. IN THE INTEREST OF JUSTICE, MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF VERIFYING THE MATERIAL PRODUCED BY THE ASSESSEE-COM PANY WITH REGARD TO PAYMENT OF RS.72.62 LAKHS, IN ADDITION TO CLARIFY THE POSITION WITH REGARD TO PAYMENT OF RS.65.27 LAKHS. HE IS DIRECTED TO AFFORD A REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING UPON BOTH THE ISSUES. AS A RESULT, APPEAL FILED BY THE AO ST ANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 7 TH NOVEMBER, 2012 TNMM ITA NO. 7485/MUM/2011 M/S.TAURUS CONTRACTORS PVT. LTD. 4 () () () () ' '' ' #, #, #, #, -,# -,# -,# -,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !,# # //TRUE COPY// () () () () / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI