ACIT, Circle- 2(2), New Delhi V. Amsure Insurence Agency Ltd., New Delhi

ITA 761/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7857 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA No. 761/Del/2019 (Assessment Year : 2013-14) ACIT Circle – 2(2), New Delhi PAN No. AAECA 8616 R Vs. M/s. Amsure Insurance Agency Ltd. Level-15, Eros Corporation Towers, Nehru Place, Delhi-110 019 (APPELLANT) (RESPONDENT) Assessee by --None-- Revenue by Ms. Suman Malik, Sr. D.R. Date of hearing: 17.02.2022 Date of Pronouncement: 28.02.2022 ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the Revenue is directed against the order dated 30.11.2018 passed by the Commissioner of Income Tax (Appeals)-I, New Delhi relating to Assessment Year 2013-14. 2. The relevant facts as culled from the material on records are as under : 2 3. Assessee is a company stated to be engaged in providing corporate insurance agency services. It is stated to be operating as corporate insurance agent of Max New York Life Insurance Company Ltd. (MNYL) & Royal Sundaram Alliance Insurance Co. Ltd. Assessee electronically filed its return of income for A.Y. 2013-14 on 29.09.2013 declaring total income of Rs.39,31,68,410/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 18.03.2016 and the total income was determined at Rs.43,23,34,150/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 30.11.2018 in Appeal No. 223/16-17 allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: “1. Whether on facts and circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.3,87,66,507/- made by the AO on account of service tax expenses. 2. Whether on facts and circumstances of the case, the Ld CIT(A) has erred in holding that the liability of Service Tax is exclusively the liability of the recipient of income and reimbursement of the same does not qualify the test of provisions of Section 37(1) of the Act. 3. Whether on facts and circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.3,99,229/- made by the AO on account of static liability payable to Hollard Life Insurance company Ltd. u/s 41(1) of the IT Act. 4. The appellant craves leave for reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.” 3 4. On the date of hearing, none appeared on behalf of the assessee nor any adjournment application was filed on its behalf. The case file reveals that the notice of hearing was served on the assessee. In such a situation, we proceed to dispose of the appeals ex parte qua the assessee and after hearing the Learned DR. 5. Ground No.1 & 2 are interconnected and with respect to the deleting the addition of Rs. 3,87,66,507/- on account of Service Tax expenses. 6. During the course of assessment proceedings and on perusing the Profit and Loss account, AO noticed that assessee has debited a sum of Rs. 3,87,66,507/- on account of ‘Service Tax expenses’. The assessee was asked to justify the claim to which assessee inter alia submitted that the company has entered into a Corporate Agency Agreement with Max Life Insurance Company Ltd. (MLIC) under which service tax on gross commission paid to the Company shall be shared equally between MLIC and the assessee. AO was of the view that assessee was, in effect, reimbursing 50% of the service tax so collected from MNYC. AO noted that assessee had not paid any such sum to the Royal Sundram Alliance Insurance Company Ltd. where the nature of services were similar. According to AO, it was a case of making a payment without any consideration and therefore it cannot be treated as an expenditure incurred wholly and exclusively for the purpose of the business. He also noted that similar expenditure 4 was disallowed in earlier years including A.Y. 2011-12 and facts of the case in the year under consideration are similar to that of earlier years. He therefore following the decision of his predecessor disallowed the service tax expenses amounting to Rs. 3,87,66,507/- u/s 37(1) of the Act. 7. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the assessee noted that services rendered by the assessee to MNYL qualified as ‘business auxiliary services’ to be taxable under Service Tax and since assessee was providing services to MNYL, it had the obligation to pay service tax on the invoice raised by the assessee for its corporate insurance services. He further noted that due to reverse charge mechanism, the service tax was required to be deposited by MNYL to the credit of central government instead of assessee. In terms of its commercial agreement and billing arrangement with MNYL, assessee was required to pay 50% of the service tax to MNYL. The process was such that MNYL first deposits full service tax with the service tax authorities and later, assessee pays 50% of the service tax back to MNYL. He further noted that his predecessor while deciding the identical issue in A.Y. 2012-13 has deleted the addition by noting that the expenses incurred by the assessee was wholly and exclusively for the purpose of business and for getting the business from MNYL. He thereafter noted that the facts of the case in the year under consideration being identical to that of A.Y. 2012-13, and therefore following the decision of his predecessor 5 held the service tax expense to be an allowable expenditure u/s 37(1) of the Act and accordingly deleted the addition. 8. Aggrieved by the order of CIT(A), Revenue is now before us. 9. Before us, Learned DR supported the order of AO. 10. We have heard the Learned DR and perused the material available on record. We find that AO while disallowing service tax expense had held the expenses to have not been incurred wholly and exclusively for the purpose of business and noted that the facts of the case in the year under consideration were identical to that of A.Y. 2012-13 and that in A.Y. 2012-13 the AO had disallowed the expenditure. We find that CIT(A) while deleting the addition has noted that his predecessor while deciding the assessee’s appeal in A.Y. 2012-13 has given a finding that the expenditure incurred by the assessee was wholly and exclusively for the purpose of business and such was allowable expenditure u/s 37(1) of the Act. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. Further, Revenue has also not placed any material on record to demonstrate that the order of CIT(A) in A.Y. 2012-13, which was followed by the CIT(A) while deciding the present appeal has been set aside/overruled or stayed by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the Grounds of the Revenue are dismissed. 6 11. Ground No.3 is with respect to deleting the addition of Rs.3,99,229/- on account of static liability payable to Hollard Life Insurance Company Ltd. u/s 41(1) of the Act. 12. During the course of assessment proceedings, assessee was asked to provide details of liabilities which was static for a period of more than three years. On perusal of the details furnished by the assessee, AO noted that an amount of Rs.3,99,229/- was shown as payable to M/s. Hollard Life Assurance Company Ltd. The assessee was asked to show-cause as to why the amount should not be added to its income being ceased liability. AO noted that the assessee did not furnish any confirmation from the creditors and further there was no transaction between the assessee and M/s. Hollard Life Assurance Company Ltd. after 17.11.2010. He therefore considered the amount shown as payable by the assessee to be as cessation of liability and added its u/s 41(1) of the Act. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who deleted the addition made by AO. Aggrieved by the order of CIT(A), Revenue is now before us. 13. Before us, Learned DR supported the order of AO. 14. We have heard the Learned DR and perused the material available on record. The issue in the present ground is with respect to the deletion of addition made by AO u/s 41(1) of the Act. We find that CIT(A) while deleting the addition has noted that merely because a liability had become static, it did not imply that 7 the said liability has ceased to exist or there has been a remission of liability. He has further noted that there was no unilateral write off of such liability by the assessee in its books of accounts. CIT(A) by following the decision of Hon’ble Delhi High Court in the case of PCIT vs. New World Synthetics Ltd. 97 taxmann.com 399 (Delhi) deleted the addition made by AO. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue nor has Revenue pointed out any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. 15. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 28.02.2022 Sd/- Sd/- (ANUBHAV SHARMA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 28.02.2022 PY* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI