Income Tax Appellate Tribunal - Delhi
Devinder Gupta & Sons (Huf), New Delhi vs Assessee on 1 December, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL
ITA No. 5911/Del/10
A.Y. 2007-08
M/s Devinder Gupta & Sons (HUF), Vs. Jt. CIT, Range-13,
M-56, Top Floor, M-Block Market, New Delhi.
GK-II, New Delhi-110048.
PAN/ GIR No.AADHD7296J
( Appellant ) ( Respondent )
Appellant by : Shri T.R. Talwar Adv.
Respondent : Smt. Nandita Kanchan Sr. DR
ORDER
PER R.P. TOLANI, J.M::
This is assessee's appeal against CIT(A)'s order dated 1-12-2010, challenging the sustenance of following disallowances relating to assessment year 2007-08:
(i) Foreign tour expenses paid to Mrs. Jatinder Kaur Johar Rs. 11,23,750/-
(ii) Expenditure on Visa fees Rs. 66,169
Misc. expenses Rs. 8,324 & 7,204/-
2. Brief facts are: Assessee is a real estate agent and claims to have paid an amount of Rs. 11,23,750/- to Mrs. Jatinder Kaur Johar. Assessing Officer disallowed the expenditure holding that there was no nexus between expenditure incurred and earning of business income of the assessee, as no evidence for rendering of services was filed. The payment was made for 2 purchase of foreign currency only which was claimed to have been handed over to Mrs. Johar. The report submitted by Mrs. Johar on completion of tour was written in 2007. No connection between places visited by her and eventual sales of properties was brought on record. It was held that onus cast on assessee to establish the business expenditure has not been sufficiently discharged.
2.1. Aggrieved, assessee preferred first appeal where this disallowance was confirmed by CIT(A) who further held that services of Smt. Johar were solicited with the understanding that she would promote the selling of products/ building of Unitech group. In this eventuality, the amount paid assumes character of commission which ought to be subjected to TDS u/s 194H. Since no TDS was deducted this amount, which is commission was disallowable u/s 40(a)(ia). Aggrieved, assessee is before us.
3. Learned counsel for the assessee contends that the addition has been upheld by CIT(A) mainly on two counts-
(1) The burden to prove the business exigencies and rendering of services by Mrs. Johar has not been discharged by assessee. (2) Even if it is assumed that the amount paid becomes commission in nature liable to TDS u/s 194H, due to non deduction of TDS the amount is disallowable u/s 40(a)(ia).
3.1. Apropos services rendered, ld. counsel brought to our attention the report submitted by Mrs. Jatubder Kour Johar containing details about persons and places visited and the properties in connection with the which the meetings were held. Ld. counsel contends that assessee deals in real estate and the nature of business includes booking of flats at pre-launch stage in the projects of various reputed builders including Unitech. CIT(A) has alternatively held that mrs. Johar as agent of Unitec Builders is 3 misconceived. Since assessee had booked various flats in Unitech and DLF Commercial projects, it wanted the projects to be promoted in U.S.And U.K. Since Mrs. Johar had proper contacts to promote the sales, the above amount was spent on the traveling of Mrs. Johar. The fact that amount was spent on traveling of Mrs. Johar has not been disputed as the purchase of foreign currency has been accepted by the Assessing Officer. With this report and the persons visited by Mrs. Johar on record it cannot be held that no services were rendered. Our attention was drawn to the details of the foreign buyers who purchased the properties from the assessee. The first item on page 3 demonstrates the name of Shri Rahul Roy, 987 Westhampton Florence, Massachvetts, USA who had purchased a property in Unitech Mohali project. The report submitted by Mrs. Johar indicates the allotment of the flat in the name of Shri Rahul Roy, is demonstrated by page 4 along with payment schedule.
3.2. Similarly, assessee entered into an agreement with one Mr. Virendra Nath, who is also mentioned in the details of foreign buyers. Similarly, other persons with whom the agreements for purchase of property have been executed includes other names also viz. Virendra Nath and Mr. Manmohan Bakaya and other persons, which are mentioned in the report of Mrs. Johar. Without controverting this evidence, it cannot be held that the assessee has failed to demonstrate the services rendered by the assessee. 3.3. Coming to the aspect of applicability of Sec. 40(a)(ia), ld. counsel pleads that section is not attracted for assessee inasmuch as no commission has been paid to Mrs. Johar . Her foreign traveling expenses were paid by purchases of foreign currency and assessee has incurred this expenditure. The amount spent on traveling expenditure cannot be held to be commission and liable for TDS.
44. Ld. DR relied on the order of lower authorities.
5. We have heard rival contentions and perused the material available on record. The assessee has submitted a report of Smt. Johar, placed on paper book pages 1 & 2, the same has not been believed only on the ground that the same was written on 5-1-2007. The assessment order in question is passed on 14-12-2009 and the appellate order is 1-12-2011. CIT(A) in his order has held that it seems to be written at the time of appellate proceedings rather than in 2007. In our view, this finding is only an assumption. The assessee has discharged its onus and if the Assessing Officer was not satisfied Mrs. Johar could have been summoned for statement. Having not done that the written report submitted by Mrs. Johar cannot be refused to believed.
5.1. Coming to the contents of the report, the other documents filed indicate that with many of the persons named in her report, the assessee has transacted the real estate business. In view of these considerations it emerges that assessee has discharged its burden the same has not been rebutted by the lower authorities properly and ignored on assumptions and surmises 5.2. Coming to the CIT(A)'s alternative finding that the amount being commission and liable for non-allowance u/s 40(a)(ia), in our view the section is not applicable to assessee's case. Firstly Smt. Johar was not working for the Unitech or DLF project. The assessee has booked the flats at pre-launch stage and to promote the sales Mrs. Johar was entrusted with the work U.K. & USA. The assessee paid traveling expenses, which is admitted by Assessing Officer albeit only for purchase of foreign currency. In our view, this amount cannot be held as commission and is not liable to deduction u/s 194H. It is the expenditure incurred by the assessee on foreign 5 traveling of Mrs. Johar for promoting its business in US & UK. In view of these facts, we delete the addition of Rs. 11,23,750/-. 5.3. In respect of remaining ground, the amount of Rs. 66,169/- is not on visa fee. Misc. Expenses of Rs. 8,324/- and Rs. 7,204/- have been confirmed as proper details were not filed by the assessee. We see no infirmity in the order of CIT(A) on this count. In view thereof the remaining grounds of the assessee are dismissed.
6. In the result, assessee's appeal is partly allowed. Order pronounced in open court on 13-7-2012.
Sd/- Sd/- ( K.G. BANSAL ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 13-7-2012. MP Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR