Income Tax Appellate Tribunal - Mumbai
Atlas Tours & Travels P. Ltd, Mumbai vs Assessee on 17 March, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH: MUMBAI
BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.2501/Mum/2009
(Assessment Year: 2004-05)
ITA No.2502/Mum/2009
(Assessment Year: 2005-06)
ITA No.2503/Mum/2009
(Assessment Year: 2006-07)
M/s. Atlas Tours & Travels Pvt. Ltd.,
53, Haji Mahal,
Mohammed Ali Road,
Mumbai -400 003 ........ Assessee
Vs
ACIT Central Circle 45,
Aayakar Bhavan,
M.K. Road,
Mumbai -400 020 ........ Revenue
ITA No.3561/Mum/2009
(Assessment Year: 2002-03)
ITA No.3559/Mum/2009
(Assessment Year: 2003-04)
ITA No.3560/Mum/2009
(Assessment Year: 2004-05)
ACIT Central Circle 45,
Aayakar Bhavan,
M.K. Road,
Mumbai -400 020 ....... Revenue
M/s. Atlas Tours & Travels Pvt. Ltd.,
53, Haji Mahal,
Mohammed Ali Road,
Mumbai -400 003 ........ Assessee
Vs
M/s. Atlas Tours & Travels Pvt. Ltd.,
53, Haji Mahal,
Mohammed Ali Road,
Mumbai -400 003 ........ Assessee
PAN: AACCA 7715 P
2 ITA 2501 to 2503/M/2009
ITA 3559 to 3561/M/2009
M/s. Atlas Tours & Travels Pvt. Ltd.
Assessee by: Shri Deepak Tralshawala
Revenue by: Shri B.K. Das
ORDER
PER R.S. PADVEKAR, JM
This batch of six appeals, three by the assessee pertain to the assessment years 2004-05 to 2006-07 and three by the revenue pertain to the assessment years 2002-03 to 2004-05, in which the respective impugned orders of the Ld. CIT-(A), Central III Mumbai dated 17.3.2009 have been challenged. We first take up the assessee's appeals.
2. Only one issue is involved i.e. in respect of the addition of the commission paid to sub-agents. The A.O. made the addition in respect of the commission paid to 15 ladies for procuring the business of the assessee-company as under:-
Assessment year Amount in `
2004-05 ` 4,95,920/-
2005-06 ` 10,10,150/-
2006-07 ` 29,05,600/-
3. The facts revealed from the record are as under. There was a search and seizure operation against the assessee and its group companies u/s.132(1) of the Act on 21.3.2006. In consequence of the search operation, assessments were framed u/s.143(3) r.w.s. 153A of the Act. So far as the issue in controversy before us is concerned, it was noticed by the A.O. that the assessee has claimed payment of the extra commission to free lancers/sub-agents. The A.O. has discussed this issue in the assessment orders from page no.16 to 21. The A.O. issued summons u/s.131 to some of the persons to whom commission was claimed to have been paid by the assessee. It appears that the summons u/s.131 were issued to 15 persons whose details are given by the A.O. on page no.17 & 18 of the assessment 3 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
order. It appears that all the persons to whom the summons were issued did not appear but requested for adjournment. Subsequently, some of the persons appeared before the A.O. It appears that written submissions were also made. The name of the 15 persons to whom the assessee has claimed to have paid the commission for procuring the business are as under:-
1) Zaria Jamil Qureshi
2) Shakila A Qureshi
3) Sjaosta Mabo Qureshi
4) Salma Anwar Mojawala
5) Saima Abdul Hafeez Merchant
6) M/s. Nahid S. Merchant
7) Mehzabeen S. Baga
8) Khadeeja A H Merchant
9) Hiral Thakkar
10) Ms Firdaus Salim Merchant
11) Farha Shoeb Merchant
12) Asma Hanif Lakdawala
13) Ms. Aneesa Siraj Merchant
14) Abdul Rehman Merchant
15) Husna Aziz Merchant
4. The A.O. rejected the claim of the assessee by giving the following reasons:-
i. They do not have knowledge about the customer business.
The do not have relevant eligible qualification of such type of business. They do not have any past experience of such type of customer related business.
ii. Everybody failed to substantiate and explain how they got the customer.
4 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
iii. After booking tickets they get the commission, after 2/3 months returning from the hajj and umrah.
iv. Without maintaining the record, how they can they control and monitor the commission on tickets is booked by them.
v. The some ladies sub agents said they are related with the above concern but they could not explain properly.
vi. Nobody could provide the list of customers which they claim to be brought for the HAJ and UMRAH pilgrimage. They could not provide any preliminary list of register which could have proved to some extent that they have made any attempts to procure customer for the ATLAS TOURS AND TRAVELS PVT LMT or the ATLAS TOURS AND TRAVELS Firm either on any particular day or month.
vii. The sub-agents could not explain satisfactorily about the commission rates per passenger. They say they get a lump sum amount.
viii. There are no agreements of appointing them as sub agents, rate of commission agreed upon. The Criteria conditions, eligibility and qualification on which they had been assigned and appointed as sub agents nobody could explain and clarify these points.
ix. The sub-agents could not explain the exact cost involved in each tour. They said they only "recommend" which was the standard reply. They said that they only told to people how to perform Haj / Umrah.
5 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
x. All sub agents ladies appeared and proved that they belong to significantly conservative and religious family. The religious norms, customs, traditions and rules may not allow them to go out for the professional purpose or I can say out of the house to get customers for the ATLAS TOURS AND TRAVELS PVT LMT or the ATLAS TOURS AND TRAVELS Firm either.
xi. Though the ladies, who have attended before undersigned have filed the return and shown commission as income, tax payment is negligible keeping in view of basic assumption. Only to authenticate the transaction, these ladies were filing the return whereas they have not rendered any services."
5. The A.O. made the additions in all the assessment years as he was of the opinion that the said extra payment of commission was not the genuine expenditure but assessee claimed the same to reduce the profit. The assessee challenged the additions before the Ld. CIT (A) but without success. Now the assessee is in appeal before us.
6. We have heard the rival submissions of the parties and perused the records. The Ld. Counsel took us through the paper book, more particularly page no.115 & 116 and submitted all agents admitted that they have worked for the assessee-company for procuring the business The Ld. Counsel referred to some of the questions and also the replies of the persons/agents. He further argues that lot of assumptions and presumptions have been made by the CIT (A), but, those are not supported by any of the evidences. Both the authorities have raised the question of qualification of the agents for procuring the business for 'HAJ' and 'UMRAH' Tours of the Muslims without understanding those tours were organized for spiritual satisfaction and to comply with religions principles. It is argued that persons 6 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
every Muslim desires to visit to holy places of "MECCA and "MADINA" at least once in one's life-time, for performing their religious rituals. It is not a normal tour and the persons going to the HAJ or UMRAH may not be educated one in the religious rituals. The Ld. Counsel referred to some of the statements of the agents and submitted that these agents have to spend their time not only for procuring tourists for the assessee's business but also to giving training to the tourists how to perform 'HAJ' or 'UMRAH' as well as also to see that they are comfortably boarded the flights in the Airports. He submits that mere professional qualification cannot be the criteria for procuring the business of 'HAJ' or 'UMRAH' tourists. This also saves the costs of the assessee for employing the additional staff. He also brought to the notice of the Bench that in the summons issued to the agents same timing is given to all. He further submitted that all the agents / sub- agents have declared the commission received from the assessee- company in their returns. He, therefore, pleaded that the claim of the assessee will be supported by the evidence. Moreover, all the payments were made through account payee cheques or wherefrom necessary TDS is also deducted. Per contra, the Ld. D.R. submits that most of the agents are ladies. They are not educated. The assessee has not produced any agreements with those persons or ladies. The assessee also failed to explain the nature of the services rendered by them. He, therefore, pleaded for confirming the additions.
7. The assessee is in the tourism business and there is no dispute about the fact that the assessee arranges 'HAJ' or 'UMRAH' tours for the Muslims. We find force in the argument of Ld. Counsel that HAJ or UMRAH Tourists are different than the regular tourists. Performing HAJ is one of the religious compulsions for followers of Islamic faith. On the perusal of the statement of the witness/agents, we find that most of them have explained the nature of the services rendered by them i.e. procuring the business for the assessee-company, giving the training to the persons who are desiring to go for 'HAJ' or 'UMRAH' in 7 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
respect of the religious rituals to be performed and also to accompany them to the Air ports. On the perusal of the statements recorded by the Investigation Wing/A.O., we find that none of the agents has denied the receipt of the commission from the assessee-company. We further find that most of the agents having filed the returns of income and declared the commission received by the assessee-company. We further find that all agents have explained nature of services rendered by them to the assessee. So far as question raised in respect of the agreements with those persons, in our opinion, considering the nature of the business of the assessee and the services rendered by those agents the claim cannot be denied because there is no written agreement. After giving our anxious consideration to the totality of the facts and evidence on record, we are of the opinion that additions made by the A.O. cannot be sustained. We, accordingly, delete the addition made by the A.O. in respect of the extra commission payment and allow a ground taken by the assessee in all the three appeals.
8. Now, we take-up revenue's appeals.
9. The only issue in revenue's appeal is addition on account of deemed dividend u/s.2(22)(e) of the I.T. Act.
10. We have heard the parties. We first take the revenue's appeal for the A.Y. 2002-03. The A.O. has noted that the assessee-company was earlier the firm having four partners, which was converted into Pvt. Ltd. Company. The assessee-company has taken the loans and advances from other following group-concerns i.e. Atlas Tours & Travels (P) Ltd. in which the partners of the assessee-company are having the equitable dues. The A.O., therefore, proceeded to make the addition in the hands of the assessee by invoking the provisions of section 2(22)(e) of the Act and accordingly made the addition of ` 8,05,217/- in the A.Y. 2002-03 and in the same way, the additions made by the A.O. for the A.Y. 2003-04 of ` 7,04,954/- and for the A.Y. 8 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
2004-05 of ` 14,22,976/- respectively. The Ld. D.R. is fair enough to concede that the assessee's case is now squarely covered by the decision of the Hon'ble High Court of Bombay in the case of CIT vs. Universal Medicare (P) Ltd. 324 ITR 263 in which the decision of the Hon'ble SB of the ITAT Mumbai has been approved. The Ld. Counsel submits that the assessee is not the shareholder in any of the concerns or companies from which loans / advances are taken. In the case of CIT vs. Universal Medicare (P) Ltd. (supra) approving the ratio laid down by the Special Bench in the assessee's own case, decided by the jurisdictional High Court in the case of Universal Medicare (P) Ltd. (supra) the ITAT Mumbai has held as under:-
9. ".....However, even on the second aspect which has weighed with the Tribunal, we are of the view that the construction which has been placed on the provisions of s.2(22)(e) is correct. Sec. 2(22)(e) defines the ambit of the expression 'dividend'. All payments by way of dividend have to be taxed in the hands of the receipt of the dividend namely the shareholder. The effect of s.2(22) is to provide an inclusive definition of expression dividend. Clause (e) expands the nature of payments which can be classified as a dividend. Clause (e) of s. 2(22) includes a p made by the company in which the public is not substantially interested by way of an advance or loan to a shareholder or to any concern to which such shareholder is a member or partner, subject to the fulfillment of the requirements which are spelt out in the provision. Similarly, a payment made by a company on behalf, or for the individual benefit, of any such shareholder is treated by cl. (e) to be included in the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal 9 ITA 2501 to 2503/M/2009 ITA 3559 to 3561/M/2009 M/s. Atlas Tours & Travels Pvt. Ltd.
position that dividend has to be taxed in the hands of the shareholder. Consequently, in the present case, the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which the assessee is sought to be taxed in the present case in respect of the amount of Rs 32,00,000 is that there was a dividend under s. 2(22)(e) and no other basis has been suggested in the order of the AO."
11. Admittedly the assessee is not the share holder of said company. We, therefore, respectfully following the decision of the jurisdictional High Court confirm the order of the Ld. CIT (A) on this issue and dismiss the ground taken by the revenue in all the appeals.
12. In the result, all the appeals of the assessee are allowed and all the appeals of the revenue are dismissed.
Order pronounced in the open court on this day of 8th April 2011.
Sd/- Sd/-
(J. SUDHAKAR REDDY) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 8th April 2011
Copy to:-
1) The Applicant.
2) The Respondent.
3) The CIT (A) Cent -III, Mumbai.
10 ITA 2501 to 2503/M/2009
ITA 3559 to 3561/M/2009
M/s. Atlas Tours & Travels Pvt. Ltd.
4) The CIT Central -IV, Mumbai.
5) The D.R. "A" Bench, Mumbai.
By Order
/ / True Copy / /
Asstt. Registrar
I.T.A.T., Mumbai
*Chavan
11 ITA 2501 to 2503/M/2009
ITA 3559 to 3561/M/2009
M/s. Atlas Tours & Travels Pvt. Ltd.
Sr.N. Concerned
Episode of an order Date Initials
1 Draft dictated on 01.04.2011 Sr.PS
2 Draft placed before author 05.04.2011 Sr.PS
3 Draft proposed & placed before the second Member JM/AM
4 Draft discussed/approved by Second Member JM/AM
5 Approved Draft comes to the Sr.PS/PS Sr.PS/PS
6 Kept for pronouncement on Sr.PS/PS
7 File sent to the Bench Clerk Sr.PS/PS
8 Date on which file goes to the Head Clerk
9 Date of dispatch of Order