Delhi High Court
Commissioner Of Income-Tax vs Five Star Holidays on 13 August, 2007
Equivalent citations: [2007]294ITR54(DELHI)
Bench: Madan B. Lokur, S. Muralidhar
JUDGMENT
1. Revenue is aggrieved by an order dated January 6, 2005, passed by the Income-tax Appellate Tribunal, Delhi Bench "C", in I.T.A. No. 5278/Del/96 relevant for the block assessment years 1995-96 and 1996-97.
2. first issue urged by the Revenue in the present appeal is with regard to payment of a sum of Rs. 93,10,418 to one Ms. Magda towards consultancy fees by the assessed out of which an amount of Rs. 66,07,193 was disallowed by the Assessing Officer but allowed by the Income-tax Appellate Tribunal.
3. The assessed was in the business of marketing time shares of various holiday resorts. For marketing the time shares, the assessed engaged some consultants from Europe including Ms. Magda. The assessed did not file returns and action was initiated against it by the Revenue on August 31, 1995, under Section 132 of the Income-tax Act, 1961, when certain documents were seized. The assessed then declared an undisclosed income of Rs. 37,11,233 claiming expenses on account of commission/consultancy charges paid to five European consultants including Ms. Magda. While the Assessing Officer accepted the amount of commission in respect of some of the consultants calculated at 3 per cent, of the value of contract he found that the commission paid to Ms. Magda was Rs. 93,10,418 which was 11 per cent, of the total value of the contract. He restricted the deduction in respect of this payment to 3 per cent, of the contract value. He rejected the contention of the assessed that the entire amount paid to Ms. Magda was expended for business purposes.
4. The assessed appealed to the Tribunal which in the impugned order accepted the contention of the assessed. The Tribunal has noted in its order that the same Assessing Officer had passed an assessment order in respect of Ms. Magda on the same date as in the case of the assessed. In the case of Ms. Magda, the Assessing Officer accepted the fact that she had been paid an amount of Rs. 93,10,418 but in the case of the assessed, the amount of Rs. 66,07,193 was disallowed and added back to the income of the assessed as undisclosed income. The Tribunal noted that under these circumstances, the order passed by the Assessing Officer in the case of the assessed was not sustainable and was, in fact, perverse.
5. We are not going into the question of perversity in the present case. We are certainly of the opinion that the Assessing Officer could not have taken two conflicting views on the same date and in respect of the same transaction. In any case, the amount paid to Ms. Magda could not be said to be the undisclosed income of the assessed.
We also find that the amount was expended for the business purposes of the assessed and this is a finding of fact rendered by the Tribunal. There is no material to suggest to the contrary.
6. In our opinion, no substantial question of law arises from the first issue urged by the Revenue in regard to the payment of commission by the assessed to Ms. Magda.
7. Learned Counsel for the Revenue then urged another issue with regard to a sum of 8854 UK pounds (equivalent to Rs. 5,26,000) which was found in a locker/safe kept inside the room of an European director who was controlling the affairs of the assessed. The Assessing Officer treated this as undisclosed income whereas the Tribunal accepted the plea of the assessed that the rupee equivalent representing the UK pounds should be "telescoped" by setting it off against the undisclosed income.
8. After hearing arguments, we admit the appeal limited to this question. We frame the following substantial question of law for consideration:
Whether the Income-tax Appellate Tribunal was correct in law in deleting the addition of 8854 UK Pounds (equivalent to Rs. 5,26,000) made by the Assessing Officer on the ground that it was covered by the undisclosed income of the assessed on account of telescoping?
The filing of paper book is dispensed with.