DCIT, New Delhi v. M/s. Sherpalo India Advisors (P) Ltd., New Delhi

ITA 6021/DEL/2014 | 2011-2012
Pronouncement Date: 21-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 602120114 RSA 2014
Assessee PAN AAKCS8766L
Bench Delhi
Appeal Number ITA 6021/DEL/2014
Duration Of Justice 3 year(s) 15 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Sherpalo India Advisors (P) Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2017
Appeal Filed By Department
Tags No record found
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 21-11-2017
Assessment Year 2011-2012
Appeal Filed On 05-11-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE PRESIDENT SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH JUDICIAL MEMBER ITA NO.6021/DEL./2014 (ASSESSMENT YEAR : 2011-12) DCIT CIRCLE 8 (1) VS. M/S. SHERPALO INDIA ADVISO RS (P) LTD. NEW DELHI. 104 ASHOKA ESTATE BARAKHAMBA ROAD NEW DELHI 110 001. (PAN : AAKCS8766L) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI U.C. DUBEY SENIOR DR DATE OF HEARING : 08.11.2017 DATE OF ORDER : 21.11.2017 O R D E R PER KULDIP SINGH JUDICIAL MEMBER : THE APPELLANT DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 8 (1) NEW DELHI (HEREINAFTER REFERRED TO AS THE R EVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE I MPUGNED ORDER DATED 27.08.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XI NEW DELHI QUA THE ASSESSMENT YEAR 201 1-12 ON THE GROUNDS INTER ALIA THAT :- ITA NO.6021/DEL./2014 2 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.7 83 150/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF LEGAL AND PROFESSIONA L CHARGES. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6 43 236/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF ENTERTAINMENT EXPENSE S; 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.23 42 772/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OUT OF TRAVELLING EXPENS ES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : DURING THE SCRUTINY PROCE EDINGS ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS CLAIMED LEGAL AND PROFESSIONAL CHARGES TO THE TUNE OF RS.15 12 000/- PAID TO M/S. LUTHRA & LUTHRA AND INSIGHT ALPHA BUT THE AO FOUND RS.2 37 150/- AND RS.5 46 000/- PAID TO LUTHURA AND LUTHURA AND M/S. INSIGHT ALPHA RESPECTIVELY NOT IN THE NATURE O F BUSINESS EXPENDITURE OF THE COMPANY AND MADE ADDITION THEREO F TO THE INCOME OF THE ASSESSEE COMPANY. AO FURTHER DISALLO WED AN AMOUNT OF RS.6 43 236/- CLAIMED BY THE ASSESSEE COM PANY AS ENTERTAINMENT EXPENSES FOR ORGANIZING A BRANCH EVEN T IN HOTEL INTERCONTINENTAL MARINE DRIVE ON THE GROUND THAT EX CEPT ONE ITA NO.6021/DEL./2014 3 INVOICE DATED 21.12.2010 ON WHICH GUEST NAME IS NOT LEGIBLE AND ANOTHER INVOICE DATED 24.11.2010 ONLY FUNCTION AT DOME HAS BEEN WRITTEN. AO FURTHER DISALLOWED AN AMOUNT OF R S.23 42 772/- OUT OF TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE COMPANY TO THE TUNE OF RS.89 15 775/- ON THE GROUND THAT TWO MAJOR TRAVELLING EXPENSES OF RS.10 05 936/- AND RS.13 36 836/- MADE TO TAJ AIR LIMITED ON 12.04.2010 AND 10.11.2010 ON THE COPY OF VOUCHERS BEARING DESCRIPTION PRIVATE JET FALCON FOR RAM/AJI T HAS BEEN FURNISHED WITHOUT ANY SUPPORTING DOCUMENTS. 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY ALL OWING THE APPEAL. FEELING AGGRIEVED THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER P ASSED BY LD. CIT (A) . 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED DELETION OF RS.7 83 150/- CONTENDED THAT THESE EXPENSES CANN OT BE TREATED AS ITA NO.6021/DEL./2014 4 BUSINESS EXPENSES. SO FAR AS AMOUNT OF RS.2 37 150 /- PAID AS LEGAL AND PROFESSIONAL FEE TO M/S. LUTHURA & LUTHRA IS CO NCERNED UNDISPUTEDLY THE ASSESSEE HAS FILED ITS SUBMISSION DATED 17.01.2014 ALONG WITH BILLS AND THE ASSESSEE HAS DULY EXPLAINE D BEFORE THE LD. CIT (A) THAT THESE LEGAL EXPENSES WERE INCURRED TO SETTLE A POLICE COMPLAINT FILED AGAINST THE DIRECTOR SHRI SANDEEP MURTHY BY SOME OF ITS INVESTORS AGAINST THE DIRECTOR AND THE COMPA NY IN THEIR OFFICIAL CAPACITY. IT IS ALSO BROUGHT ON RECORD BY THE ASSESSEE COMPANY THAT THE ALLEGATIONS IN THE COMPLAINTS WERE OF CRIMINAL BREACH OF TRUST BY ONE SHRI RABI SINGH AGAINST SHRI SANDEEP MURTHY AND SHRI RAM SRIRAM. WHEN THE ASSESSEE COMP ANY HAS FOUND FIR AGAINST DIRECTORS OF THE COMPANY THERE C ANNOT BE ANY DISPUTE THAT THE DIRECTORS WERE ARRAYED AS ACCUSED IN THEIR OFFICIAL CAPACITY AND THESE EXPENSES ARE CERTAINLY BUSINESS EXPENDITURE AND LD. CIT (A) HAS RIGHTLY AND VALIDLY ALLOWED THE SAM E BY DELETING THE ADDITION. 6. SO FAR AS AN ADDITION OF RS.5 46 000/- MADE BY T HE AO AND DELETED BY LD. CIT (A) CLAIMED BY THE ASSESSEE COM PANY UNDER THE HEAD LEGAL AND PROFESSIONAL EXPENSES PAID TO M/S. INSIGHT ALPHA FOR PRIVATE PHONE CONSULTATIONS IS CONCERNED LD. C IT (A) WHILE DELETING THE SAME RELIED UPON ONE CONSULTANCY AGREE MENT ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND M/S. INSIGHT ALPHA ITA NO.6021/DEL./2014 5 EFFECTIVE FROM 12.11.2010 RECITAL OF THE AGREEMENT (SUPRA) AS REPRODUCED BY LD. CIT (A) IN PARA 8.4 OF THE IMPUGN ED ORDER IS COMPREHENSIVE ENOUGH TO PROVE THAT THE AMOUNT HAS B EEN CHARGED AS HOURLY CONSULTING CHARGES NECESSARY FOR THE BUSI NESS OF ASSESSEE COMPANY AS AN INVESTMENT CONSULTANCY COMPANY. MORE OVER ASSESSEE COMPANY HAS PRODUCED INVOICE BEFORE AO WHI CH HAS BEEN DULY EXAMINED BY THE LD. CIT (A) IN THE LIGHT OF TH E AGREEMENT (SUPRA). MOREOVER WHEN GENUINENESS OF THESE EXPEN SES HAVE NOT BEEN DISPUTED BY THE AO WE FIND NO ILLEGALITY OR P ERVERSITY IN DELETION OF ADDITION OF RS.5 46 000/- BY LD. CIT (A ). SO GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 7. AO DISALLOWED THE AMOUNT OF RS.6 43 236/- CLAIME D BY THE ASSESSEE COMPANY ON ACCOUNT OF ENTERTAINMENT CHARGE S FOR WANT OF LINK OF SUCH ACTIVITIES TO THE BUSINESS OF THE ASSE SSEE COMPANY AND ON THE GROUND THAT THE INVOICE OF THE HOTEL WAS NOT LEGIBLE. LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT THE ASS ESSEE COMPANY HAS PRODUCED COPY OF INVITATION CARD AND COMMUNICAT ION THROUGH EMAIL TO VARIOUS DIGNITARIES INCLUDING KNOWN INDUST RIALISTS TO ATTEND THE ANNUAL DAY CELEBRATION. THE ASSESSEE COMPANY P RODUCED TWO INVOICES NAMELY INVOICE DATED 21.12.2010 WHEREUPO N GUEST NAME ITA NO.6021/DEL./2014 6 IS NOT LEGIBLE AND ANOTHER INVOICE DATED 24.11.2010 WHEREUPON FUNCTION AT DOME HAS BEEN WRITTEN BEFORE THE AO. F IRST OF ALL LD. CIT (A) HAS NOT GIVEN THE DATE OF ANNUAL DAY ALLEGE DLY CELEBRATED BY THE ASSESSEE COMPANY NOR HE HAS GOT CLARIFIED FR OM THE ASSESSEE COMPANY AS TO WHY THE TWO INVOICES ONE DATED 21.12. 2010 AND ANOTHER DATED 24.11.2010 HAVE BEEN RAISED WHEN IT I S ALSO NOT EXPLAINED BY THE ASSESSEE COMPANY BEFORE THE AO AS WELL AS LD. CIT (A) IF THE ANNUAL DAY FUNCTION TOOK PLACED ON 2 1.12.2010 AND 24.11.2010 OR TWO ANNUAL DAY FUNCTIONS WERE ORGANIZ ED. AT LEAST INVOICES RELIED UPON BY THE ASSESSEE COMPANY WERE R EQUIRED TO BE IN THE NAME OF THE ASSESSEE COMPANY WITH LEGIBLE NA ME OF THE SO BOTH THE BILLS RELIED UPON BY THE ASSESSEE COMPANY CANNOT BE CONNECTED WITH THE ASSESSEE COMPANY OR ITS BUSINESS . SO WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6 43 236/-. HENCE GROUND NO2 IS DE TERMINED IN FAVOUR OF THE REVENUE. GROUND NO.3 8. AO DISALLOWED AN AMOUNT OF RS.23 42 772/- OUT OF TRAVELLING EXPENSES OF RS.89 15 775/- CLAIMED BY THE ASSESSEE COMPANY ON ACCOUNT OF TRAVELLING EXPENSES ON THE GROUND THAT N O SUPPORTING DOCUMENT OR ANY SUBMISSION BY THE ASSESSEE COMPANY HAS BEEN ITA NO.6021/DEL./2014 7 FILED TO SUBSTANTIATE THE PURPOSE OF THESE VISITS THE EVENTS OR MEETINGS. THE LD. CIT (A) DELETED THE ADDITION OF RS.23 42 772/- KEEPING IN VIEW THE FACT THAT SINCE THE ASSESSEE CO MPANY IS PROVIDING SERVICES TO THE INVESTING COMPANIES INTE REST IN INVESTMENT IN VARIOUS COMPANIES WORKING IN INDIA AN D THE ASSESSEE COMPANY HAS BEEN ARRANGING MEETINGS OF THE INVESTIN G COMPANIES THAT THE PROSPECTIVE CLIENTAGE OF INVESTING COMPANI ES FOR WHICH ASSESSEE COMPANY WAS CHARGING 17% AND 15% OVER AND ABOVE THE TOTAL EXPENDITURE INCURRED BY IT IN RESPECT OF PROV IDING THEIR SERVICES. 9. SO WHEN THE ASSESSEE COMPANY IS OPERATING UNDER COST PLUS MARK UP ARRANGEMENT CHARGING 15% AND 17% OVER AND A BOVE SUCH EXPENSES THE AMOUNT HAS BEEN INCURRED ON BEHALF OF THE INVESTOR COMPANIES THE SAME ARE CERTAINLY BUSINESS EXPENSES . ASSESSEE COMPANY PRODUCED VOUCHERS AS WELL AS EMAIL COMMUNIC ATIONS QUA THE MEETINGS ORGANIZED BY THE ASSESSEE COMPANY QUA EXPENDITURE IN QUESTION. 10. ASSESSEE COMPANY EXPLAINED THAT SHRI AJIT WHO H AS AVAILED OF THE AIR TRAVEL SERVICES IS THE REPRESENTATIVE OF MURUGUN CAPITAL AND SHRI RAM IS THE REPRESENTATIVE OF SHERPALO MAUR ITIUS LLC FROM WHOM THE ASSESSEE COMPANY IS CHARGING COST PLU S 17% AND 15% RESPECTIVELY FOR ENTIRE TRAVELLING EXPENSES. S O WHEN THE ITA NO.6021/DEL./2014 8 TRAVELLING EXPENSES HAVE BEEN INCURRED BY THE ASSES SEE COMPANY ON BEHALF OF THE ASSOCIATED COMPANY WITH 17% AND 15% M ARKUP OVER AND ABOVE THE TOTAL EXPENDITURE FOR WHICH VOUCHERS AS WELL AS EMAIL COMMUNICATIONS HAVE BEEN PRODUCED THE LD. CI T(A) HAS RIGHTLY AND VALIDLY DELETED THE ADDITION OF RS.23 4 2 772/-. SO GROUND NO.3 IS DETERMINED AGAINST THE REVENUE. 9. RESULTANTLY THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF NOVEMBER 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 21 ST DAY OF NOVEMBER 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.