TMI Blog2014 (6) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion income is in respect of the air travel insurance and the accrual of income depends on the actual journey undertaken by the passenger - If the passenger decides not to undertake the journey and the ticket is cancelled then the insurance also gets automatically cancelled - The commencement of the policy is dependent upon the commencement of the journey and once the ticket is cancelled then there is no question of commencement of the policy - the revised policy of accounting wherein the revenue of the commission on travel insurance is recognized by the assessee only when there is a commencement of the policy and not on mere sale of policy - the accrual of the revenue depends upon the actual journey undertaken by the passenger, the accounting policy of recognizing the revenue only at the time of commencement of the policy is proper and justified – Decided against assessee. Disallowance of payment made - Reimbursement of expenses – Held that:- The parent company namely TCIL is having taxable income and subjected to the highest rate of tax - the sharing of the expenses is revenue neutral - expenses which were relatable to the area being used by different companies e.g. rent/ ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usively for business purposes. 2. Ground no. 1 is general in nature and does note require any specific finding. 3. Ground no. 2 is regarding disallowance made u/s 40(a)(ia) which was deleted by the CIT(A). The Assessing Officer noted that the assessee has not deducted tax in respect of advertisement and business promotion expenses to the tune of Rs. 40,50,335/- out of various expenses paid to the various parties. Accordingly the Assessing Officer disallowed a sum of Rs. 40,50,335/- u/s 40(a)(ia). 3.1 On appeal before CIT(A), the assessee has submitted that the Assessing Officer has made disallowance in respect of the expenses debited which were in the nature of rebate given to the customers, therefore, these debits did not represent any payment towards expenses and no TDS is required to be deducted at source. Further it was submitted that the amount debited under the head business promotion expenses was rebate only which was not covered u/s 40(a)(ia) and further the amounts debited in respect of each person s was less than 20,000/-, therefore, the provisions of chapter XVII-B for TDS were not applicable. It was submitted that certain disallowances were made by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat extent. We further note that the assessee raised a fresh plea before the CIT(A) that the expenses debited to the P L account under the head business promotion expenses also includes a sum of Rs. 19,32,706/- towards the bad debts and, therefore, the said amount cannot be disallowed by applying the provisions of section 40(a)(ia). CIT(A) has accepted this explanation of the assessee without getting this fact verified from the Assessing Officer. Since the Assessing Officer was not given the opportunity to verify the correctness of the claim and further the claim of bad debts also requires to be examined. Therefore, in the interest of justice, we set aside this issue of bad debts amounting to Rs. 19,32,706/- being part of the business promotion expenses to the record of the Assessing Officer to verify and examine the same and then decide the issue as per law. Since the assessee has claimed bad debts first time before the CIT(A) and this claim of bad debts itself was not examined by the CIT(A), therefore, the Assessing Officer is directed to examine the claim of bad debts to the tune of Rs. 19,32,706/- after giving an opportunity to the assessee of being heard. Hence this ground is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that the accrual of the revenue depends upon the actual journey undertaken by the passenger, therefore, the accounting policy of recognizing the revenue only at the time of commencement of the policy is proper and justified. The CIT(A) has decided this issue by considering all these aspects and peculiar facts and, therefore, we do not find any error or illegality in the order of CIT(A) qua this issue. 5. Ground No. 4 is regarding disallowance of Rs. 50,00,000/- representing the payment made by the assessee to its group company Thomas Cook India Ltd. (TCIL) on account of reimbursement of expenses which was deleted by the CIT(A). 5.1 The Assessing Officer noted that the assessee has made reimbursement of expenses amounting to Rs. 3.37 crore to its parent company TCIL for the services it has given to the assessee and also paid on or behalf of the assessee. The Assessing Officer has made an adhoc disallowance of Rs. 50,00,000/- out of the total payment of Rs. 3.37 crore on the ground that it was not clear as to how much work was done by the employees of TCIL for TCIL itself and assessee. The Assessing Officer has observed that a part of the expenses reimbursed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company by 'reimbursing in excess of what was due from them: An examination of the chart giving the basis/ratio on which . allocation of expenditure has been made between the group companies, it is noted that while some expenses, where specific identification was possible, were being allocated on actual basis. Some, expenses which were relatable to the area being used by different companies e.g. rent/ electricity / rates the taxes, general maintenance, house keeping and security were allocated on the basis of 'area' being occupied/used by each of these companies. It is further seen that certain expenses which were directly relatable to the employees for e.g. staff welfare, internet usage and resource input were being allocated on the basis of 'head count' of each company. Thus the basis of allocation of expenses is fair and. reasonable. The observation of the AO that it was not clear as to how the expenses on an employees of TCIL rendering services to the appellant were allocated to the appellant may not have much consequence firstly because, the allocation of expenses relating to resource input is on the basis of 'head count' and secondly because no us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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