TMI Blog2017 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... f work in the agreement. The documents submitted by the assessee are mostly computer-generated printouts of correspondence between the assessee and the commission agent. No evidence is available in paper book, as how these correspondences exchanged between the assessee and the commission agent, whether it was through post or whether it was through emails. The assessee has not produced any evidences supporting the technical expertise and experience of the commission agents in the field of services rendered. We are of the opinion that the fact of services rendered has to be examined in each year on the basis of the documentary evidences submitted by the assessee and therefore, issue in dispute cannot be treated as covered by the decision of the Tribunal in assessment year 2004-05. The documentary evidences in the year under consideration for establishing the services rendered need to be produced by the assessee and examined by the Assessing Officer afresh. Accordingly, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine copy all the documents produced by the assessee. Accordingly, the ground of the appeal is allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re him in the assessment proceedings nor forwarded to him by the Ld. CIT-(A), the claim of the assessee has remained non-verified by the lower authorities. In the interest of justice, we feel it appropriate to restore the issue to the file of the AO to verify the documentary evidence supporting the claim of the assessee that the expenditures on telephone and car were incurred towards the business purpose only and decide the issue in dispute in accordance with law. The assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is accordingly allowed for statistical purposes. - ITA No. 1675/Del/2010 - - - Dated:- 13-11-2017 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Assessee : Sh. Ashwani Taneja, Adv. For The Department : Sh. H.K. Choudhary, CIT(DR) ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 05/02/2010 passed by the Commissioner of Income-tax (Appeals), Faridabad [in short the CIT-(A) ] for assessment year 2005-06, raising following grounds: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions. (6) The ld. TPO accepted the most appropriate method applied by the assessee in its transfer pricing study, however, he disagreed with average of multiple year data of the comparable chosen by the assessee for computing average profit level indicator (PLI). The assessee had shown working capital adjusted margin (operating profit/operating revenue) of the five comparable companies with three years data (i.e. FY 2002-03, 2003-04 and 2004-05) at 5.95% as against the margin of the assessee of 6.17% for FY 2004-05. The ld. TPO accepted the contention of the assessee to drop one of the comparable i.e. M/s ABB limited because of lack of availability of segmental data. The average OP/OR of the four comparable companies after the working capital adjustment to the comparables with data for financial year 2004-05 was worked out at 8.77%. In view of the findings, the ld. TPO in his order dated 05/09/2008 under section 92CA(3) of the Act, computed the adjustment to the international transaction as under: Operating revenue Rs.121,62,17,344 Operating expenditure Rs.114,11,76,625 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The Assessing Officer followed finding of his predecessor in assessment year 2004-05, keeping in view the identical facts and circumstances. In assessment year 2004-05, the Assessing Officer disallowed the entire expenses towards commission for project procurement in absence of documentary evidences of services rendered by the commission agents. Alternatively, he also concluded that assessee claimed entire commission expenses towards projects though no revenue from the contracts was recognized in the year under consideration therefore, keeping in view the percentage completion method followed by the assessee, commission expenses corresponding to revenue recognized was only allowable. Accordingly, he held that only part of the commission expenses was only allowable. Following the same view, the Assessing Officer in the year under consideration disallowed entire expenses of ₹ 12,62,73,121/- towards project procurement expenses (commission) and alternatively, without prejudice to entire disallowance, on the basis of percentage completion method, held the expenses of ₹ 2,76,08,085/- as allowable only. 3.2 Before the Ld. CIT-(A), the assessee submitted that Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the issue in dispute in assessment year 2003-04 has been restored back by the Tribunal to the Assessing Officer. He further submitted that assessee has not furnished any documentary evidence of the services rendered by the so-called commission agents. According to him, the assessee has merely filed copy of agreements and correspondence between the assessee and the commission agent. He submitted that no documentary evidence have been filed to establish the role played by the commission agent in procuring the contract order from the government authorities or other principle parties including any evidence of representation by the commission agent before government authorities etc. The Ld. CIT(DR) submitted that correspondence between the assessee and agent are only internal documents and no independent evidence from third parties whether the commission agent has rendered any services has been filed either before the Ld. CIT-(A) or before the Tribunal. He accordingly requested that issue in dispute may be restored to the file of the Assessing Officer following the finding of the Tribunal in assessment year 2003-04. 3.5 We have heard the rival submission and perused the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has undertaken execution of various Hydel Power Projects and a number of projects / contracts, are the Government contracts which are awarded by the competent authorities after following the prescribed procedures of calling up the tenders, opening of bids, study of relevant data's, financial capacity of the bidder's, technical expertise of the bidder's and other relevant details and informations. It is not understood as to how and what type of arrangements are made by the commission agents for attending of tender opening. One of the important area of work mentioned in the scope of work is preparation of comparative statements. it is not understood as to how the comparative statements can be prepared before opening of tenders and once the tenders are opened in presence of all the bidders and the tender is awarded to any one of the bidder on the basis of rates quoted by him and his technical expertise in the relevant field then what is the role of the commission agent in preparation of comparative statements. Similarly there does not appear any role of the commission agent on submission of reports in regard to development on the tender process and collection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commission expenses claimed by the assesses are not genuine and disallowed 3.6 The Tribunal in ITA No.3945/Del/2009 for assessment year 2004- 05 deleted the disallowance. The relevant part of the decision of the Tribunal is extracted as under: 11. It is a matter of record that Assessing Officer has not placed any evidence on record that the assessee has not incurred the expenditure for business purposes. Whereas the assessee has filed all the copies of the agreement with the commission agents where the type of services to be rendered by the agents are stated. The assessee has also submitted the copies of the invoices raised by the agents along with correspondences with the agents as mentioned hereinabove. The details of commission expenses, mode of payment and TDS deducted. These all documentary evidences go to prove that nature of work executed by the commission agent and the necessary evidences as asked by the Assessing Officer in paragraph 1.2 of his order. The agents has executed the work for procuring the contracts for the assessee and necessary correspondences are on record in which no defect has been pointed out by the Assessing Officer in the remand report. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of part of the commission paid in a sum of ₹ 54,41,905/- which itself proved that the commission agents did render services for the business and profession of the assessee. The Assessing Officer while making the addition of disallowing the commission relied upon statement of Shri S.K. Kaul, M.D. recorded in preceding Assessment Year 2003-04. Every year is separate year and no material produced on record as to how the statement recorded in preceding assessment year was relevant to the assessment year under appeal. The material facts for assessment year under appeal. Assessment Year 2004-05 have not been referred and could not be referred in statement of Shri S.K. Kaul in preceding Assessment Year 2003-04. It is also not clarified whether before relying upon the same statement the assessee was confronted of this fact or not. It is admitted fact that the matter in Assessment Year 2003-04 has not yet reached finality, therefore, how the statement recorded in Assessment Year 2003-04 was relevant in assessment year under appeal has not been explained. 15. Learned counsel for the assessee also produced on record the assessment orders passed by the Assessing Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the facts and circumstances of the case because Assessing Officer did not bring any evidence on record for payment of any illegal gratification etc. 16. Considering the totality of the facts and circumstances of the case, we do not find any justification to interfere with, the order of the learned CIT(A). 3.7 In the above decision, the Tribunal has noted that each assessment year is separate and no material was produced on record as how the statement recorded in preceding year was relevant to the assessment year under appeal. Further, the Tribunal held that matter in assessment year 2003-04 has not yet reached finality and therefore, relevancy of the statement recorded in assessment year 2003-04 in the assessment year under appeal was not explained by the assessee. 3.8 We concur with the above finding of the Tribunal, and we are of the opinion that the assessee is required to discharge onus of the services rendered in each year separately and no reliance can be placed on any documentary evidence supporting services rendered either in preceding or succeeding assessment years. In the brief synopsis, the Ld. counsel has referred following documents as eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Sagar Project. 19. PB-112 is letter from the assessee to M/s C.T. Cotton Yam Ltd. requesting the agent to send various informations in respect of Rani Awanti by Sagar Project. 20. PB-113 is letter from M/s C.T. Cotton Yam Ltd. informing the assessee that agent can provide valuable information in respect of Rani Awanti by Sagar Project. 21. PB-114 is letter dated 31.08.2002 from M/s C.T. Cotton Yam Ltd. intimating that M/s SEW Construction Ltd. is prepared to sign MOU in relation to the execution Rani Awanti by Sagar Project. 22. PB 115 is assessee s letter dated 03.09.2002 to M/s C.T. Cotton Yarn Ltd. in relation to Rani Awanti by sagar project offering the modified the term. 23. PB-116 is letter dated 08.10.2002 from M/s C.T. Cotton Yam Ltd. to the assessee in respect of Rani Awanti by Sagar Project informing the extension to date for submissions of tender. 24. PB-117 is letter dated 14.10.2002 from M/s C.T. Cotton Yam Ltd. to the assessee giving valuable information in respect of Rani Awanti by Sagar Project. 25. PB 118 is assessee s letter dated 11.12.2002 to M/s C.T. Cotton Yam Ltd. requesting to pursue the consultants in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd M/s Orrisa Power Consortium Ltd. regarding Samal Project. 44. PB 102M-102N is appointment of M/s C.T. Cotton Yam Ltd. appointing them as representative in relation to Malana Power Project. 45. PB 129-134 are the correspondence between M/s C.T. Cotton Yam Ltd. with the assessee regarding Malana Power Project. 46. PB 135 is the copy of bill of M/s C.T. Cotton Yam Ltd. regarding Malana Power Project. 47. PB 136-137 are the release of advance payment in respect of Malana Power Project. 48. PB 138-145 is the copy of agreement between assessee and Malana Power Project. 49. PB 1020-102P is appointment of M/s C.T. Cotton Yam Ltd. appointing them as representative in relation to Ganguwal and Cottla Projects. 50. PB 158-161 are the correspondence between assessee is M/s C. T. Cotton Yarn Ltd. regarding Ganguwal and Cottla Projects. 51. PB 162 is copy of invoice from M/s C. T. Cotton Yam Ltd. regarding Ganguwal and Cottla Projects. 52. PB 102Q-102R is appointment of M/s Sachdeva Financial Services P. Ltd. appointing them as representative in relation to Varahi Under Ground Power Projects. 53. PB 204-205 is the copy of bill from M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying to counter comments dated 28-01-2010. 73. PB 671 - 673 is assessee s letter dated 06-01-2010 filed to Ld. CIT(A) furnishing additional documents. 74. PB 674 - 675, 727 is the detailed chart showing project procurement expenses from the period 01-04-2004 to 31-03-2005. 75. PB 676 is the debit note dated 31-12-2004 raised by M/s VA Tech Hydro India Pvt. Ltd. 76. PB 677 is the bill dated 16-09-2004 raised by M/s D. D. Agrovet Pvt. Ltd. amounting to ₹ 5,89,20,882/-addressed to M/s VA Tech Hydro India Pvt. Ltd. for consultation and solicitation fees NHPC contract for supply and erection of Teesta Low Dam Project. 77. PB 678 - 684 is the copy of purchase order dated 31-12-2005 placed by Andritz Hydro Pvt. Ltd. (M/s VA Tech Hydro India Pvt. Ltd.) before M/s D. D. Agrovet Pvt. Ltd. 78. PB - 685 is the invoice dated 08-12-2004 raised by M/s Sharika Enterprises Pvt. Ltd. amounting to ₹ 20,00,000/- addressed to M/s VA Tech Hydro India Pvt. Ltd. for consultancy charges for the services offered. 79. PB 686 - 690 is the copy of purchase order dated 21-12-2004 placed by Andritz Hydro Pvt. Ltd. (M/s VA Tech Hydro India Pvt. Ltd.) bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces rendered has to be examined in each year on the basis of the documentary evidences submitted by the assessee and therefore, issue in dispute cannot be treated as covered by the decision of the Tribunal in assessment year 2004-05. The documentary evidences in the year under consideration for establishing the services rendered need to be produced by the assessee and examined by the Assessing Officer afresh. Accordingly, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine copy all the documents produced by the assessee or any other evidences to discharge the onus of services rendered by those commission agents, and after carrying out the necessary enquiries as required in the facts and circumstances of the case, he shall decide the issue in accordance with law. If required so, the Assessing Officer may examine original copies of the correspondence between the assessee and the commission agents. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. Accordingly, the ground of the appeal is allowed for statistical purposes. 4. In ground No. 2, the Revenue has challenged deletion of the Transfer Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been accepted by the Department (the same TPO, New Delhi) for the next assessment year 2006-07 or the identical facts and issue under reference, as is apparent from assessments records of that assessment year. Keeping in view such a scission, therefore, I am satisfied that the adjustments made on account of ALP by the TPO are unsustainable and that the ALP u/s 92(2) submitted by the assessee company is quite fair and reasonable. Hence the addition of ₹ 95,47,197/- worked by the TPO stands cancelled. 4.2 Before us, the learned counsel of the assessee supporting the finding of the Ld. CIT-(A) submitted that total international transaction in the case is of ₹ 9,75,96,756/- and therefore, the PLI (OP/OR) of 6.95% should be applied only on the amount of international transaction and not on the gross revenue of the enterprise. 4.3 On the other hand, Ld. CIT(DR) on the issue of applying PLI over the amount of international transaction only, submitted that the assessee is not in appeal and therefore cannot be allowed to raise any new grounds while arguing the appeal filed by the Revenue. 4.4 On the issue of single year data versus multiple year data the Ld. CIT(D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 4.7 In our opinion, the learned CIT-(A) was not justified in deleting the transfer pricing addition without giving reasons for taking average of multiple year data for computing PLI of comparables. In view of above discussion, we set aside the finding of the Ld. CIT-(A) on the issue in dispute and restore that of Ld. TPO/AO. The ground of appeal is accordingly allowed. 5. In ground No. 3, Revenue has challenged deletion of the addition of ₹ 2,52,406/- and ₹ 2,45,572/- made by the Assessing Officer on account of disallowance out of telephone and car expenses. 5.1 As far as the facts in respect of the addition of ₹ 2,52,406/- on account of disallowance out of telephone expenses is concerned, the Assessing Officer has noted that the assessee failed to prove the genuineness of the expenses and no call register or any other record was maintained by the assessee so as to explain that all telephone and fax expenses were related wholly and exclusively for the purpose of business. The Assessing Officer accordingly disallowed a sum equal to 5% of the total expenses, which amounted to ₹ 2,52,406/-. Before the Ld. CIT-(A), the assessee filed submission that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, in support of its claim that all expenses incurred were for the purpose of business. He submitted that the learned CIT-(A) allowed the ground in favour of the assessee only relying on the decision of the Tribunal in the case of Haryana oxygen Ltd. (supra). The Ld. CIT(DR) submitted that finding of the Ld. CIT-(A) was contrary to the decisions of the Hon ble Madras High Court in the case of CIT Vs. Chitram and Company Private Limited 191 ITR 96 and CIT versus Madura Coats Ltd 263 ITR 241. 5.6 We have heard the rival submission and perused the relevant material on record. In the case of CIT Vs. Chitram Co. Company Private Limited (supra), it was not disputed before the Assessing Officer that the cars had been used for business and non-business purposes as well. Even in the course of the appeals preferred by the assessee before the AAC (First Appellate Authority), the only plea taken was that the disallowance was on the higher side. The issue before the Hon ble High Court was that in view of the use of car for non-business purpose, whether the assessee was entitled for full depreciation on the Car. In view of the facts of the case, the Hon ble High Court held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he personal purposes of the employees and directors of the assessee and the Tribunal was not correct in deleting this amount. We, therefore, answer this question in favour of the Revenue and against the assessee. 5.9 Hon ble High Court in above case has clearly held that expenses on cars used for personal purpose by the employees and directors of the company cannot be allowed as expenditure under the head profit and gains of business. 5.10 In the instant case, the Ld. CIT-(A) has not given any finding on the basis of documents produced by the assessee before him whether the expenditure was incurred wholly and exclusively for the purpose of business or not. Since the Assessing Officer did not get opportunity to examine documents like call registers for telephones and logbook etc. of vehicles as same were neither produced before him in the assessment proceedings nor forwarded to him by the Ld. CIT-(A), the claim of the assessee has remained non-verified by the lower authorities. In the interest of justice, we feel it appropriate to restore the issue to the file of the Assessing Officer to verify the documentary evidence supporting the claim of the assessee that the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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