TMI Blog2020 (3) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... the origin and sources of such information are available outside India and merely utilizing such information in India, whether such utilization can be taxable in India. Therefore, in our considered view, the availing of net based services are outside the ambit of FTS provisions particularly when it cannot chargeable to tax in India and further as per the information submitted before us, the assessee has utilized these information outside India. Therefore, any income /payment for which such payments are not taxable in India, certainly such payments are outside the provision of TDS. See . INDUSIND BANK LTD. [ 2019 (4) TMI 1677 - BOMBAY HIGH COURT] - Decided in favour of assessee. Addition towards entertainment expenses - AR submitted before us that entertainment expenses were paid to Gymkhana Club for which director utilized the same and he submitted that Ld. CIT(A) wrongly observed that it is the payment for Gym which is not to any club for its membership - HELD THAT:- We notice that Ld. AR has not brought on any bill or copy of any voucher which clearly indicate whether this payment is actually to the Gymkhana or towards any payment on behalf of Gym as observed by the tax aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,624/-. The case was selected for scrutiny under CASS to verify the following:- 1. High ratio of refund to TDS 2. Certificate u/s 197 for Nil or Lower rate of TDS (Form 13) 3.Low income shown by large contractors. 4. Mismatch in sales turnover reported in Audit Report and ITR. 5. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR. 3. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, AR of the assessee filed the relevant information as called for. Thereafter, AO after considering the submission of assessee, completed the assessment by making addition on deemed rent, payment made to ICOM, entertainment expenses, Non media billing having difference between sales declared for VAT and service tax and sales declared in profit and loss account and also disallowed leave salary paid. 4. Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee, partly allowed the appeal of the assessee by allowing deemed rent and leave salary paid and dismissed the other grounds raised by the assessee. 5. Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961. 3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals)-6 has erred in law as well as on facts by unjustifiably confirming the addition made by the Assessing Officer of the billing amount of ₹ 21.82 lakhs as unaccounted sale, without properly verifying the details filed before him during the course of hearing. 3.1 The learned Commissioner of Income Tax (Appeals)-6 failed to appreciate that difference of ₹ 21.82 lakhs as per Service Tax Turnover and Book Turnover is on account of Non-Media Billing at cost. In Media Billing Turnover is calculated on the basis of commission received where in Non-Media Billing, the assessee does not receive any commission, therefore it does not form part of the Turnover in the Profit and Loss Account, however, this amount of Non-Media Billing forms part of the total Turnover in the Service Tax and Vat Tax Returns. Therefore, the difference of ₹ 21.82 lakhs is because of the total amount of Non-Media Billing which has entered into the total turnover in the Service Tax and Vat Tax Returns but the same is not a part of total Turnover as per Profit and Loss A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this services are rendered outside India and the ICOM does not have PE in India, therefore the provisions of TDS is not applicable in this case of transaction. In this regard, he relied on of case of CIT vrs. Indusind Bank Ltd. (2019) 179 DTR (Bom) 18, which is placed at page no. 51 of the paper book and submitted that the facts in this case are similar to the facts of the present case. Accordingly, he submitted that since assessee has made payment for subscription only, which will not fall under any of the FTS provisions. 8. On the other hand, Ld. DR argued in support of the findings of tax authorities and he opposed the case law relied by the assessee and submitted that the case relied by Ld. AR are decided on the issue of GDR, whereas the present case is on the payment of subscription charges which is distinguishable. With reference to page 24 of the paper book, he submitted that the nature of payment is not clear and assessee has utilized the services, therefore it will fall under technical services and the services were provided by the foreign entity and assessee has utilized the same. Accordingly, it will fall within the ambit of FTS. 9. Considered the rival contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR submitted that payment to Gymkhana, what is the benefit assessee will get out of such expenditure and he supported the orders passed by tax authorities. 12. Considered the rival contentions and the material placed on record, we notice from the record that both AO and Ld. CIT(A) treated the payment of ₹ 5,640/- to Gym on behalf of the director of the company. Whereas, Ld AR merely submitted that this payment is towards payment to Gymkhana club only any payment made to club is allowable of expenditure and he objected to the findings of Ld. CIT(A) in para no. 8 of its order. We notice that Ld. AR has not brought on any bill or copy of any voucher which clearly indicate whether this payment is actually to the Gymkhana or towards any payment on behalf of Gym as observed by the tax authorities. Since the payment involved is very small, we direct the AO to verify whether this payment is towards Gymkhana club, then the AO is directed to allow the above expenditure as entertainment expenses. Accordingly, ground raised by the assessee is allowed for statistical purposes. 13. With regard to ground no. 3, Ld. AR submitted before us that AO observed that there is a differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference. The assessee explained vide its letter dated 20th December, 2017 (copy enclosed at page 27of the paper book) that the difference of ₹ 21.82 lakh as per Service Tax Turnover and book Turnover is on account of Non- Media billing at cost. The assessee further explained by reconciling of total revenue as per service tax vat returns (copy enclosed at pages 28 to 30 of the paper book). 11 The remarks of the AO that the assessee has failed to report income of ₹ 21.82 lakhs in the total sales are totally unwarranted and without understanding the accounts maintained by the assesse. He has not understood that the amount of ₹ 21.82 lakhs has been shown in the sales as well in the purchases. In fact, the assessee has not earned any income on these sales, the assessee issued the bill to its client for this amount which he has paid to the media owners. Thus, this amount has been shown in the sales as well in the purchases (this was contra entry in the profit and loss account) and has no effect on the profits. However, the Service Tax is payable even on the sales where the assessee has not earned any profit. Thus, the profit shown for the purpose of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities. Even Ld. CIT(A) acknowledged the method adopted by assessee, but however he observed that the assessee must have claimed the expenditure for the reimbursement and the reimbursement income was not declared by the assessee. 16. After considering the submissions, we notice that the method adopted by assessee must have disclosed the turnover less the non-media turnover as their sales and at the same time, assessee must have claimed cost of services less non media expenditure as their expenditure. On record, assessee has submitted only the reconciliation of sales and not submitted any reconciliation of cost of services as per which it has reduced the corresponding cost of services in the expenditure charged to profit and loss account. Therefore, we are inclined to remit this issue back to AO to verify the cost of services rendered by assessee relevant for both media and non media services. If it is found that the assessee has excluded the cost of services relating to non media, in their profit and loss statement, the addition in turnover, may be deleted. It is needless to say that assessee may be given proper opportunity of being heard and at the same time, assesse is dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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