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2015 (4) TMI 766 - AT - Income TaxDis-allowance u/s section 40(a)(i) - Non deduction of TDS u/s 194E - Payment made to Association of Tennis Professionals, a non-resident sports association - Addition on account of unclaimed liability - Dis-allowance of payment made to Tamil Nadu Tennis Association on account of non deduction of TDS - Disallowance u/s 40(a)(i) - Dis-allowance of expenses - reimbursement of expenses - Held that - It is evident that section 194E read with section 115 BBA apply to payments made to a non-resident sports association or an institution. In the instant case, ATP is undisputedly a governing body of the world wide men s professional Tennis Circuit responsible for ranking of its players and co-ordinating the Tennis tournament in the world. In such circumstances we are of the opinion that ATP is a non-resident sports institution and therefore Section 194E applies to the payments made by the assessee to the ATP. In the light of the above, the order of the ld CIT(A) is reversed and the order of the AO is restored. Unclaimed liability - At no stage it has been established that the liability to pay the above surplus has extinguished. Even if the amount cannot be repatriated to Canada, the amount belongs to IMG Canada and it can be spent or utilized in India as per the directions of IMG Canada.s the facts and circumstances of the present case are pari materia with the case of the appellant in A. Y .2001-02, and there being no change in the facts during the year under consideration vis-a-vis the facts of AY 2001-02 with respect to the amount/liability involved in this matter, for the reasons as discussed in the aforesaid order of the CIT(A)-XXIX, New Delhi this ground of appeal is allowed. Disallowance of payment made to Tamil Nadu Tennis Association on account of non deduction of TDS - The argument of the revenue, that the disallowance is warranted u/s 40(a)(i) of the Act is misplaced as payment is made to a resident and within India and not to a non-resident or a foreign company, which is a condition precedent to invoke section 40 (a)(i) of the Act. As such the AO had not even correctly invoked section 40(a)(i) of the Act. Thus the specific ground of the revenue is that the ld CIT(A) has erred in ignoring the fact that the provision of section 40(a)(i) of the Act talks not only talks about interests, royalty Fee For Technical Services but other sum chargeable under the Act, is misconceived because section 40(a)(i) is neither been invoked nor can be invoked because payments are admittedly paid to a resident and even if disallowance can be invoked, it is only u/s 40(a)(ia) of the Act, wherein the expression other sum is absent. Therefore we do not find any infirmity in the impugned order of the ld CIT(A) and so we dismiss the same. Disallowance of payment to All India Tennis Association on account of non submission of any proof of tax exemption - We find that the payment made to AITA a resident is to obtain necessary sanction/ approval for conducting Chennai Open Tournament is not covered under any of the specific TDS provisions under Chapter XVIIB of the Act. The AO in the order has not stated any of the section under which the assessee should have withheld taxes. Therefore for the reason stated with regard to similar payment to TNTA the sum paid to AITA cannot be disallowed u/s 40(a)(ia) or even u/s 40(a)(i) of the Act and so we do not find any infirmity in the order impugned in this respect and so the appeal of revenue on this ground is dismissed. Disallowance u/s 40(a)(i) - We have already held while deciding the appeal for Assessment Year 2005-06 that the disallowance made u/s 40(a)(ia) of the Act and now challenged u/s 40(a)(i) in Assessment Year 2006-07 is misconceived, we further hold that expenditure so incurred is not in the nature of royalty or fees for technical services. The payments have been made to TNTA for granting permission to conduct the tournament organized by the assessee. The said payments were of 20% share of income generated by sale of tickets. In such circumstances it cannot be said that such payments were for the use of logo of TNTA on the contrary the logo is used is that of ATP (U.S.A.). In the light of the above we had rejected the additional grounds preferred by the Revenue in Assessment Year 2006-07 and direct to delete the disallowances made in Assessment Year 2007-08 and Assessment Year 2009-10. As a result the grounds raised by the assessee in the appeal for Assessment Year 2007-08 and 2009-10 are allowed. Dis-allowance of expenses - reimbursement of expenses - We find that the AO has disallowed the expenditure on the ground that necessary evidences have not been produced on record. Whereas, the ld CIT(A) has followed the order for Assessment Year 2005-06 and sustained the disallowance. However, the ld AR has placed on record before us certain evidences to support the claim that expenses reimbursed were incurred wholly and exclusively for the purpose of the business of the assessee. The aforesaid evidence has not been specifically examined by any of the authorities below, therefore we consider it appropriate to remit the matter back to the file of AO, who shall decide the issue de-novo, after granting adequate opportunity to the assessee. Lest, it be stated here that such fresh examination be made, without being influenced by the disallowance made in Assessment Year 2005-06, as an independent year and the eligibility and allowability of the expenditure has to be thus examined independently in accordance with law. The ground raised by the assessee is allowed for statistical purposes. - In net, appeals are partly allowed in favour of assessee.
Issues Involved:
1. Deletion of payments to Association of Tennis Professionals (ATP) under Section 40(a)(i). 2. Addition of amounts shown as liability in the name of IMG Canada. 3. Disallowance of payment to Tamil Nadu Tennis Association (TNTA) and All India Tennis Association (AITA) under Section 40(a)(i). 4. Disallowance of reimbursement of expenses. Issue-Wise Detailed Analysis: 1. Deletion of Payments to Association of Tennis Professionals (ATP) under Section 40(a)(i): The revenue contended that the CIT(A) erred in deleting the payments made to ATP, arguing that Section 40(a)(i) covers any sum chargeable under the Act payable outside India or to a non-resident, on which TDS is deductible unless a certificate of NIL withholding is obtained. The assessee argued that ATP is a governing body and not a sports association, thus Section 194E does not apply. The Tribunal held that Section 194E read with Section 115BBA applies to payments made to a non-resident sports association or institution. ATP, being a governing body of the worldwide men's professional tennis circuit, qualifies as a non-resident sports institution. Therefore, the disallowance made by the AO was found to be in order, and the CIT(A)'s order was reversed. This ground of the revenue was allowed. 2. Addition of Amounts Shown as Liability in the Name of IMG Canada: The revenue argued that the CIT(A) erred in deleting the addition of amounts shown as liability payable to IMG Canada. The CIT(A) had previously deleted an identical addition for Assessment Year 2001-02, observing that the amount was kept payable to IMG Canada as the games were not held and the amount was not repatriated due to non-availability of permission from the Government of India. The Tribunal upheld the CIT(A)'s decision, noting that the issue had acquired finality in the assessee's favor for Assessment Year 2001-02, and there was no change in facts. The ground raised by the revenue was thus rejected. 3. Disallowance of Payment to Tamil Nadu Tennis Association (TNTA) and All India Tennis Association (AITA) under Section 40(a)(i): The AO disallowed payments to TNTA and AITA under Section 40(a)(i), arguing that the assessee failed to deduct tax at the time of payment. The CIT(A) held that the payments were not covered under any specific sections under Chapter XVII B of the Act, thus no withholding was required. The Tribunal found that the payments to TNTA and AITA were contributions towards the development and promotion of tennis and were not specified payments eligible for deduction of taxes. The payments were made to residents within India, and Section 40(a)(i) applies to non-residents or foreign companies. Therefore, the disallowance was not warranted, and the CIT(A)'s order was upheld. The revenue's appeal on this ground was dismissed. 4. Disallowance of Reimbursement of Expenses: The AO disallowed reimbursement of expenses on the grounds that the necessary evidence was not produced. The CIT(A) upheld the disallowance following the order for Assessment Year 2005-06. The assessee argued that the expenses were incurred wholly and exclusively for business purposes and provided evidence to support the claim. The Tribunal found that the evidence provided by the assessee had not been specifically examined by the authorities below. Therefore, the matter was remitted back to the AO for a fresh examination, granting adequate opportunity to the assessee. The ground raised by the assessee was allowed for statistical purposes. Conclusion: The appeals were partly allowed, with the Tribunal upholding the disallowance of payments to ATP, rejecting the addition of amounts shown as liability to IMG Canada, dismissing the disallowance of payments to TNTA and AITA, and remitting the issue of reimbursement of expenses back to the AO for fresh examination.
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