2017 (2) TMI 330 - AT - Income Tax

Deduction of travelling expenditure - Held that - This Tribunal is of the considered opinion that when the assessee has made comprehensive payment of commission, which included travelling expenditure, deduction towards travelling expenditure of foreign agent cannot be claimed. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against assessee TDS u/s 195 - Disallowance u/s 40(a)(ia) - non deduction of tds on services of Walmsleys Ltd., UK for engineering drawings - Held that - Erection of the machine was done by the engineers of M/s. Walmsleys Ltd., UK in India. In fact, the engineers came down to India to the site of the assessee to supervise the erection personally. This clearly demonstrates that the engineering service was rendered in India by M/s. Walmsleys Ltd. UK. Even though the design and drawings were said to be prepared in the UK, mere preparing design and drawings would not complete the service rendered by M/s. Walmsleys Ltd. UK. The Walmsleys Ltd. UK has to necessarily execute the project and supervise the same in India. Therefore, the UK company not only made available of design and drawings to the assessee-company but also erected the entire project in India under the personal supervision. Therefore, the services rendered by M/s. Walmsleys Ltd., UK, is very much taxable in India. Assessee has to necessarily deduct tax under section 195 of the Act - Decided against assessee Addition under section 28(iv) - advance receipt - Held that - The assessee could not furnish any details with regard to so called advance said to be received and details of the supplies made to the above parties. Even though the assessee incurred an expenditure of ₹ 14,92,200 in executing the orders, which was shown as work-in-progress, the assessee could not produce any material before the authorities below regarding work-in-progress. In the absence of details, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the addition made by the Assessing Officer. - Decided against assessee

Summary

Issues:
1. Condonation of delay in filing appeal
2. Deduction of travelling expenditure
3. Disallowance under section 40(a)(ia) of the Act
4. Disallowance of certain amounts received from concerns

Condonation of Delay in Filing Appeal:
The appellant filed a petition for condonation of a 33-day delay in filing the appeal. The Tribunal found sufficient cause for the delay and admitted the appeal for hearing. The delay was condoned based on the circumstances presented by the appellant.

Deduction of Travelling Expenditure:
The appellant claimed a deduction for travelling expenditure of ?4,14,826 paid to a foreign agent. The Tribunal noted that the agreement did not permit payment for travelling expenses. As the commission payment already included the travelling expenditure, the Tribunal held that the deduction for travelling expenditure cannot be claimed separately. The order disallowing the deduction was confirmed by the Tribunal.

Disallowance under Section 40(a)(ia) of the Act:
The issue involved disallowance of ?2,89,70,704 under section 40(a)(ia) of the Act. The appellant engaged a UK company for engineering drawings, and the Tribunal found that the services were rendered in India. Even though the designs were prepared in the UK, the UK company supervised the project in India, making the services taxable in India. The Tribunal upheld the disallowance as confirmed by the Commissioner of Income-tax (Appeals).

Disallowance of Certain Amounts Received from Concerns:
The appellant received amounts from three concerns in earlier assessment years, claiming them as non-taxable. However, the appellant failed to provide details regarding the supplies made to these parties, bills raised, or refunds during the relevant year. The Tribunal found the lack of evidence and details led to the confirmation of the addition made by the Assessing Officer under section 28(iv) of the Act.

In conclusion, the Tribunal dismissed both appeals filed by the assessee, upholding the orders of the lower authorities on the issues of delay condonation, travelling expenditure deduction, disallowance under section 40(a)(ia) of the Act, and disallowance of certain amounts received from concerns. The judgment was pronounced on September 12, 2016, in Chennai.