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TMI Blog2016 (7) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr. DR For the Respondent : Shri A.K.Upadhyay, Advocate ORDER Per N.V.Vasudevan, JM This is an appeal by the Revenue against the order dated 23.01.2012 of CIT(A)- VIII, Kolkata, relating to AY 2008-09. 2. There is a delay of about 4 days in filing appeal by the revenue. The same has been explained in an affidavit filed before us as owing to inability to trace the assessment records. After considering the reasons given in the affidavit, we are satisfied that the delay in filing the appeal was due to reasonable and sufficient cause. Accordingly the delay in filing the appeal is condoned. 3. The only ground of appeal raised by the revenue in this appeal is that the CIT(A) erred in law and facts by deleting the addition of ₹ 2,35,97,622/- made by the AO. The Assessee is a company. The Assessee provides Cable TV services to subscribers. Assessee obtains cable TV signals from Multi System Operator M/S.Wire and Wireless (India) Pvt. Ltd. (WWIL). Multi-System Operator (MSO) means a cable operator who receives a programming service from a broadcaster and re-transmits the same directly or through one or more local cable operators. Broadcaster are persons prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further claimed that the aforesaid persons to whom it paid services charges are income tax payee with permanent account numbers. The details of the recipients with complete address and PAN, mode of payment and details of TDS thereon were provided to the AO in the course of assessment proceedings. 7. Under sec.37(1) of the Income Tax Act, 1961(Act), any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession. Explanation-1 to Sec.37(1) of the Act provides that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. The law by now is well settled that to claim commission expenditure as an allowable deduction u/s.37(1) of the Act, the Assessee has to prove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou have answered as per question no.2 ; iv, Liaison work requires travel, more so when the Broadcasters are Based in other cities. Therefore Furnish the details of tours made by your employee to cities outside your place of work in following format v. Place visited Mode of visit (Rail/Air/By car Date of Visit Place of stay with complete address In support of your answer, provide evidence in form of Hotel Bills , Air Ticket or Train Ticket etc. x. Naturally Broadcasters must have written you sometime regarding the negation or eve order placement .Furnish copy of, any letter written by broadcaster to you? xi. Furnish copy of order placement letter- written by broadcaster with whom your employee liaise. xii. How did you know about the business you got from channels? : xiii. How did the WWIL came to know which channel .is going to take their services. xiv. How did you know how much money or rate is to be. paid by the channels to WWIL? xv. Who collected the payments - YOU Hi 'I'ech or WWIL? xvi. How much business did you do i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee for deduction of a sum of ₹ 2,35,97,622/- being commission paid to the sub-agents. The following were the conclusions drawn by the AO: 12.Questionable conduct of the liaising persons .: BMA Stainless Ltd Apart from the complete failure to bring a ' single piece; of evidence .in support of its claim that it had done liaison job, following serious questions arises : (i) BMA Stainless Ltd. could not even say who actually performed the liaising job. It simply did not answer the question' No.4 of notice u/s 133(6) dt. 4/8/2010 .which was Name of the employee and his designation in sour company who liaison on behalf of, you for HTVCPL . -letter of assessee [Annex VII] (ii) When summon u/s131 was served on BMA, it did not appear but submitted a letter dt 09/12/22010 in which states: In this connection, we would further like to inform you that the persons who has dealt this matter has already left .out organization [ Annex III] So, a company claiming' to liaison service failed even name its employee who helped it earn income, from HTVCL and when it was time to bring truth on record, it informs that such person has left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticity of work and merely he opined that based on his judgment the liaison Job has been done by appellant himself Whereas, it was stated to him that the appellant has no marketing set up, proper Manpower strength or net work to do the job. The appellant due to its connection with WWIL as Cable Operator, had obtained the work. However due to its lack of marketing strength and adequate set up off loaded the jobs to assigns. (II) The appellant had appointed sub agents or assigns, namely BMA Stainless Ltd, C.P.Re-rollers Ltd, Vaishnavi Traders Pvt Ltd, Max pro Tracon (p) Ltd and Statt Investment Securitas (P) Ltd with the permission and in due know edge of the Wire and Wireless India Ltd. only as mentioned in the letter of Wire and Wireless India Ltd , copy of which was also given to AO during the course of hearing. The AO has not commented on it or not taken into cognizance. (III) The assessing officer did not provide the proper opportunity to represent the case under various pleas, as appear from the letters filed by the parties. Despite of the fact, the appellant sought the cooperation of such payee to file their reply and supporting documents. (IV)The AO drew th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes such fee, which is subject to tax. The accounts of the recipients are .duly checked and audited by the statutory auditors under the Companies act and Income tax act. (XI) Such payments of liaising fees were subject to proper deduction of tax at source and such compliances have been duly made. The copies of the respective income tax records and audited annual accounts of the assigns are furnished. (XII) In view of the above observation/findings and discussion, the claim of the appellant that it had appointed the assigns to do the job in its behalf and has not done the job by itself cannot be denied. Keeping in view the above, considering the facts and circumstances of the case and perusing the impugned assessment order and other materials on records, I am of the opinion that disallowance of ₹ 2,35,97,622/- and addition made thereof to the total income of the appellant to delete the addition so made of ₹ 2,35,97,622/- on account of disallowances of liaising fees to the sub-agents. 17. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. We have heard the submissions of the learned DR and the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper manpower strength or net work to do the job. The appellant due to its connection with WWIL as Cable Operator, had obtained the work. However due to its lack of marketing strength and adequate set up off loaded the jobs to assigns. The A.O never question the authenticity of the liaison job by assessee . In fact there is evidence of record that only assessee had done the liaison job. This is stated by the broadcasters who paid ,the amount. So, LD CIT(A) wrongly assumed that the assessee has no adequate set up. 2. II) The appellant had appointed sub agents or assigns, namely BMA Stainless Ltd, C P Re-rollers Ltd, Vaishnavi Traders Pvt Ltd, Max Pro Tracon Pvt Ltd and Statt Investment Securities Pvt Ltd with the permission and in due knowledge of the Wire and Fireless India Ltd only as mentioned m the letter of Wire and Wireless India Ltd, copy of which is also given to the AOduring the course of hearing. The AO has not commented on it or not taken into cognizance. It is surprising that LD CIT(A) has raised such question in favour of assessee despite the fact that A.O has on the basis or the evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V The AO failed to appreciate the fact that with effect from 1st April 2008 from the subsequent periods, WWIL had directly appointed BMA Stainless Ltd, as its liaison agent in place of the appellant. Thus the question on the capability of the said party to work as assign of the appellant does not _ arise. More so when the authenticity of the job is not in doubt. Since the period from 0110 4/2008 is not under consideration, it can help the case of BMA.. So , it would have been better that BMA Stainless should have placed some evidence that during FY 2007-08 , it actually did the liaison job. VI The AO did not enquire about the payment with other two parties namely M/s. Maxpro Tracon Pvt Ltd and Statt Investment Services Pvt Ltd. However, he added to the total income, the amount of liaison fees paid to these two parties too. The three parties who were enquired into got 99% of. the payment for alleged liaison job. Therefore, A. 0 concentrated his effort on the same. Even if no enquiry was done, how come that proves other three parties' dealing correct . Without agreeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IX It has not been denied that the appellant had earned such income and the principal has paid the sum' on the execution of the job only. It cannot be denied the WWIL had appointed the appellant to do liaison job with the broadcasters. It can conversely stated that the liaison job has taken place. The AO had no different view on this. The point of dispute is who did this job. Whether appellant itself did the same job or it assigned to any third parties. The appellant had not claimed any expenditure than the expenditures an dispute. If it is assumed that appellant had executed the job then there must be some expenditure on salary, telephone, travelling or conveyance. None of such expenses is debited to the audited annual accounts of the appellant. On the other hand, the payees of the liaison fees had admitted the transactions and receipt of such fees from the appellant. The A.O accepts that the assessee received the job, that he concluded that the job was performed by itself only which is confirmed by the broadcaster that Sri Suresh Sethia, Director of assessee had done the job. Non claiming expense was opted because whole factious. expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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