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TMI Blog2019 (2) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses cannot be considered as the income of the assessee. The assessee was earning commission income as well as incurring the expenses on behalf of M/s Unifruitti India (P) Ltd. Those expenses incurred by the assessee were reimbursed by the said company, therefore, the reimbursed expenses cannot be considered as income of the assessee. In that view of the matter, we delete the impugned addition sustained by the ld. CIT(A). - Decided in favour of assessee. - ITA No. 3408/Del/2013 - - - Dated:- 10-12-2018 - Sh. N. K. Saini, Hon ble Vice President And Smt. Beena A. Pillai, Judicial Member For the Assessee : Sh. R. K. Gupta, CA For the Revenue : Sh. Amit Katoch, Sr. DR ORDER PER N. K. SAINI, VICE PRESIDENT: This is an appeal by the assessee against the order dated 21.12.2012 of ld. CIT(A)-XXII, New Delhi. 2. Following grounds have been raised in this appeal: 1. That the assessment order making an addition of ₹ 24,27,721/- in the income of the appellant is contrary to the facts, erroneous, bad in law and the learned Commissioner of Income Tax (Appeals) grossly erred in upholding the same. 2. That both the authorities below without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd for which no cognizance has been taken in the appeal before CIT (Appeals). In the said certificate M/s Unifrutti India (P) Ltd. has once again confirmed that the appellant firm incurred expenses on their behalf which has been reimbursed by them after deducting TDS u/s 194C just to be on safer side. 5. That the reimbursement of expenses are admissible and do not part of revenue receipt as held by various Courts: Refer to: (i) Supreme Court in the case of CIT vs. Tejaji Farasram Kharwalla Ltd. 1967 SCR (3) 876. (ii) Delhi High Court in the case of CIT vs. Industrial Engineering Projects (1993) 202 ITR 1014 Delhi. (iii) Bombay High Court - Director of Income Tax (International Taxation) vs. Krupp Udhe GMBH. 6. That the appellant reserves his right to make addition, alteration, modification and withdrawal of grounds of appeal at any stage of the appellate proceedings 3. From the above grounds, it is gathered that only grievance of the assessee in this appeal relates to the sustenance of addition of ₹ 24,27,721/- made by the AO on account of reimbursement of expenses. 4. Facts of the case in brief are that the assessee filed the return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of contract payment as is certified by the TDS certificate. 2. That the nature of payment of ₹ 24,27,721/- on which TDS of ₹ 55,012/- was deducted is clearly indicated to be as Contract payment on the prescribed form No. 16A dated 07-06-2009. Hence, this payment is treated as contract payment and is subject to income liable to be credited in the Profit and Loss Account, instead of otherwise accounting treatment. 3. That the certificate (undated) issued by M/s. Unifruitti India (P) Ltd, thereby later on clarifying the nature of payment of ₹ 24,27,721/- on which TDS of ₹ 55,012/- was deducted, bears no importance. Moreover, the certificate is undated; besides no reply regarding authenticity of the same was received from the tax deducting company even in spite of specific notice under section 133(6) of the Income-tax Act, 1961. 7. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: I. The Assessing Officer has made an addition of ₹ 24,27,721/- in the income, of the assessee alleging receipt on account of payment to contractor not credited in the profit Loss account and based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.O. The assessee is maintaining a separate account of such expenses under the head Unifruitti Reimbursement Account and a detailed copy of ledger account of all these expenses and reimbursement thereof was filed during the assessment proceedings. Thus, there is no element of any income arising to the assessee in respect of reimbursement of expenses received and the payment is not liable to be credited in the Profit Loss Account. This view has also been upheld by Courts in various cases as under:- a) Supreme Court in the case of CIT vs. Tejaji Farasram Kharwalla Ltd. 1967 SCR (3) 876 : To the extent of the receipt representing reimbursement of expenses the same were not taxable. It is only when there was surplus that the same should be taxed. b) Delhi High Court in the case of CIT vs. Industrial Engineering Projects (1993) 202 ITR 1014 Delhi: in our opinion of the aforesaid judgment of the Supreme Court, reimbursement of expenses can, under no circumstances, be regarded as revenue receipt. c) Bombay High Court in the case of Director of Income Tax (International Taxation) versus Krupp Udhe GMBH : ITAT was justified in holding that charges to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the company i.e. M/s Unifruitti India (P) Ltd. mentioned the nature of payment as that of payment to Contractor. The Assessing Officer had also required M/s Unifruitti India (P) Ltd. to confirm the actual nature of payment alongwith supporting evidences. It was also required to send a confirmed copy of account and also to specify the PAN, Ward/Circle and the acknowledgment receipt of filing of Return of Income. The Assessing Officer had rejected the claim of the Assessee Firm in view of the apparent contradiction in the two claims and in view of the fact that no reply was received from M/s Unifruitti India (P) Ltd. till 02.12.11 or even thereafter till 23.12.11 when the Assessment Order was passed. Further, the Assessing Officer also pointed out that no written Agreement between the Assessee and M/s Unifruitti India (P) Ltd. was produced before him regarding the nature of transactions or incurring of expenses by the Assessee on behalf of M/s Unifruitti India (P) Ltd. and subsequent reimbursement. 8.3.1 It was claimed in Para 3 of the reply dated 02.11.12 that the Sales are effected by the Assessee at the price at which the goods are received plus 1% A PMC Market Fee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar also there should have been Nil gross profit in the Trading account. According to him, this was a small but significant deviation. 11. The ld. CIT(A) asked the assessee to explain the following: 1. It is seen that the Appellant has claimed two periods but actually there is a claim for 3 different periods i.e. F.Y. 07-08. April May 08 and June 08 to March 09 in which there have been different business terms with M/s Unifruitti. Please give comparative details for these 3 periods. 2. Please explain why adverse view should not be drawn and the claims of the manner of conducting of Business and the results thereof should not be rejected as the Appellant claims that there were no written Agreements or Contract for the conducting of Business with M/s Unifrutti for each of the above 3 periods. 3. As it is claimed that the business with M/s Unifrutti was conducted on a verbal basis, please specify who was the person or persons who negotiated the business with M/s Unifrutti and who are persons actually conducting the business. Please give their complete names addresses, relationship with the firm etc. 12. In response to the above, the assessee submitted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,27,721/- from M/s Unifruitti India (P) Ltd. which as per the TDS Certificate is a contract receipt and as per the Assessee is a reimbursement of expenses and no reply having been given by M/s Unifruitti India (P) Ltd. u/s 133(6) to the Assessing Officer and it further being claimed that there was no written agreement or contract between these two parties, the entire nature of transactions between these two parties are required to be understood alongwith the entire documents to arrive at a decision regarding the nature of transactions between these two parties. However, it is seen that the Appellant is resorting to giving evasive replies and not coming out with the truth. 8.9 It has further been claimed in Para 1 in the abovementioned letter dated 18.12.12 that in the current year the sales were made to far reaching areas of nearby states whereas in earlier years relatively nearby areas were explored. However, no proper details or any documents or evidence in support of such claim was given and hence such claim for explaining the discrepancy in freight visa- vis the quantum of goods handled cannot be accepted. 8.10 It has been claimed that no adverse view should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complete details and to justify the relationship with sale of Unifruitti items. It is clear that when the expenses themselves are not genuine, then it is obvious that their reimbursement cannot be genuine. Thus whatever may be the nature of receipt, whether it is contractual or it is an additional Commission or of any other nature, there is no evidence with the Assessee regarding expenditure being incurred against such receipts and in such a situation there is no doubt at all that these receipts of ₹ 24,27,721/- are of the nature of Income in the hands of the Assessee Firm. 8.11 It is seen that the Appellant Finn has been unable to give any proper reply to the query raised vide Order Sheet entry no. 2 on 07.12.12 as to why adverse view should not be drawn and the claims of the manner of conducting of business and the results thereof should not be rejected, in view of the entire facts of the case it is hereby held that the Assessee Firm has not come out with the full terms of the manner of conducting of business and has evaded giving the correct details and documents regarding the business of the Assessee Firm, particularly its transactions with M/s Unifruitti India (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material available on the record. In the present case, it is an admitted fact that the assessee earned the commission income from M/s Unifruitti India (P) Ltd. and also received the expenses which were incurred by it for the said company. In this regard, the company M/s Unifruitti India (P) Ltd. furnished a certificate (copy of which is placed at page no. 6 of the assessee s paper book). The said certificate was not produced before the AO, however, the assessee furnished the same before the ld. CIT(A) who admitted the said fact in para 8.3 of the impugned order and also mentioned that the said certificate was undated but the facts mentioned in the said certificate resembled with the details furnished by the assessee. The figure of the Tax Deducted at source u/s 194C of the Act amounting to ₹ 55,012/- on the said expenses was same which was in the TDS certificate and the amount of reimbursement of expenses was claimed to be on account of payment of freight, cartage, conveyance, telephone etc. The assessee also furnished the details of the expenses reimbursed by M/s Unifruitti India (P) Ltd. (copy of which is placed at page nos. 8 to 33 of the assessee s paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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