IN THE ITAT DELHI BENCH ‘C’
Income-tax Officer, Ward 11(4), New Delhi
v/s.
Interserve Travels (P.) Ltd.
IT APPEAL NO. 3526 (DELHI) OF 2010
[ASSESSMENT YEAR 2006-07]
MAY 18, 2012
ORDER
A.N. Pahuja, Accountant Member
This appeal filed on 20.07.2010 by the Revenue against an order dated 19.05.2010 of the CIT(A)-XIII, New Delhi, raises the following grounds:-
1. “On the facts and the circumstances of the case and in law, the order of CIT(A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside.
2. On the facts and the circumstances of the case and in law, the ld. CIT(A) has erred in deleting an addition of Rs. 52,22,326/- ignoring the provisions of Section 40(a)(ia) of the Income-tax Act, 1961 and the facts that the entire TDS amount has been claimed by assessee company.
3. On the facts and in circumstances of the case and in law, the learned CIT(A) has erred in deleting an addition of Rs. 52,22,326/- without appreciating the fact that the commission received from M/s Amadeus India Pvt. Ltd. was rotated through the assessee company and intimately paid to the parties concerned and that the mischief of the provisions of section 194H and 40(a)(ia) of the Income-tax Act, 1961 are clearly attracted.”
2. Facts, in brief, as per relevant orders are that return declaring loss of Rs. 71,644/- filed on 20.11.2006 by the assessee, engaged in the business of travel agents, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (as the Act), issued on 06.10.2007. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed on perusal of profit and loss account that the assessee received commission from Amadeus India Pvt. Ltd. for an amount of Rs. 13,49,364/- while TDS certificate in Form No.16A enclosed with the return revealed commission of Rs. 65,71,690/-. To a query by the AO, seeking to invoke the provisions of section 40(a)(ia) of the Act, the assessee replied vide letter dated 18th December, 2008 as under:-
” … Interserve is acting as collection agency on behalf of its member travel agencies and passing the respective money received from Amadeus for the bookings made by those member travel agencies. Since, interserve is acting as a collection agency, the amount received and paid by interserve is not reflecting in its profit and loss statement. Interserve has not rendered any service to Amadeus and neither has the member travel agencies rendered any services to interserve. It is also pertinent to note that the member travel agencies have recognized the money collected through interserve in their profit and loss account and recognized as income. In other words, interserve has rendered no service which can render the collection handled by the interserve (on behalf of its member travel agencies) as its own income. The same principle applies to money paid by interserve to the member travel agencies which represents distribution of collected money which cannot be categorized as an expense. We, therefore, submit that it is prudent to recognize only the commission retained by interserve as its own income. On the other hand, since no expense has incurred by interserve while making payments to its members, provisions of Chapter XVII-B do not apply to this transaction ….”
3. However, the AO did not accept the submissions of the assessee on the ground that the commission income paid/credited to the assessee by M/s Amadeus India Pvt. Ltd. was the business income of the assessee and was recorded in their books of accounts under the nomenclature of commission income. The receipt of this income in the hands of the assessee was liable to TDS provisions as per Chapter XVII B of the Act and M/s Amadeus India Pvt. Ltd. duly deducted the tax on commission income paid to assessee at their end, which the assessee has claimed in its return. However, since the assessee did not deduct at source while making payment of commission to the travel agents, referring to provisions of sec. 40a(ia) of the Act, the AO disallowed the amount of Rs. 52,22,326/-.
4. On appeal, the ld. CIT(A) deleted the addition holding as under:-
“I have perused the various agreements referred and on consideration of the facts and arguments of the appellant I agree with the contentions of the appellant that the entire sum of Rs. 65,71,690/- received by the appellant from Amadeus India Pvt. Ltd. was not in the nature of income but was received in a representative capacity for and on behalf of the various travel agencies who were part of the consortium agreement. The appellant has not rendered any service to Amadeus so as to construe the amounts received as income as the services were actually rendered by the constituent members, who alone are chargeable to tax on the same. Thus, I hold that the addition of Rs. 52,22,326/-made by the Assessing Officer is not sustainable. The appellant succeeds on this ground of appeal.
