This is an appeal challenging the order dated 30.01.2017 by the AO that is the ACIT, New Delhi pursuant to the order dated 04.11.2016 by the Dispute Resolution Panel-1, New Delhi.
2. Brief facts of the case are that the assessee Fino Pay tech Ltd. was earlier M/s Alpha Payments Service India P. Ltd. It has been engaged in the business of developing, testing, marketing, selling, buying, deploying, exporting, importing, designing, coding and making hardware and/or software systems and solutions for the relating to or in connection with electronic payment and mobile banking systems and during the year the assessee company is not engaged in the any business activity. For the AY 2012-13 the assessee filed return of income on 27.11.2012 showing an income of Rs. 7,25,06,370/-. It was found that during the year under consideration the assessee had undertaken International Transaction with its associated enterprises valuing more than 15 crores as such u/s 92CA of the Act, the matter was referred to the Transfer Pricing Officer for determining the arm’s length price. Draft assessment order prepared thereafter was objected to by the assessee before the DRP-1 and pursuant to the orders dated 04.11.2016, the AO passed the assessment order dated 30.01.2017 assessing the income of the assessee at Rs. 26,12,49,555/-, while making addition of a sum of Rs. 13,21,53,000/- in respect of the claim made by the assessee as capital receipt and a sum of Rs. 5,65,90,190/- in respect of the claim made by the assessee that it was offered for tax in the earlier year. Challenging these two additions the assessee is before us in this appeal both on merits and also on the question of law.
3. It is the argument of the Ld. AR that during the assessment year 201 1-12, the assessee, though initially claimed an expenditure of Rs. 19,22,37,523/-, subsequently withdrew such claim in respect of a sum of Rs. 18,63,61,346/- which comprised of Rs. 13,21,53,000/- spent for acquisition of the new business from one OBOPAY and a sum of Rs. 5,65,90,190/- which was business expenses of the assessee. According to the assessee the withdraw was pursuant to the agreement between assessee and ultimate parent company for cost reimbursement as well as Transfer Pricing. The voluntary dis allowance of Rs. 18,63,61,346/- was accepted by the Department. However, since the agreement was finalized only on 18.05.2012, initially the expenditure was debited to the profit and loss account but when the reimbursement was received during the assessment year under consideration it was credited to the profit and loss account. Ld. AR argued that though for the AY 2011-12 the expenditure was debited to the profit and loss account, but still during the computation of income, such claim for deduction of such expenditure was withdrawn, as such when the amount was received, though it was credited to the profit and loss account, the said amount was deleted during the computation of income. However, the AO as well as the DRP while laboring under the impression that the cost reimbursement agreement between the assessee and the parent company of the assessee was only an afterthought and there is no presumption that every reimbursement of expenditure would be capital in nature. In the circumstances, Ld. AR submits that since the entire amount of Rs. 18,63,61,346/- was offered to tax during the AY 2011-12 the same cannot be brought to tax during the AY 2012-13 merely because of the book entries and submitted that the tax has to be charged not on the book entries but on the real income only.
4. Per contra, it is the argument of the Ld. DR that the earlier claim of the expenditure as Revenue item during the AY 2011-12 belies contention of the assessee that the same is Revenue during the AY 2012-13. She further argued that if in reality the amount was to be reimbursed by the holding company, there was no reason as to why the assessee had not shown the same as recoverable during the AY 2011-12, but under the guise of the cost reimbursement agreement which is only an afterthought, the assessee is trying to put forth the claim for deduction of the prior period expenses in the current year. Ld. DR further submits that no evidence was placed before the AO in support of the contention of the assessee and the very fact that the agreement dated 18.05.2012 between Nokia Corporation and Alpha Payment Services India P. Ltd. with retrospective operation, shows that such an agreement is an afterthought, more particularly in view of the fact that the agreement with OBOPAY has never seen the light of the day. Lastly, by placing reliance on the decision of Somdutt Vs ACIT Kolkata passed by a coordinate bench of Kolkata Tribunal, It is submitted that it is the duty of the assessee to discharge the onus that the amount credited in the books of account is not the real income and is exempt from tax. On this aspect Ld. DR also referred to Section 114(1)(g) of Indian Evidence Act to submit that the evidence which could be and is not produced would, if produced, by unfavorable to the person who withholds it.
5. Having heard the arguments we have carefully gone through the record. Absolutely there is no dispute, and on the other hand it is acknowledge by the assessment order for the AY 2011-12, that in the computation of income for the AY 2011-12 originally the assessee has claimed the deduction of an expenditure of Rs. 19,22,37,523/-. Having debited the same in their profit and loss account, it is also an admitted fact, that subsequently during the revised computation of income the assessee themselves had added back a sum of Rs. 18,63,61,346/- which includes as could be seen from page no. 47 of the Paper Book;, sum of Rs. 13,21,53,000/- towards business development expenditure and
7. In view of the undisputed fact that a sum of Rs. 18,63,61,346/- was offered to tax though it was originally debited to the profit and loss account during the AY 2011-12,and because of the cost reimbursement agreement between the assessee and the parent entity on 18.05.2012 pursuant to which a sum of Rs. 13,21,53,000/- and Rs. 5,44,13,490/- was credited to the profit and loss account, we hold that the assessee has rightly deleted the said amounts from computation of income for the AY 2012-13 though the same was credited to the profit and loss account. It is only an adjustment of book entries and there is no real income for the AY 2012-13. However, the sum representing the 4% of mark up as per transfer pricing agreement to a tune of Rs. 21,76,540/- is Revenue in nature and the income of the assessee during the AY 2012-13. Therefore, the additions of Rs. 13,21,53,000/- and Rs. 5,44,13,490/- are liable to be deleted, whereas the sum of Rs. 21,76,540/- has to be sustained. We, therefore, direct the AO to delete Rs. 13,21,53,000/- and Rs. 5,44,13,490/- while sustaining the addition of Rs. 21,76,540/-. Since we have disposed of the appeal itself the stay petition becomes infructuous and is liable to be dismissed. Hence, the same is dismissed.
8. In the result, the appeal of the assessee is partly allowed and the stay petition is dismissed.
Order pronounced in the open court on 12th July, 2017