ITA No. 4679/Del/2011, ITA No. 525/Del/2011, ITA No. 1012/Del/2011, ITA No. 4567/Del/2011,ITA No. 686/Del/2013,ITA No. 687/Del/2013

Shri J.S.REDDY And Shri A. T. Varkey JJ.

For the Appellant : Sh. S.K.Aggarwal, CA Sh. Sujay Paul, CA
For the Respondent : Satpal Singh, Sr. DR

ORDER

The order of the Bench was delivered by

A. T. Varkey, JUDICIAL MEMBER-These are six appeals, four appeals filed by the Revenue and two by the assessee relate to Assessment Year 2005-06 to 2009-10. Since the issues involved in these appeals are common, therefore, they were heard together and are being decided by this consolidated order. In appeal No. 1012/Del/2011, for Assessment Year 2005-06, the revenue has raised the following grounds:-

“1. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the payments to Association of Tennis Professionals, without appreciating that the Section 40(a)(i) covers any sum chargeable under the Act, which is payable outside India/ to a non-resident, on which TDS is deductible under Chapter XVII-B, unless a certificate of NIL withholding is obtained.

2. CIT(A) erred in deleting the addition of amounts shown as liability in the name of IMG Canada received from Sahara India Financial Corporation Ltd. towards title sponsorship, without appreciating that since the games were not held and since Sahara India has not demanded the money back, the same has become the income of the assessee.”

2. The revenue has also raised the following two additional grounds:-
“i) On the facts and in the circumstances of the case, the ld the Commissioner of Income Tax (appeal) has erred in deleting the additions made under section 40(a)(i) by the AO holding that the assessee was not liable to withhold tax at the time of payments made to Tamil Nadu Tennis Association and All India Tennis Association.

ii) On the facts and in the circumstances of the case, the ld Commissioner of Income Tax (Appeal) has erred in ignoring the fact that the provisions of section 40(a)(i) of the Act not only talks only about interest, royalty, fees for technical services but about ‘other sum’ chargeable under the Act as well.”

3. Ground No.1 relates to payment of Rs. 20,30,554/- to Association of Tennis Profession (ATP) by the assessee and disallowed by the AO u/s 194 E read with section 40(a)(i)of the Income Tax Act, 1961 (herein after ‘the Act’).

4. The AO in this regard has observed that the assessee was required to deduct TDS u/s 194E on the payment to ATP and in absence thereof the expenditure was disallowed u/s 40 (a)(i) of the Act. The ld CIT(A) however has held as under:-

“In respect of the payment of Rs. 20,30,554/- made in Foreign Currency to the Association of Tennis Professionals, it is observed that the they are in the nature of Tour Fees and Player Welfare Contribution. It is also not in dispute that the Association of Tennis Professionals is a non resident sports association in relation to a game or sport played in India under the name and style of Chennai Open. However, I am of the considered view that the impugned payment is not in the nature of royalty or fees for professional or technical services which would have attracted the provisions of section 40(a)(i) of the Act.”

5. Before us the ld DR submitted that provisions of section 194E apply to the facts and therefore the ld CIT(A) was wrong in reversing the disallowance. The ld AR on the other hand, submitted that section 194E does not apply as ATP is just a governing body of sport and not a sports association.
6. Having considered the rival submissions and facts on records we find that section 194E provides that where any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution an assessee is obliged to deduct income tax thereon at the rate of ten per cent as per the law for the relevant assessment year.

7. Section 115BBA provides that when
“(1) Where the total income of an assessee -
(a) ......................................................................
(b) being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India, income tax is payable at the rate of 10% thereon.

8. Accordingly the disallowance so made by the AO is found to be in order. The Hon’ble Calcutta High Court in the case of Indcom Vs. CIT (TDS) (2011) 11 Taxmann.com 109 (Cal) held as under after taking note of the provisions of laws applicable to the issue in hand i.e. sections 2(24)(ix), 5(2), 9(1)(i), 115BBA, 194E, 194J and 201(1) of the Income-tax Act, 1961 which are quoted below :

(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;

(2) subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which-
 (a)is received or is deemed to be received in India in such year by or on behalf of such person; or
(b)accrues or arises or is deemed to accrue or arise to him in India during such year.
Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance-sheet prepared in India.

Explanation 2.-For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.
9. Income deemed to accrue or arise in India.-(1) The following incomes shall be deemed to accrue or arise in India-

(i)all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.
Explanation.-For the purposes of this clause-

(a)in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India;

(b)in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export;

(c)in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India;

 (d)in the case of a non-resident, being-
(1)an individual who is not a citizen of India; or
(2)a firm which does not have any partner who is a citizen of India or who is resident in India; or
(3)a company which does not have any shareholder who is a citizen of India or who is resident in India, no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India;

115BBA. Tax on non-resident sportsmen or sports associations.-(1) Where the total income of an assessee,-

(a)being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, includes any income received or receivable by way of-
(i)participation in India in any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport; or
(ii)advertisement; or
(iii)contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or

(b)being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India, the Income-tax payable by the assessee shall be the aggregate of-

(i)the amount of Income-tax calculated on income referred to in clause (a) or clause (b) at the rate of ten per cent; and

(ii)the amount of Income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b)
Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b )

(2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of his income if-
(a)his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and
(b)the tax deductible at source under the provisions of Chapter XVIIB has been deducted from such income.

194E. Payments to non-resident sportsmen or sports associations.-Where any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct Income-tax thereon at the rate of ten per cent.

194J. Fees for professional or technical services.-(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of-
(a)fees for professional services, or
(b)fees for technical services,
shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum as Income-tax on income comprised therein :
Provided that no deduction shall be made under this section-

(A)from any sums as aforesaid credited or paid before the 1st day of July, 1995; or
 (B)where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed-
(i)twenty thousand rupees, in the case of fees for professional services referred to in clause (a), or
(ii)twenty thousand rupees, in the case of fees for technical services referred to in clause (b) :

[Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct Income-tax under this section :]

[Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct Income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.]

Explanation.-For the purposes of this section,-

(a)"professional services" mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;

(b)"fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;

(c)where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly. 201. Consequences of failure to deduct or pay.-(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax :

Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax."
10. Thereafter the Hon’ble Calcutta High Court held as under:-

“ 3. A plain reading of the aforesaid provisions of the Act makes it abundantly clear that if a foreign cricket team, by virtue of agreement among the various teams of different cricket-playing countries, participates in a cricket match played in India and an agreed amount is paid to such a team for participating in such a match in the form of prize money, such prize money, whether for winning or for losing the match, will come within the term "winnings" and hence, should be treated to be "income" within the meaning of section 2(24)(ix) of the Act. Similarly, such income should be deemed to accrue or arise in India being income accruing or arising, whether directly or indirectly, through or from any source of income in India as provided in section 9(1)(i) of the Act.

4. Section 115BBA of the Act, as quoted above, explicitly makes the aforesaid income of a foreign cricket team for participating in a cricket match in India taxable being an amount payable to such association or institution in relation to any game or sport played in India.

5. Mr. Bajoria, the learned Senior Advocate appearing on behalf of the appellant, in this connection, tried to impress upon us that the money paid to the manager of a foreign team for meeting the administrative expenses, such as, stationery items, typing expenses, telephone calls, xerox-expenses, etc., required to be incurred while on tour for World Cup matches, would not fall within the scope of taxable income and thus, his client had no duty to deduct tax from that amount paid to the team at the source. In our opinion, such contention is not tenable for the simple reason that it was the appellant who made a lump sum amount to the team-manager and as indicated in the proviso to section 115BBA(1) of the Act, no deduction in respect of any expenditure is permissible for calculation of the income under the said provision from the total amount received by the foreign team for such participation. Thus, in our opinion, the additional amount paid in form of the alleged "administrative expenses" was really part of the prize money allotted to the teams. It goes without saying that prize money is payable also to a losing team, although, at a lesser rate.

6. In the case of GE India Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456/ 193 Taxman 234 (SC) and relied upon by Mr. Bajoria, it was pointed out that section 195(1) of the Act uses the expression "sum chargeable under the provisions of the Act" and there is no necessity to give weightage to those words. Further, it was held that section 195 of the Act uses the word "payer" and not the word "assessee" and the payer is not an assessee. The payer, the Court proceeded, became an assessee-in-default only when he failed to fulfil the statutory obligation under section 195(1). If the payment does not contain the element of income, according to the said decision, the payer cannot be made liable and be declared to be an assessee-in-default.

7. In the case before us, we have already pointed out that the amount paid to the foreign team for participation in the match in India in any shape, either as prize money or as the administrative expenses, is the income deemed to have accrued in India and is taxable under section 115BBA and thus, section 194E is attracted. Thus, the said decision does not help the appellant in any way.

8. We, therefore, find no substance in the aforesaid contention of Mr. Bajoria that the prize money or the purported administrative expenses are not taxable in India and consequently, his client had no liability to deduct at source under section 194E of the Act.”

11. From the above, it is evident that section 194E read with section 115 BBA apply to payments made to a non-resident sports association or an institution. In the instant case, ATP is undisputedly a governing body of the world wide men’s professional Tennis Circuit responsible for ranking of its players and co-ordinating the Tennis tournament in the world. In such circumstances we are of the opinion that ATP is a non-resident sports institution and therefore Section 194E applies to the payments made by the assessee to the ATP. In the light of the above, the order of the ld CIT(A) is reversed and the order of the AO is restored. This ground of the revenue is allowed.

12. Ground No.2 relates to addition of Rs. 5,59,83,783/- representing liability payable to IMG Canada and taxed u/s 41(1) of the Act.

Page 10 of 19
13. The ld CIT(A) has deleted the said addition by observing as under:-

“6.1 I have considered the submissions made on behalf of the appellant and the facts on record. I have also perused the order of the CIT(A)-XXIX, New Delhi referred to above. It is noticed that the Ld. CIT(A)-XXIX, New Delhi had deleted the identical addition made in the appellant's own case in Assessment Year 2001-02 with the following observations made (Refer to Para 3 and 3.1 of the CIT(A)'s order):-

"3..........The Sahara Cup for 1999 could not take place and 2000 was cancelled due to Kargil War between India & Pakistan. Similarly, Sahara Cup for the year 2000 was cancelled due to tensions between India & Pakistan. Therefore, the appellant kept this amount of Rs. 55,983,783 as payable to IMG Canada as this amount was received on behalf of IMG Canada only. The amount could not be repatriated because of non-availability of the permission from the Government of India ...

In this case the appellant has not claimed any deduction in any earlier assessment years and no benefits has been received in any subsequent year. IMG Canada has also not waived its claim of receiving the money. It has been confirmed that the amount is receivable from the appellant. The appellant has also shown the amount as payable in its balance sheet to IMG Canada. At no stage it has been established that the liability to pay the above surplus has extinguished. Even if the amount cannot be repatriated to Canada, the amount belongs to IMG Canada and it can be spent or utilized in India as per the directions of IMG Canada .....

3.1 From the above facts, legal position and considering reply of the appellant it is clear that the conditions of section 41 of 1. T. Act are not fulfilled in this case and accordingly AD was not justified in making this addition u/s 41. Accordingly, the addition of Rs. 55,983,783 is deleted. "

6.2 As the facts and circumstances of the present case are pari materia with the case of the appellant in A. Y .2001-02, and there being no change in the facts during the year under consideration vis-a-vis the facts of AY 2001-02 with respect to the amount/liability involved in this matter, for the reasons as discussed in the aforesaid order of the CIT(A)-XXIX, New Delhi this ground of appeal is allowed. As a result, ground of Appeal No. 3 is allowed.”

14. Having considered the rival submission we feel the issue was concluded by the order of ld CIT(A) for Assessment Year 2001-02 whereby identical addition made stands deleted and the said order has been accepted by the revenue. As the issue has acquired finality we are inclined to uphold the conclusion of the ld CIT(A). The ground raised is thus rejected.

15. The additional grounds raised by the revenue relates to disallowance of payment made to Tamil Nadu Tennis Association (TNTA) of Rs. 11,00,000/- and Rs. 47,50,000/- to All India Tennis Association (AITA) u/s 40(a)(i) of the Act.

16. The AO in regard to payment to TNTA has held as under:-

“The assessee has not deducted tax out of payment of Rs. 11,00,000/- made to Tamil Nadu Tennis Association and has submitted a copy of letter (undated) from TNTA, stating that the amount of Rs. 11,00,000/- received from you towards development fund has been treated as such and has not been considered in our P&L account. This should be treated as donation and, therefore, no tax is deductible. The assessee had already made the payments and this certificate is obtained later on. As per the provisions of TDS the tax is required to be deducted at the time of credit of such sum to the account of the payee and at the time of payment thereof in cash, whichever is earlier. The assessee should have deducted the at the time of making the payment itself and, therefore, assessee has failed to deduct the tax and an amount of Rs. 11,00,000/- is disallowed considering the provisions of Section 40(i)(ia).”

17. The ld CIT(A), held that the aforesaid payment is not covered under any of the specific sections under Chapter XVII B of the Act and therefore assessee is not required withhold taxes.

18. Before us the ld DR supported the disallowance u/s 40(a)(i) of the Act. And the AR submitted that in order to promote the business of Tennis and Chennai Open Tournament in the State of Tamil Nadu, a contribution was made towards development and promotion of Tennis by the assessee.

19. We have considered the rival submission and perused the records and find that the payment is towards a contribution to the Tamil Nadu Tennis Association (TNTA) and thus is not a specified payment eligible for deduction of taxes. The AO in the order also has not specified any provision to attract chapter XVII B (TDS).

20. The argument of the revenue, that the disallowance is warranted u/s 40(a)(i) of the Act is misplaced as payment is made to a resident and within India and not to a non-resident or a foreign company, which is a condition precedent to invoke section 40 (a)(i) of the Act. As such the AO had not even correctly invoked section 40(a)(i) of the Act. Thus the specific ground of the revenue is that the ld CIT(A) has erred in ignoring the fact that the provision of section 40(a)(i) of the Act talks not only talks about interests, royalty Fee For Technical Services but ‘other sum’ chargeable under the Act, is misconceived because section 40(a)(i) is neither been invoked nor can be invoked because payments are admittedly paid to a resident and even if disallowance can be invoked, it is only u/s 40(a)(ia) of the Act, wherein the expression ‘other sum’ is absent. Therefore we do not find any infirmity in the impugned order of the ld CIT(A) and so we dismiss the same.

21. As regards, disallowance of payment to All India Tennis Association (AITA) of Rs. 47,50,000/- under section 40(a)(i) of the Act. The AO has disallowed by stating that the assessee has not submitted any proof of tax exemption of AITA. The ld CIT(A) held that the payment to AITA is not covered under any of the specific section provide under chapter XVII B of the Act and deleted the same.

22. Having considered the rival submission we find that the payment made to AITA a resident is to obtain necessary sanction/ approval for conducting Chennai Open Tournament is not covered under any of the specific TDS provisions under Chapter XVIIB of the Act. The AO in the order has not stated any of the section under which the assessee should have withheld taxes. Therefore for the reason stated with regard to similar payment to TNTA the sum paid to AITA cannot be disallowed u/s 40(a)(ia) or even u/s 40(a)(i) of the Act and so we do not find any infirmity in the order impugned in this respect and so the appeal of revenue on this ground is dismissed.

23. In respect to the following appeals preferred by the revenue:-
(a) ITA No.4567/Del/2011 for Assessment Year 2006-07 (Appeal of the Department)
(b) ITA No.525/Del/2011 for Assessment Year 2007-08 (Appeal of the assessee)
(c) ITA No.686/Del/2013 for Assessment Year 2008-09 (Appeal of the assessee)
(d) ITA No.678/Del/2013 for Assessment Year 200910 (Appeal of the assessee)
24. All the grounds in the aforesaid four appeals relates to following disallowance, made u/s 40(a)(i)/ 40(a)(ia) of the Act.

25. So far as the payments to Association of Tennis Profession (ATP) are concerned, we have already held for Assessment Year 2005-06, that the assessee ought to have deducted TDS u/s 194E before payment was made to ATP. So we uphold the disallowance made in the order of assessment. So to that extent the ld CIT(A) order for Assessment Year 2006-07 stands reversed and order of the DRP for Assessment Year 2007-08 and the order of the ld CIT(A) order for Assessment Year 2008-09 stands upheld. As regards, the payment to IMG USA is concerned, we find that the AO has observed that according to the assessee aforesaid sum had been paid as a reimbursement of the expenditure incurred for organizing a free trip to USA for teenagers, before the commencement of the tournament “Chennai Open”. However, as the assessee did not provide any vouchers or debit note in relation to this payment, therefore the AO in absence of any proof disallowed the said expenditure. The ld CIT(A) has not given any specific finding while allowing the claim of the assessee. The DRP in Assessment Year 2007-08 while considering an identical claim has observed that it needs to be appreciated that any payment to the head office of the assessee, source of which is the PE would also be considered as income of the assessee, taxable in India and it has been concluded as under:-

“ As such, payment of Rs. 10,85,541/- by PE to HP and receipt of such amount by HO cancel each other while computing the taxable income of the PE. Thus, even if assessee's argument that it was payment to self and, therefore, not liable to withholding tax is accepted in view of the decision of Hon'ble ITAT in the case of ABN Amro Bank (supra), it would not help the assessee as the assessee cannot be allowed deduction of an amount paid to self. Moreover, the amount of Rs. 10,85,514/- was taxable in the hands the assessee as income of its HO. As such, payment of Rs. 10,85,541/- made by PE of the assessee to its HO cannot be allowed as deduction.”

26. Having considered the rival submissions and perusing the material on record, we find that the payments by the assessee to the head office are reimbursement of expenditure, and by no stretch of imagination one can conclude that payment made by PE to Head office for organizing a trip are liable of deduction of TDS, particularly when the claim is that such an expenditure is a mere reimbursement of expenses. The Hon’ble Calcutta High Court in the case of ABN Amro Bank Vs. CIT had held that section 40(a)(i) is in-applicable when payment are made to Head office and held as under:-

“An unnecessary complication has been created by the interpretation made of section 40(a)(i) of the Income Tax Act read with section 195 of the Act by both the appellant and the respondents. First of all, a proper meaning has to be ascribed to the expression "chargeable" under the provisions of this Act. Section 195(1) says that, if any interest is paid by a person to a foreign company, which interest is chargeable under the provisions of this Act tax should be deducted at source. The word "chargeable" is not to be taken as qualifying only the phrase "any other sum" only but it qualifies the word "interest" also. This interpretation is supported by the phrase in parenthesis, namely, not being income chargeable under the head "salaries". Therefore, the meaning of this section is that such interest must be chargeable under the provisions of this Act. To simplify the matter, this interest must be accounted for or credited in the account of some person who is chargeable under the Act. In other words, this remittance of interest must result in an income which is chargeable under the Act. In those circumstances tax may be deducted at source. But where this interest is not so chargeable, no tax is deducted. In this case, by virtue of the above convention, the head office of the appellant is not liable to pay any tax under the Act. Therefore, in our opinion, there was and still is no obligation on the part of the appellant's said branch to deduct tax while making interest remittance to its head office or any other foreign branch.

Therefore, in the circumstances there is no scope for any argument that for the purpose of computation of expenditure the branch and the head office are to be taken as separate entities but for the purpose of payment of tax to be deducted at source on interest payment, it is to be taken as one bank and no deduction is to be made as sought to be made by the learned counsel for the appellant. Such contentions are totally unfounded in our opinion. The permanent establishment and the head office have to be taken as separate entities for all purposes. But in the making of payment of interest no tax has to be deducted under section 195(1), for the reasons above.

Therefore, if no tax is deductible under section 195(1) section 40(a)(i) of the Act will not come in the way of the appellant claiming such deduction as from its income. Therefore, in the circumstances the appellant would be entitled to deduct such interest paid, as permitted by the convention or agreement, in the computation of its income.”

27. We therefore uphold the claim of the assessee to this extend. As a result, ground raised by the revenue is dismissed for Assessment Year 2006-07 to the extent of the aforesaid payments. And ground no. 2 of the assessee for Assessment Year 2007-08 is allowed.

28. The next issue relates payments made to Tamil Nadu Tennis Association (TNTA) and AITA.
29. Having considered the rival submission we have already held while deciding the appeal for Assessment Year 2005-06 that the disallowance made u/s 40(a)(ia) of the Act and now challenged u/s 40(a)(i) in Assessment Year 2006-07 is misconceived, we further hold that expenditure so incurred is not in the nature of royalty or fees for technical services. The payments have been made to TNTA for granting permission to conduct the tournament organized by the assessee. The said payments were of 20% share of income generated by sale of tickets. In such circumstances it cannot be said that such payments were for the use of logo of TNTA on the contrary the logo is used is that of ATP (U.S.A.). In the light of the above we had rejected the additional grounds preferred by the Revenue in Assessment Year 2006-07 and direct to delete the disallowances made in Assessment Year 2007-08 and Assessment Year 2009-10. As a result the grounds raised by the assessee in the appeal for Assessment Year 2007-08 and 2009-10 are allowed.

30. The solitary issue that is reaming which has been raised in the assessee’s appeal for Assessment Year 2006-07 for disallowance of Rs. 49,81,932/- being the reimbursement of expenses. The aforesaid issue has been dealt by the ld CIT(A) are as under:-

“I have carefully considered the findings of the Assessing Officer and the written submissions made on behalf of the Appellant. I find that the identical issue in the appellant's own case was decided by the undersigned against the appellant vide order dated 16.12.2010 in Appeal No. 48/2010-11 for assessment year 2005-06. As the facts and circumstances of the case are pari materia with the case of the appellant in assessment year 2005-06, for the reasons as discussed in the aforesaid order of the undersigned, disallowance of the payments totalling Rs. 49,81,932/-on account of reimbursement of expenses by the appellant to its Associated Enterprises is confirmed. In this context, it may be appropriate to reproduce the findings of the undersigned in Para 7.4 of the appellate order for assessment year 2005-06 referred to above:-

"7.4 I have considered the written submission on behalf of the appellant, the findings of the Assessing Officer in the assessment order as well as in the remand report and the facts on record. For any expenditure to be permitted as deduction under section 37(1) of the Act the twin conditions which are required to be fulfilled are that the expenditure in issue should not be of a capital nature, and that it should have been expended wholly for the purposes of business. It is well-settled that the expression 'for the purposes of business' in section 37 of the Act has been held to mean an expenditure which is voluntary in nature and commercially expedient. In the present case the Assessing Officer has given a finding of fact that the assessee-company has not been able to prove that the reimbursement of expenses to the Associated Enterprises were made in the course of business or on account of commercial expediency. I also feel that if at all the appellant's claim is bona fide, it could have produced documents in the form of audited financials and the assessment order completed in the name of its Associated enterprises showing the inclusion of Rs. 1,21,54,146/- being the reimbursement received from the appellant. In the absence of any clear evidence towards this, I am of the considered view that the Assessing Officer was justified in coming to the conclusion that the impugned expenses are disallowable for being non business in nature and also under the provisions of section 40(a)(i) of the Act. Therefore the action of the assessing officer is upheld and ground of appeal No. 4 is dismissed.”

Accordingly, it is held that the payments of Rs. 49,81,932/- were not related to the business of the appellant and therefore not allowable under section 37 of the Act. As a result, Ground of Appeal No. 3 is dismissed.”

31. Before us the ld AR has submitted that reimbursements were incurred wholly and exclusively for business purposes only and hence, deductible under section 37 of the Act. In the first instance, due to administrative convenience, these expenses were paid by various group entities i.e. AE's on behalf of the assessee and subsequently, reimbursed by the assessee to AE's on a cost to cost basis.
32. In respect to Salary of Mr Ravi Krishnan, MD of Rs. 4,096,116/- it was contended by the ld AR that Mr Ravi Krishnan was seconded to the assessee’s office during the relevant AY and was working as a MD thereof (i.e. employee of the assessee BO) for business development and promotion for IMG group in India. As the MD of the Branch, he was responsible for taking care of all the operation carried on the branch in India. He was also responsible for taking strategic decisions towards betterment of the branch business in India. Accordingly, during his term of secondment in India, it would be evident that Mr Ravi Krishnan was working as an employee of India branch during relevant previous year and the expenses incurred were purely business expenditure. The ld AR took our attention to the month-wise break up of salary is enclosed on page no. 51 of paper book. The ld AR also took our attention to the copy of power of Attorney and resolution evidencing power and role of Mr Ravi Krishnan in the capacity of MD of the assessee is evident from reading of page no. 52 to 54 of paper book. Further, relevant e-mails showing bifurcation of salary amount of Rs. 4,278,685 is enclosed on page no. 55 to 56 of paper book. Out of the aforesaid amount, Rs. 182,569/- relates to expenses paid on air ticket of Simon Lock for attending Lakme Fashion week. Salary of Mr Ravi Krishnan was paid by IMG America Pty Ltd on account of administrative convenience and charged back to the Appellant on a cost to cost basis. The withholding taxes/ income taxes as applicable to such transaction were duly deducted/ deposited/ paid in India (Refer Form 16 for Mr Ravi Krishnan for the subject A Y on page no. 58 to 59 of paper book).

Health insurance charges of Mr Ravi Krishnan (Rs 368,496) - Such expense incurred on Ravi Krishnan for the period when he stayed in India for business purposes, was initially paid by International Management Group (UK) Ltd and cross charged to Appellant. Copy of debit note received with respect to health insurance charges of Mr Ravi Krishnan is enclosed on page no. 57 of paper book.

Travel expenses of Mr Ravi Krishnan (Rs 334,751) - Such expenses incurred on travel of Ravi Krishnan for business purposes of the Appellant were initially paid by IMG Overseas Hong Kong, and cross charged to the Appellant. The details for such expenses along with the copy of third party invoices on sample basis has been enclosed on page DO. 60 to 67 of paper book. Travel expenses (Simon Lock) (Rs 182,569) - The expenses incurred on account of air ticket of Simon Lock for attending Lakme Fashion Week event were initially paid by IMG America Pty Ltd and cross charged to the Appellant. The event is an event of the Appellant and all income there from has been offered to tax. This expense was clearly incurred in connection with the business of the Appellant and accordingly, is a business expense. Copy of debit note and third party invoice for such expenses is enclosed on page no. 68 to 70 of paper book.

The ld AR brought to our attention that the Dispute Resolution Panel (DRP) vide order dated 20 September 20 I 0 for AY 2007-08 has held that the similar reimbursement of salary, blackberry charges of Mr Ravi Krishnan, MD of the Appellant are allowable as business expenses. Accordingly, the proposed addition was deleted. (Paragraph 6.4 of DRP directions).

33. In the light of the aforesaid submission the ld AR prays that the aforesaid expenses reimbursed to its AE's were incurred wholly and exclusively for the purposes of business of the Appellant and therefore, deductible under section 37(1) of the Act.

34. The ld DR relied on the authorities below and does not want us to interfere in the impugned order.

35. Having considered the rival submissions, we find that the AO has disallowed the expenditure on the ground that necessary evidences have not been produced on record. Whereas, the ld CIT(A) has followed the order for Assessment Year 2005-06 and sustained the disallowance. However, the ld AR has placed on record before us certain evidences to support the claim that expenses reimbursed were incurred wholly and exclusively for the purpose of the business of the assessee. The aforesaid evidence has not been specifically examined by any of the authorities below, therefore we consider it appropriate to remit the matter back to the file of AO, who shall decide the issue de-novo, after granting adequate opportunity to the assessee. Lest, it be stated here that such fresh examination be made, without being influenced by the disallowance made in Assessment Year 2005-06, as an independent year and the eligibility and allowability of the expenditure has to be thus examined independently in accordance with law. The ground raised by the assessee is allowed for statistical purposes.

36. In the result the appeals are partly allowed as indicated above.

The order pronounced in the open court on 25.03.2015.