TaxTMI 
TaxTMI 
2016 (5) TMI 975
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.... of October 2007, the holding company M/s GMR Hyderabad International Airport Limited (GHIAL) requested it to recruit manpower specialized in various field to work for its hotel division. It was agreed that GHIAL will reimburse the amount of manpower cost incurred by the assessee company for and on its behalf on cost to cost basis. The assessee company accordingly recruited manpower specialized in various field during the period from November 2007 to March 31st 2008. 2.2 The Hyderabad International Airport was inaugurated on March 14th 2008 and GHIAL commenced operation at the airport w.e.f. March 23rd 2008. After the Hyderabad Airport became operational, GHIAL vide agreement dated March 31st 2008 formalized the availing service of the Assessee under which it was agreed that GHIAL shall pay service charges by way of professional fee for the services of the Assessee company at the rate of Rs. 1,00,000/- per month towards deputation of upto 300 associates and Rs. 2,00,000/- per month where the no. of associates are more than 300 nos. It was further agreed that the said amount of professional fees shall be payable w.e.f. April 2008 onwards. 2.3 Accordingly, the assessee company ....
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....on of up to 300 Associates. In case the Associates deputed are increased beyond 300, the monthly fee shall stand revised to Rs. 2,00,000-(rupees two lakhs). B. From the thirteenth month a monthly professional fee of Rs. 2,00,000/- shall be paid towards deputation of up to 400 Associates. In case Associates deputed are increased beyond 400, the monthly fee shall stand revised to Rs. 3,00,000/-(Rupees three lakhs). 2.5 The Assessing Officer in the assessment order passed u/s 143(3) has determined a taxable income of Rs. 5,00,000/- under normal provisions of the Act by taking service fee on notional basis. Upon completion of assessment, the AO has determined taxable income of Rs. 5,00,000/- by considering service fee of Rs. 1,00,000/- per month on notional basis for five months from November 2007 to March 2008 by disregarding the terms of arrangement between the parties that the amount of service fees was to be paid from April 2008 onwards. 2.7 The Assessing Officer has not allowed the business loss/ expenses of Rs. 1,16,014/- incurred and claimed in the return of income by taking a stand that entire expenses incurred by the Assessee were reimbursement by GHIAL. 3. A....
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....m April,2008. On analysis of the above facts, it is clear that the agreement entered into by the assessee and the holding company is clearly favouring the interests of the holding company only. It is strange to say that the assessee is entitled for service fee from April, 2008 and not entitled for any service fee for the period November,2007 to March,2008 even though there was no change in the nature of the services rendered. Therefore, the agreement entered into is one-sided aimed to suit the interest of the holding company only. 8.2 Further, the contentions of the assessee are not acceptable, as the assessee has been following mercantile system of accounting wherein income is shown on accrual basis. After going through the above facts, it can be concluded that the assessee has earned income of Rs. 5,00,000/- on accrual basis, as the assessee has actually rendered the services to the holding company for the said period November,2007 to April,2008. As a result, the grounds raised are dismissed." 6. During the appellate proceedings, the AR contended that the AO has erred in computing the total income at Rs. 5,00,000/- on notional basis by taking service fee without allow....
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.... laws: 1. Rambhai Kalabhai & Co Vs. ACIT, [2004] 1 SOT 559 (Ahd.) 2. CIT Vs. Shanker Constructions, [2015] 60 taxmann.com 63 (AP) 3. ACIT Vs. Travancore Titanium Products Ltd., [2009] 121 ITD 513 (Cochin) (TM) 4. ED Sasson & Co. Ltd. Vs. CIT [1954] 26 ITR 27 (SC) 5. M/s shoorji Vallabhdas & Co. 46 ITR 14 (SC) 6. CIT Vs. M/s Arihant Avenue & Credit Ltd., 36 Taxmann.com 14 (Guj.) 7. United Nilagiri Tea Estates Co. Vs. DCIT 23 Taxmann.com 423 (Mad.) 8. CIT Vs. M/s Sahara India Mutual Benefit Co. Ltd., ITA No. 184/2005, order dated 09/10/2013 (All. High Court) 9. Highways Construction Co. Pvt. Ltd. Vs. CIT, [1993] 199 ITR 702 10. Voltamp Transformers (P) Ltd. Vs. CIT, [1981] 129 ITR 105 (Guj.); CIT Vs. Walchand & Co., 65 ITR 381 11. Kewal Chand Vs. CIT, 183 ITR 207, 211 (Cal.) 10. The ld. DR, on the other hand, relied on the orders of Assessing Officer and CIT(A). 11. Considered the submissions of both the parties and perused the material facts on record as well as the orders of the revenue authorities. The assessee had entered into supply of manpower with its holding company on 31/....
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..... Shoorji Vallabhadas & Co., ]1962] 46 ITR 144 (SC), wherein the Apex Court has held as under: "Income-tax is a levy on income. No doubt, the IT Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a "hypothetical income", which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. The agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the pr....