TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 533
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.... 1. The Commissioner of Income Tax (Appeals) has erred in confirming the addition on account of under invoicing of Rs. 42,89,213/- on the basis of email correspondence between the Director Mr. Pradeep Thampi and the customer. 2 The ld. Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of incentive to Shri Pradeep Thampi Managing Director which was sustained only to the extent of Rs. 99 lakhs for A.Y. 2010-11 and further CIT Appeal have deleted only disallowed of expenses of Rs. 51,00,000/- instead of total deletion of Rs. 1,50,00,000/- (Rs.75,00,000/- each for A.Y. 2009-10 & 2010-11). Apropos issue relating to under invoicing of Rs. 42,89,213/- 4. The assessee in this case is in the business of hiring charter plains and air taxi. The assessee company has leased an aircraft "challenger 300" from Peel Aviation Limited, Ireland. In the assessment order, the Assessing Officer has noted that survey action u/s. 133A was carried out. During the course of survey, incrementing documents were impounded. A statement of Shri Pradip Thampi, Managing Director of the company was recorded. The Assessing Officer noted that in the statement, Shri Pradip Thampi acce....
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....and amount realized from the client who is going to utilize the operational services of charter plane in India. During the South African Tour, the duration is from 23.03.09 to 25.05.09 the assessee does not have any inquiry for the charter plane & if the same had not been utilized for Peel Aviation Ltd. then the assessee might had incurred huge losses since irrespective of utilization of single flying hours In a month still they are liable to pay a fixed lease rent amount. A/so, the flying hour rate charged to Peel Aviation Ltd. on basis of prevailing / market rate. The managing director of the assessee company had decided to let them at Rs. 2,75,000/- per hour with the intention that whatever the sale proceeds will be received from them for that tour will be indirectly repaid towards their lease amount. Thus, the necessary to get the inflow to the tune of Rs. 2,65,40,937/- will be automatically reduced from the assessee working capital. In the competitive market, if this party had been introduced by someone else then, the assessee had to pay them incentive in the range of 7-10% approx. which they have saved. Thus, the assessee had saved incentive figure on an average o....
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....pellant company's books at Rs. 2,65,40,937/-. There is no merit in the arguments of the AR figure of Rs. 3,08,30,150/- was merely a quotation based on estimation. The of the relevant period was recorded in the books which shows that the invoice raised in the name of Shri Lalit Modi amounting to Rs. 49,79,5857- and Pee Ltd. amounting to Rs. 2,15,61,352/-. Shri Lalit Modi is the defacto owner of the appellant company and in all likelihood of Peel Aviation Ltd. also. The action of Assessing Officer adding the under invoicing is confirmed. 8. Against the above order, the assessee is in appeal before us. 9. We have heard both the counsel and perused the records. We find that in this case assessee is a corporate entity. There is no finding that there is any change in the shareholding pattern or the control of directors in the company. Hence, the observation of the authorities below that the company belongs to Mr. Lalit Modi, is not based upon any cogent material. In the course of survey an email was found wherein there was a conversation between a director of the company Shri Pravin Thampi and Mr. Lalit Modi regarding the rates to be billed. The actual rates booked in the account ....
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.... u/s. 131 of the 1 T Act, 1961 on 02.01.2013 of Shri Pradeep Thampi, Director of the assessee company. In the statement, he stated that as per the instructions of Mr. Lalit Modi, he was paid an incentive of Rs. 75,00,000/- in financial year 2008-09 & 2009-10 each. 11. The assessee company was asked by the Assessing Officer to justify the reasonableness of the payment. The assessee company gave following response: "Mr. Pradeep Thampi entered the world of Aviation in 1990 working under I AT A recognized travel agency. In 1990, he got himself acquainted with the first Air Taxi Operator. He joined as a General Manger for another Air Taxi operator based in Mumbai. After gaining knowledge, in 1994 formed an independent company ~ M/s. Executive Airways Pvt. Ltd. Worked full time as a director, chartering various types of aircrafts and helicopters from other operators all over India for his clientele and soon monopolized the charter business. He facilitated induction of various aircrafts for many corporate houses and managing their aircrafts. After successfully running the charter business for 14 years, he expanded the business and started a Non Schedule Charter Company - M/s. Golden W....
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....his deduction cannot be allowed to the assessee this year because of the same reasons listed above for disallowing Rs. 75,00,000/- shown as incentive but actually reimbursement of share capital. Hence, Rs. 75,00,000/- given to Mrs. Pradeep Thampi in A.Y. 2009-10 is also treated as reimbursement of share capital the amount of Rs. 75,00,000/- belonging to 2009-10 is disallowed from the computation of the A.Y. 2010-11. The reimbursement of share capital is not an allowable expense u/s. 37 of the I. T. Act, 1961 and it treated as capital expenditure. So, it cannot be allowed as a deduction from the Profit & Loss account of the assessee company. 14. Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals). 15. Upon the assessee's appeal, the ld. Commissioner of Income Tax (Appeals) referred to the submissions of the assessee. The ld. Commissioner of Income Tax (Appeals) did not give any findings of his own. He referred to the Assessing Officer's holding that the nature of payment is not really a genuine payment for business of the assessee company. He did not accept the Assessing Officer's reasoning that it is the repayment of share capital, ....