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DCIT Circle 2(1) Gurgaon vs Kellog Brown & Roof Engineering & Construction India Pvt. Ltd. 16th Floor, Tower-A, DLF Building, Nos. 5, DLF Cyber Terraces, DLF Phase-III, Gurgaon
November, 15th 2018
                                         ITA No. 3007/Del/2018 A.Y. 2014-15
                               Kellog Brown & Roof Engineering & Construction

             DELHI BENCHES: `F', NEW DELHI


                    ITA No. 3007/Del/2018
                         AY: 2014-15
DCIT              vs.  Kellog Brown & Roof Engineering &
Circle 2(1)            Construction India Pvt. Ltd.
Gurgaon                16th Floor, Tower-A, DLF Building,
                       Nos. 5, DLF Cyber Terraces,
                       DLF Phase-III, Gurgaon

(Appellant)                      (Respondent)
     Revenue by : Sh. Surender Pal, Sr. DR
     Assessee by : Sh. Binod Gupta, Accountant
                Date of Hearing :      06/11/2018
                Date of Pronouncement: 14/11/2018


  Present appeal has been filed by revenue against order dated
21/02/18 passed by Ld. CIT (A)-1, Gurgaon, for assessment year
2014-15 on following grounds of appeal:
  1. "The CIT(A) has erred on facts and in law in deleting the
     addition of Rs. 72,82,724/- made by the Assessing Officer
     on expenditure in foreign currency to related parties.
  2. The Ld. CIT(A) has erred in not considering the fact that
     regardless of the mark up system followed by the
     assessee to compute its revenue, the assessee has failed
     to prove the genuineness in the expenses claimed by it for
     the period under consideration.
  3. That the appellant craves for the permission to add, delete
     or amend grounds of appeal before or at the time of
     hearing of appeal."

                                            ITA No. 3007/Del/2018 A.Y. 2014-15
                                  Kellog Brown & Roof Engineering & Construction

2.    Brief facts of the case are as under:
Assessee filed its return of income on 27/11/14 declaring total
income of Rs.7,15,18,720/-. Return was processed under section
143 (1) of the Act and was picked up for scrutiny. Accordingly,
notice under section 143(2) of the Act along with questionnaire
and notice under section 142(1) was issued to assessee. In
response    to   statutory   notices,   representative        of    assessee
appeared before Ld. AO and filed requisite details as called for.

2.1   Ld. AO observed that assessee is in business of providing
engineering services with respect to offshore and underwater
construction activities, for offshore oil and gas businesses India.

2.2   Ld. AO noted that assessee claimed expenditure on account
of foreign currency payment amounting to Rs.72,82,724/-.
Assessee was called upon to furnish details like invoice/debit
note raised by parties on account of reimbursement along with
relevant bills/vouchers, explanation of each expenses which was
reimbursed, including type of services provided by related party,
applicability of TDS under section 195 of the Act, if any, and to
furnish copy of Form 15 CA/15 CB.

2.3   In response to query raised by Ld. AO assessee vide reply
dated 10/11/16 submitted that assessee incurred expenditure in
foreign currency pertaining to travel expenses, communication
expenses and other expenses, which was evidenced from Note No.
26 of audited financial statements. Assessee submitted that these
expenses are already included in relevant heads appearing in
Note no. 20, being other expenses. It was also submitted that

                                          ITA No. 3007/Del/2018 A.Y. 2014-15
                                Kellog Brown & Roof Engineering & Construction

applicable tax on same has already been withheld by assessee
and has filed Form 27Q in respect of the same.

3.    Ld. AO, however, after considering submissions was not
satisfied and observed that assessee did not furnish any
agreement with regard to the aforesaid payments made to the
associated enterprises. He, accordingly, disallowed the sum of

4.    Aggrieved by addition made by Ld. AO, assessee preferred
appeal before Ld.CIT (A). Before Ld. CIT (A) assessee filed detailed
submission based upon which said addition was deleted.

4.1   Aggrieved by order of Ld. CIT (A) Revenue is in appeal before
us now.

5.    Ld. Sr. DR placed reliance upon order of Ld. AO.

6.    Ld. AR placing reliance upon order of Ld. CIT (A) submitted
that service agreement between assessee and group company was
furnished before Ld. CIT (A). He submitted that Ld. CIT (A) on
detailed analysis of clauses in service agreement pertaining to
"Payments", has held that, assessee has been reimbursed for
entire cost incurred under engineering service with its AE. He
also submitted that certain expenses on which provisions of TDS
were applicable has been applied and amount has been

7.    We have perused submissions advanced by both sides in
the light of records placed before us.        Article 4 of Agreement
which has been reproduced in order passed by Ld. CIT (A), deals

                                         ITA No. 3007/Del/2018 A.Y. 2014-15
                               Kellog Brown & Roof Engineering & Construction

with `Payments'. Ld.CIT(A) observed that assessee has been
reimbursed the cost with 12% of actual cost, in the form of
service   fee. He   further observed that        in    the event said
disallowance is not deleted, it would lead to further reduction in
Revenue. Further assessee has been applying cost plus method
for purposes of determining Revenue. There is no allegation that
has been pointed by Ld. AO regarding expenditure claimed by
assessee, received in foreign currency. The only reason for
disallowance was that assessee did not file agreement in support
of its claim. Ld.AO on the sole reason treated expenditure to be

8.   Before Ld. CIT (A) assessee filed the Agreement which has
been analysed by Ld. CIT (A) threadbare. We, therefore, do not
find any infirmity in observations of Ld. CIT (A) and the same is

Accordingly the grounds raised by revenue stands dismissed.

In the result order appeal filed by revenue stands dismissed.

Order pronounced in the open court on 14/11/2018
              Sd/-                                        Sd/-
    (PRASHANT MAHARISHI)                              (BEENA A PILLAI)
     ACCOUNTANT MEMBER                                JUDICIAL MEMBER
Dt. 14th November,2018

*Kavita Arora

                                                       ITA No. 3007/Del/2018 A.Y. 2014-15
                                             Kellog Brown & Roof Engineering & Construction

Copy forwarded to: -
1.  Appellant
2.  Respondent
3.  CIT
4.  CIT(A)
5.  DR, ITAT
                  -            TRUE COPY             -

                                                                By Order,

                                                               ASSISTANT REGISTRAR
                                                                ITAT Delhi Benches
Draft dictated on                                 13.11.2018
Draft placed before author                        13.11.2018
Draft proposed & placed before the second
Draft discussed/approved by Second
Approved Draft comes to the Sr.PS/PS              14.11.2018
Kept for pronouncement on                         14.11.2018
Order uploaded on :
File sent to the Bench Clerk                      14.11.2018
Date on which file goes to the AR
Date on which file goes to the Head Clerk.
Date of dispatch of Order.

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