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2018 (6) TMI 1318 - ITAT DELHIAllocating indirect expenses against "commission income from other group companies" based upon sales made by other group companies in India - Held that:- Allocation key should be accepted for determination of indirect expenses to be deducted from the gross income to arrive at the net income. The assessee has stated that the allocation of indirect expenses should be made based upon commission income. The assessee has also relied upon the cost accounting standard 3 issued by ICWA and emphatically relied upon on para No. 5 of that standard. The assessee has relying on the old cost accounting standard which was revised in 2011, and further revised in 2015. Assessing Officer has without assigning the detailed reason rejected the contention of the assessee and referred straightway for the guidance of the Addl Commissioner. In fact the assessee took an additional ground before the coordinate bench who allowed grant of relief by allowing expenses against commission income earned from group companies and other income earned by its branch office. ITAT merely accepted the claim of the assessee in principle that gross income cannot subjected to tax and assessee must be granted deduction of the expenses from the gross income and tax only net income. To determine the net income the issue was set aside to the file of the ld AO at the request of both the parties which is evident from the order of the coordinate bench. In the interest of justice, we set aside the issue of determination of indirect expenditure to be reduced from gross total income back to the file of the AO with a direction to him to first examine the claim of the assessee, give reasons why the same is not proper and then if he is not satisfied with the explanation of the assessee give his reasons for adopting an alternative method and after giving opportunity of hearing to the assessee decide the issue afresh. Assessee is also directed to substantiate its claim with proper reasoning. Therefore, ground No. 1 of the appeal of the assessee is rejected for the reasons given above and ground No. 2 of the appeal is allowed with above direction.
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