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2011 (4) TMI 877 - AT - Income TaxAddition of mark up of 8 per cent of the cost - cost sharing arrangement - Held that:- In order to decide as to whether it was merely a cost sharing arrangement or the payments were made in the course of rendering services by the assessee to affiliates need to be decided after examining the various aspects of the matter and various services undertaken by the assessee vis-a-vis the nature and purpose of the alleged payment made for and on behalf of BGLNG by the assessee. The terms and conditions of the service agreement dated 23rd August, 2002 between the assessee and BG Asia Pacific Holdings Pte. Ltd. (Singapore) need to be examined in the light of nature of expenses disbursed by the assessee - restore the matter back to the file of the AO for further examination and verification. Entertainment expenses and staff function expenses - Held that:- It is well settled that expenditure incurred by the company on making gifts to employees and hosting dinner at a farewell party is purely on commercial consideration and of business expediency to maintain healthy relationship between the company and its staff - Decided in favor of the assessee Telephone expense to director's wife - Held that:- Assessee has not been able to establish as to how the payment made towards telephone expenses of directors' wives incurred voluntarily by the company can be said to be on the ground of commercial expediency and facilitating the carrying on of the business of the assessee - in favor of the assessee Business development expenses - Held that:- Nowadays, it is not uncommon that lunches and dinners are being arranged at directors' house where the customers of the company are invited to develop cordial relations with them - In this case, the amount is very nominal and it has not been proved that the parties were not arranged by the company but it was a personal party of a director - Decided in favor of the assessee
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