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2015 (3) TMI 792 - AT - Income TaxApplicability of section 44BB on assessee's income - allocation of expenses incurred by assessee for the services rendered to BGEPIL - whether assessee has been able to provide primary evidence in respect of various types of services allegedly rendered to BGEPIL for which it claimed to have received reimbursement from BGEPIL? - assessee is a non-resident company and is AE of M/s BGEPIL - Held that:- Once it is accepted that global cost allocation policy exist in a case of group of size like B.G. Group, then it cannot be denied that the debit notes raised are towards services rendered. Now the core issue that remains for consideration is whether the whole amount claimed to be reimbursement should be accepted or not. On this count, admittedly the assessee has not been able to establish one to one nexus between the services rendered and alleged reimbursement. There are also no comparable cases which obviously could not be there. Thus, in sum and substance the position as it emerges is that inspite of there being a global cost allocation policy, the existence of which is not doubted by revenue, the assessee failed to substantiate its claim regarding allocation of expenses incurred by it for the services rendered to BGEPIL. It has not been able to substantiate its claim as to what common expenses had been incurred; how those were allocated to assessee; and why those needed to be allowed as deduction from Indian operations. It is settled law that unless the assessee is able to substantiate its claim the deduction cannot be allowed. In this regard we may refer to the decision of Hon’ble Supreme court in the case of CIT Vs. Calcutta Agency Ltd. (1950 (12) TMI 4 - SUPREME Court) wherein it has been held that the burden of proving the necessary facts in order to entitle the assessee to claim exemption u/s 10(2)(xv) was on the assessee but the necessary facts had not been established by the assessee at any stage of the proceedings and the High Court was in error in applying the principles of Mitchell’s case on the assumption of facts which were not proved. Consequently the assessee was not entitled to the deduction claimed. In view of above discussion, keeping in view the entire conspectus of the cases, we are of the opinion that it would be fair to tax the assessee’s receipts u/s 44BB, as has been done in past also. In this regard we find ourselves in agreement with the ld. counsel for the assessee that in AY 2003- 04, the department while preferring appeal before Hon’ble High Court has itself taken a ground that the assessee’s receipts are taxable u/s 44BB and the ITAT erred in deciding that the receipt are not taxable u/s 44BB. We are conscious of the fact that earlier we have observed that merely because in AY 2004-05 assessee agreed for its receipts being taxed u/s 44BB, cannot operate as estoppels against it for pleading that the entire receipts were in the nature of reimbursement. However, considering the fact that assessee is not able to substantiate its claim, as has been extensively demonstrated by ld. Cit(DR) in his submissions and the assessee has only given a general writ e up for the benefits derived by BGEPIL, we are of the considered opinion that no fruitful purpose would be served by restoring the matter to the file of AO for examining the assessee’s claim again as that would be a futile exercise particularly because assessee has clearly stated that it is not possible to have one to tone nexus of the expenses with the services rendered. Thus the only possible course is to invoke section 44BB because B.G.I. provide services to BGEPIL, which was engaged in prospecting the mineral oils. We direct accordingly.
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