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2021 (10) TMI 563 - AT - Income TaxDisallowance of service expenses - said expense was not supported by evidences - Allowable business expenses or not? - HELD THAT:- Although agreement entered between assessee and M/s. Sundaram Finance Ltd., was on 14.03.2013, but the services has been availed for the entire financial year on PAN India basis, which is evident from the fact that except shared cost and service expenses, no other expenses was incurred by the assessee in its business - when the assessee has demonstrated with evidence that it does not have any permanent establishment and other infrastructure facilities to carry out its business operations and further, it had availed services of M/s. Sundaram Finance Ltd., through network of its branches across the country, the AO was erred in disallowing expenses merely for the reason that said expense was not supported by evidences, more particularly when the assessee has filed agreement between the parties and debit note raised by M/s. Sundaram Finance Ltd. It is not a case of the AO that expenditure incurred by the assessee is not genuine. In fact, the AO has not questioned genuineness of expenses, but what was doubted is necessity and rationale behind incurring expenditure. It is a well settled principle of law that AO cannot question rationale behind incurring any expenditure. We further noted that in the subsequent financial year relevant to assessment year 2014-15, the AO has accepted the claim of the assessee towards reimbursement of shared cost and service expenses to M/s. Sundaram Finance Ltd. Therefore, we are of the considered view that when expenditure was considered as genuine and further, it was incurred wholly and exclusively for the purpose of business, then there is no reason for the AO to disallow said expenditure without assigning proper reasons. The ld.CIT(A) after considering relevant facts, has rightly deleted addition made by the AO - Appeal filed by the Revenue is dismissed.
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