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2022 (8) TMI 562 - AT - Income TaxTP Adjustment - addition towards managerial and technical services - Proof of allowable as business expenditure incurred for the purpose of business of carrying out freight and other cargo forwarding services - whether management service charges paid by the assessee to its AE-CPA fails on the benefit test and since not incurred for business purposes, deserves to be disallowed? - as per AO Assessee failed to prove the benefit received by it by making payment to its AE-CPA for management support services - HELD THAT:- We find that the alleged management services are merely 2% of the total revenue of the company which is even less than 2% of the revenue of the company and the said sum paid by the assessee has also been offered to tax by AE-CPA. Also the nature of services rendered by AE-CPA to the assessee are not specific but provided on day to day basis whenever needed. The AE-CPA has expertise in the overseas freight and forwarding business and there are various types of issues and problems attached in such services and the AE being an expertise in the international business - the assessee company is taking regular service through the personnel of AE-CPA to get guidelines on various fronts including the marketing, commercial management, corporate sales, invoicing, finance, other connected issues on various courses. For day to day smooth and effective working of business and for trying to keep an error free working environment, such management support services have been taken. In the past also, during the assessment year 2010-11 and 2011-12 such services have been taken and have been consistently charged in the books of account. The observation of the Revenue authorities is not specific but general in nature that the assessee has failed on the benefit test but nowhere any specific instances have been given to show that the so-called services taken by the assessee company from its AE under various agreements are not related to the nature of business carried on by the assessee. It is not the case that the assessee which is carrying on forwarding chain business has paid the management services for some other unrelated business activity. The nature of business of the assessee company is directly linked to the nature of services and business carried on by its AE-CPA. In simple way, we find that the AE-CPA is an associated enterprise and the headquarter of the group company is based in Austria and they have to maintain their brand and uniformity in services to be provided to its clients which are attached to its various subsidiaries and other enterprises located in various part of the world. Thus we are of the considered view that the alleged management charges paid towards management support services to the AE-CPA are allowable as business expenditure incurred for the purpose of business of carrying out freight and other cargo forwarding services and by paying the alleged charges the assessee has been able to run the business smoothly and effectively. We, therefore, delete the transfer pricing adjustment made and allow ground raised by the assessee. Non grant of credit for tax deducted at source - HELD THAT:- As we find that during the course of hearing, no submissions were made by learned Counsel for the assessee on this issue. It seems that the assessee is not interested to press this ground. Even otherwise, this issue is of mere reconciliation of tax deducted at source and such exercise can be carried out at the level of Assessing Officer if not made earlier. Hence, ground No. 7 is allowed for statistical purposes.
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