Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (1) TMI 311 - AT - Income TaxDisallowance under section 37(1) on account of any allocation of cost - Cost allocated by the AEs - Held that:- Assessee has placed on record the evidence of support services being received from the AEs which are in the nature of back office accounting services and IT support services which enable the assessee to run its business in India. The assessee has no establishment in India and has only a branch office wherein it is utilizing the place of its AEs and is also using services for carrying on its service or providing procurement services to its principal, i.e. EIMG, Switzerland, then it cannot be said that the said expenditure has not been wholly and exclusively incurred for the purpose of business. The cost of the services provided by the AEs has been allocated on a formula which has been followed form year to year and there is no merit in disallowance of the cost incurred on receipt of support services from its AE. In the entirety of the fact and evidences produced by the assessee in respect of its claim of receipt of services from its AEs in India, both support services and Corporate services and also considering the fact that the assessee was recovering the said cost with markup of 18.8%, there is no merit in the disallowance made under section 37(1) of the Act. Further, the transaction is deemed to have been accepted at Arm’s Length price where no such adjustment has been made by the Assessing Officer. The Assessing Officer in its order makes a remark that the assessee had not produced the order of TPO for assessment year 2011-12 to show that the cost allocation transactions were accepted at Arm’s Length. There is no merit in the said observation of the Assessing Officer as under the statute it is incumbent upon the Assessing Officer, if it thinks fit, to make a reference to the TPO under section 92C of the Act to benchmark the international transactions entered into by the assessee. The Assessing Officer in the present case has failed to make any such reference. Consequently, there is no merit in the observation of the Assessing Officer in this regard. Accordingly, we direct the Assessing Officer to allow the expenditure - Decided in favour of assessee
|