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2016 (7) TMI 100 - ITAT MUMBAI

2016 (7) TMI 100 - ITAT MUMBAI - TMI - Disallowance of 30% of “Common expenses” reimbursed by the assessee to its group concern - Held that:- A careful perusal of the orders passed by the tax authorities would show that they have made the adhoc disallowance mainly for want of particulars, i.e., the details furnished by the assessee were not considered to be sufficient by them. There should not be any dispute that the initial onus to prove the claim rests upon the assessee. It is noticed that the .....

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sfaction of the tax authorities. Under these set of facts, in the interest of natural justice, we are of the view that the assessee should be provided with one more opportunity to explain the claim made by it. Accordingly, we restore this issue to the file of the DRP/AO for considering the same afresh. - Assessment of Rental and circuit charges incurred by the assessee on behalf of its group concern - Held that:Orders passed by tax authorities do not bring out exact nature of services provid .....

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e issue to the file of AO/DRP for fresh examination. The assessee is also directed to furnish all the information and explanations that may be called for by the AO/DRP. - Decided in favour of assessee for statistical purposes. - I.T.A. No. 1166/Mum/2016 - Dated:- 8-6-2016 - Shri B.R. Baskaran (AM) & Ralal Negi (JM) For The Assessee : Shri Ajit Kumar Jain and Ms. Radhika Thakkar For The Department : Shri J. Chauhan ORDER Per B.R. Baskaran, AM :- The appeal filed by the assessee is directe .....

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in United Kingdom. It has opened a branch office in India. It provides telecommunication networking services which includes network design and management, project management and implementation, network management, providing lease circuit and trading of equipment and maintenance. 3. The first issue urged by the assessee relates to adhoc disallowance of 30% of expenses claimed by the assessee. The assessee had reimbursed a sum of ₹ 1.59 crores to its sister concern named M/s Cable & Wir .....

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by the assessee on adhoc basis. The Ld CIT(A) noticed that the assessee, in addition to the claim of reimbursement of common expenses, has also claimed a sum of ₹ 30.21 crores. The DRP further observed that the assessee has not furnished financial statements of the group company in order to show that the same was not a loss making company. Accordingly, on a conspectus of the matter, the Ld DRP confirmed the disallowance. 4. The relevant observations made by Ld DRP in respect of this issue .....

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number of employees in each company every month. Normally, iii absence of any tangible material to the contrary, such basis of allocation of employee cost cannot be faulted. 3.4 However we find that total reimbursement of such cost is ₹ 1,59,16,201/- but the assessee has also debited similar expenses in Schedule 13 of the accounts ₹ 30,21,73,000/-. It has not been explained if all the employees of group are on the pay-roll of another group company and employee how additional salary c .....

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hereby upheld and the objection is rejected. 5. We have heard rival contentions on this issue. A careful perusal of the orders passed by the tax authorities would show that they have made the adhoc disallowance mainly for want of particulars, i.e., the details furnished by the assessee were not considered to be sufficient by them. There should not be any dispute that the initial onus to prove the claim rests upon the assessee. It is noticed that the assessee did not furnish the basis of allocat .....

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et of facts, in the interest of natural justice, we are of the view that the assessee should be provided with one more opportunity to explain the claim made by it. Accordingly, we restore this issue to the file of the DRP/AO for considering the same afresh. 6. The next issue relates to assessment of rental and circuit charges incurred by the assessee on behalf of its group company. The AO noticed that the assessee had received a sum of ₹ 2.92 crores as reimbursement from two of its sister .....

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t the assessee has procured Circuit services and in turn provided the communication facilities to its group concerns. Accordingly he took the view that the money received by the assessee as reimbursements should be assessed as Royalty/ Fee for technical services. The Ld DRP noticed that the telecom companies have raised invoices upon the assessee only. Accordingly, the DRP endorsed the view taken by the AO that the assessee has taken services of Telecom companies in India for providing Communica .....

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s Cables & Wireless Network India Pvt Ltd. (315 ITR 72). For the sake of convenience, we extract below the relevant observations made by Ld DRP on this issue:- 4.1 We have considered the facts of the case and the submissions made. We have also seen the 3rd party invoices as furnished on sample basis. Invoices are from Tata Communications and raised on the assessee. Similar invoices horn Reliance Communications are also furnished, and it has been explained that actual cost paid to Communicati .....

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axman. Corn 54 (Bombay). 4.2 We have considered the facts of the case and the submission made. However, we find that the issue involved in this case is not cost reimbursement simplicitor as argued. It is a case where the assessee has taken the services of Telecom companies in India for communication network called international Private Leased Circuit (IPLC) and the payment received is JPLC charges. Therefore on facts, this case cannot be said to be covered by the Bombay High Court judgment in th .....

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see M/s Cable & Wireless Network India Pvt. Limited (20069) [315 ITR 721, while arriving at the decision. 4.4 Respectfully following the order of Madras High Court in the case of Verizon Communication supra, the order of the AO is hereby upheld and the objections are rejected. 7. We heard the parties on this issue and perused the record. According to Ld A.R, there was a specific understanding between the assessee, its group concerns referred above and the Telecom companies that the Telecom c .....

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es to its group concerns is wrong. When a specific query was put to Ld A.R as to whether there was any written document to support his claims, he submitted that he would file the same within two or three days. 8. However, we notice that the assessee has not furnished any document after the conclusion of hearing. The main contention of the assessee is that there was a mere arrangement between the telecom companies and the assessee, as per which the bill for rent and circuit charges utilized by th .....

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