TMI Blog2017 (9) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. In this case, the assessee has reimbursed certain expenses on the basis of an agreement between holding company and its group companies. The assessee claims that the holding company has rendered certain services as listed in the agreement. However, no such evidence has been furnished to the AO to prove as to what are the services rendered by its holding company. We further observe that the assessee has furnished certain additional evidence to prove the nexus between reimbursement of corporate overhead allocation and business activity of the assessee. The assessee claims that those details are not before the AO except copy of agreement between holding company and group companies. Therefore, we are of the considered view that the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A), the assessee agitated all the additions made by the AO. The CIT(A), for the detailed discussion in his order, partly allowed appeal filed by the assessee, wherein he directed the AO to sustain additions of ₹ 1,89,75,259 out of total additions made of ₹ 2,45,55,709 in respect of reimbursement of expenses towards corporate overhead allocation and deleted additions made by the AO towards foreign travel expenses, seminar and conference expenses, professional fee and difference in AIR reconciliation; however, confirmed additions made by the AO towards repairs and maintenance expenses. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 3. The first issue that came up for our consideration is addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter considering the submissions of the assessee observed that though assessee claims to have reimbursed expenditure incurred by the holding company towards common expenditure on behalf of all group companies, failed to file any details to prove the nature of work done by the executives and the method of charging expenses. The AO further observed that the onus is on the assessee to prove that expenses incurred are wholly and exclusively for the purpose of business, but assessee failed to prove that expenses incurred under the head corporate overhead allocation has been incurred for the business purpose. The assessee cannot be made liable to any reimbursement of expenditure by its parent company of the associate companies located overseas i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include various other expenses in foreign exchange under the head travelling expenses, consultancy and referral fees , etc. the same appears to be correct, because the expenses of reimbursement for corporate head appeared to be only ₹ 1,89,75,259. It is a matter of record. Therefore, the AO was directed to verify and disallow actual amount of reimbursement of expenditure, after verification of the claim of the assessee. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 6. The Ld.AR for the assessee submitted that the Ld.CIT(A) has grossly erred in law as well as on facts in confirming the action of AO in respect of disallowance of corporate overhead expenses, even though the assessee has filed necessary evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessee has not produced any evidence to prove expenditure. Mere filing of an agreement with general conditions as to rendering of certain services on cost sharing basis is not sufficient compliance to prove expenditure. The AO has made additions in the absence of any evidence to support the expenditure and his order should be upheld. 8. We have heard both the parties and perused the material available on record. The AO has disallowed corporate overhead allocation and other expenses on the ground that the assessee has failed to prove direct nexus between reimbursement of expenditure between holding company and income generating activity of the assessee. It is the claim of the assessee that corporate overhead allocation has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h services by the group companies. However, assessee has failed to furnish necessary direct and proximate evidences of nexus between reimbursement of corporate allocation expenses and income generating activity of the assessee. It is an admitted fact that only expenditure incurred in relation to earning income wholly and exclusively for the purposes of business of the assessee is allowed, as deduction. It is the primary onus of the assessee to prove the nexus between expenditure incurred and business connection of the assessee. In this case, the assessee has reimbursed certain expenses on the basis of an agreement between holding company and its group companies. The assessee claims that the holding company has rendered certain services as l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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