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Colliers International (I) Property Services Pvt Ltd. Versus Dy. CIT-5 (1) , Mumbai

2017 (9) TMI 812 - ITAT MUMBAI

Disallowance of reimbursement of expenses on corporate overhead allocation - failure to furnish necessary direct and proximate evidences of nexus between reimbursement of corporate allocation expenses and income generating activity of the assessee - agreement between holding company and its group companies - Held that:- 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. .....

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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 issue needs to be examined by the AO in the light of the additional evidence filed by the assessee. Hence, we set aside the iss .....

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s of real estate services to occupiers, owners and investors on a local, regional and international levels, filed its return of income for the AY 2010-11 on 30-09-2010 declaring total income at ₹ 43,72,857. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative attended from time to time and submitted the details called for. The assessment was completed u/s 143(3) on 28-02-2013 determining total inc .....

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rein 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 .....

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iture incurred under the head corporate overhead allocation and business connection. In response, the assessee submitted that it is part of global network of companies and as per the management and technical support agreement between its parent organization and other companies, a cost sharing agreement has been entered into towards sharing of common expenses of parent company based on the revenue of other group companies. The assessee further submitted that corporate overhead expenses are in the .....

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the group companies by raising bills on the group companies. 4. The AO, after 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 an .....

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he assessee company. Accordingly, he disallowed expenditure claimed under the head reimbursement of corporate overhead allocation and other expenses amounting to ₹ 2,45,55,709. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). 5. Before the CIT(A), the assessee reiterated its submissions made before the AO. The CIT(A), on consideration of the submissions of the assessee observed that it is noticed that at the time of assessment as well as during the appellate .....

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the nexus between sharing of common expenditure and business activity of the assessee. Since the assessee failed to prove the exact details, the AO has correctly disallowed these expenses. However, the CIT(A), further observed that as regards claim of the assessee that the AO has made excess disallowance which also 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 re .....

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ad expenses, even though the assessee has filed necessary evidences to prove the expenditure incurred by its holding company and reimbursed by the assessee. The Ld.AR referring to the paper book filed by the assessee submitted that the assessee has made a clear disclosure of expenditure incurred towards corporate overhead allocation in its financial statements and also Notes to Accounts. The Ld.AR further submitted that the assessee has entered into a management and technical support agreement w .....

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overhead allocation which has been reimbursed by the assessee on actual billing made by the holding company. The Ld.AR further submitted that all these details have been filed before the AO to prove the expenses but, the AO has discarded all evidences to make additions. 7. On the other hand, the Ld.DR strongly supporting the order of the CIT(A) submitted that the assessee has failed to prove primary onus cast upon it to prove the nexus between reimbursement of expenditure between holding compan .....

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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 been reimbursed on the basis of agreement between the holding company and group companies as per which the holding company rendered certain services to the group companies for which a cost sharin .....

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ssessee has filed copy of agreement between its holding company and other group companies. As per the agreement, the holding company undertook to provide several group services to the other group companies, in particular, employees, certain top managerial persons, who defines on the group companies in respect of strategic business divisions for which the group companies have to share expenses on the basis of a prescribed formula. We further observe that the assessee has listed certain services t .....

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