TMI Blog2020 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, but it is outside his domain to decide whether there was any necessity to avail such services or not. The assessee having availed the support services for its day to day running of business, is entitled to claim the expenditure. Hence, we hold so. Assessee during the year itself establishes the case of the assessee that the availment of support services from the AE has benefitted the business of assessee and hence expenditure is business expenditure. Now, coming to the next aspect of the assessee i.e. the evidences of availment of support services from the AE. The assessee before us has furnished evidences in the form of additional evidences to establish its case of availment of services. Such evidences are available filed by the assessee in this regard. The sufficiency of availment of services can be gone into by Assessing Officer, but where evidences have been filed, the Assessing Officer cannot sit in judgement as to allowability of expenditure on the surmise that assessee is already increasing expenditure upto 40%. There is no merit in the stand of the authorities below. Disallowance on account of impairment of stock - whether the said expenses would lead to establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon ble CIT(A) / Ld. AO has erred on facts and in law in disallowing the management fee amounting to ₹ 17,586,958 paid by the Appellant, and questioning the need for availing such services from its associated enterprise, thereby further questioning the commercial expediency of the services availed. The Hon ble CIT(A) / Ld. AO have failed to give due cognizance to the detailed submissions filed by the Appellant which clearly demonstrate the nature services availed, need of the Appellant and the benefit reaped therefrom., and have instead subjectively disallowed the expenditure purely based on presumed disposition. 3. The Hon ble CIT(A) / Ld. AO erred in mindlessly disallowing management fee paid by the Appellant without appreciating the prime facts applicable to the Appellant s business operations and thereby causing double taxation in the hands of Appellant. 4. Without prejudice, the disallowance confirmed by the Hon ble CIT(A) / Ld. AO in relation to management fees paid by the Appellant, is in contradiction to the finding of the Ld. TPO and not supported by any cogent facts or evidence to hold such a contrary view. The Hon ble CIT(A) / Ld. AO has erred in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer further noted that during the preceding year, the amount of expenditure debited was ₹ 1.39 crores (approx.). Another aspect which was noted by the Assessing Officer was that the assessee was incurring huge operating expenses i.e. salary and wages of ₹ 9.21 crores, professional and legal charges of ₹ 1.43 crores and all kind of other managerial and establishment expenses, which were included in total operating expenses of ₹ 49.96 crores. The assessee was asked to furnish complete details of management services provided by MAP Singapore alongwith the copy of Agreement and date-wise activities to establish its case of services being provided by the said concern. In response thereof, the assessee pointed out that it had availed certain management support services from its AE. The said services are enlisted at page 2 3 of the assessment order. The assessee stressed that the managerial services availed constitute relevant business assistance received by the assessee from MAP Singapore to undertake its operation in a more efficient way. 9. Reliance was placed on various decisions for the allowability of the said claim. The Assessing Officer notes as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-mail or online access and workshop/conferences organized by the AE for the Indian entity. The CIT(A) was of the view that the issue raised in the present appeal stands covered by the order of CIT(A) in Assessment Year 2007-08 and since the assessee has not furnished sufficient documents to prove its availment of benefit, the expenditure needs to be added in the hands of the assessee. The assessee is in appeal against the order of CIT(A). 12. The Ld.AR for the assessee pointed out that the assessee was a trading company and its operating expenses were to the tune of 40% of the total turnover. In para 3.2 of the assessment order, the Assessing Officer talks about the nature of expenses incurred by the assessee. The Ld.AR for the assessee stressed that routine support services were provided by the AE to the assessee for better management of the business and sufficiency and benefit of such services provided by the AE, could not be seen or gone into by the Assessing Officer. He further stressed that the TPO had accepted the transaction to be at arm s length. It was further pointed out by the Ld.AR that the expenses were incurred from year to year; and once the expenditure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order; hence, there was mistake apparent on record and the order of the Tribunal was thus recalled. 16. We have heard the rival contentions and perused the record. The issue arising in the present appeal filed by the assessee is against the deduction claimed on account of management fee paid to MAP, Singapore at ₹ 1.76 crores (approx.). The assessee had entered into an Agreement with MAP, Singapore, for availing the services. Availment of services from AE were in the following fields:- General business and administration services: Assistance in the field of general business and corporate affairs and facilitates internal and external contacts. Economic planning and accounting services: Assistance in economic plans, accounting and results analysis. As an enterprises functioning in the highly competitive tyre industry, the Assessee requires external assistance to meet its goals, and improve profitability. Industrial assessment services other than technical assistance: Management of the creation modification and maintenance of industrial tools. Marketing training and planning: Assistance in developing marketing strategy and determining actions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, was the managerial salary and perquisite paid by the assessee to its Directors. The Assessing Officer has time and again pointed out that the operating expenses were to the tune of 40% and over which again the assessee has claimed the management fee of ₹ 1.76 crores (approx.). The Assessing Officer holding that payment of management fee was clear diversion of payment also observed that the group company were paid in the name of management fee though there were sufficient management directors in the assessee s company. He was of the view that though it is claimed as a charge on the taxable income but infact it was application of income and the said claim was not genuine business claim. 18. At this juncture, we need to see whether the Assessing Officer had exceeded the jurisdiction cast upon him, while deciding the issue of allowability of claim of management fees paid by the assessee to its AE. In the first instance, it is for the businessman to decide its course of carrying on the business and in such course, for availing management services from its AE. The Assessing Officer cannot sit in judgment, with such decision of businesssman to hold that the group companies w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. Now, coming to the next aspect of the assessee i.e. the evidences of availment of support services from the AE. The assessee before us has furnished evidences in the form of additional evidences to establish its case of availment of services. Such evidences are available at pages 1 to 66 of the Paper Book filed by the assessee in this regard. The assessee had also filed evidences before Assessing Officer/CIT(A) which are noted by them. The sufficiency of availment of services can be gone into by Assessing Officer, but where evidences have been filed, the Assessing Officer cannot sit in judgement as to allowability of expenditure on the surmise that assessee is already increasing expenditure upto 40%. There is no merit in the stand of the authorities below. Thus, grounds of appeal no.2 3 raised by the assessee are allowed. ITA No.2946/Del/2014 (Revenue s Appeal) Assessment Year 2008-09 20. The Revenue has raised following grounds of appeal:- 1. Whether in the facts and circumstances of the case in law, the Ld. CIT (A) erred in deleting the disallowance of an amount of ₹ 27,83,732/- on account of impairment of stock entirely relying on the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognizing the value of stock at the close of the year i.e. as per AS-2 of Accounting Standard and the cost of the closing stock is declared on the basis of cost or net realizable value, whichever is less. Hence, there is no merit in the aforesaid disallowance made in the hands of the assessee. We uphold the order of the CIT(A). Ground of appeal No.1 raised by the Revenue is thus dismissed. 26. The second issue raised by the Revenue is against the order of CIT(A) in deleting the addition of ₹ 3.36 crores (approx.) made on account of AMP expenses. The assessee during the year under consideration had claimed expenses of ₹ 6.72 crores (approx.) on account of advertisement and publicity, as against the claim of ₹ 4.44 crores (approx.) made in the last year. The Assessing Officer asked the assessee to provide the requisite details as to whether the said expenses would lead to establishment and promotion of Michelin brand in India. The Assessing Officer was of the view that where the brand is owned by the parent company, then they should contribute towards advertisement and marketing expenses incurred by the assessee, on the surmises that expenses were incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer. The expenditure in question was advertisement expenses, wherein the assessee during the year under consideration had claimed expenditure totaling to ₹ 6.72 crores (approx.) as against ₹ 4.44 crores (approx.). The assessee is a trader in tyres of Michelin brand in India. The assessee claimed that it was incurring said expenditure wholly and exclusively for carrying on its business in India. Similar expenses to the tune of ₹ 4.44 crores (approx.) were also incurred in the earlier years and no disallowance u/s 37(1) of the Act was made in the hands of the assessee in the earlier years. However, transfer pricing adjustment was made on account of aforesaid expenditure incurred on advertisement and publicity. The Tribunal in assessee s own case relating to Assessment Year 2007-08 in ITA Nos.3166 3306/Del/2013 vide order dated 30.04.2019 has deleted the aforesaid adjustment on account of advertisement and publicity. In the instant Assessment Year, the Assessing Officer however, was of the view that the expenditure incurred by the assessee needs to be disallowed on two counts i.e. first it was not incurred wholly and exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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