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TMI Blog2021 (10) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. 2. The ld. CIT(A) erred in deleting the disallowance of service expenses of Rs. 2,19,95,966/- . 2.1 The ld. CIT(A) failed to note that the agreement for sharing of expenses is made only at the fag end of the year i.e. on 14.03.20 13 and monthly Debit Notes for use of common facilities were not raised on the 12'h of each month which is a condition made in the agreement. 2.2 The ld.CIT(A) failed to note that the company has incurred Rs. 3.22 crores as manpower outsourcing cost representing manpower and other costs to M/s Aparajitha Dynamic Synergies P Ltd. which includes salary, travel etc. Service expenses of Rs. 2.19 crores paid to M/s Sundaram Finance Ltd (SFL) also includes expenses towards administration, infrastruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. 3. The brief facts of the case are that the assessee company is engaged in the business of distribution of financial products filed its return of income for assessment year 2013-14 on 28.09.2013 admitting total income of Rs. 1,13,95,034/-. During the year under consideration, the assessee has availed various services including infrastructure facilities from M/s. Sundaram Finance Ltd., for which it has made payments for shared cost and service charges. During the course of assessment proceedings, when the AO called upon the assessee to explain nature of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee has shared common cost and other service charges. The ld.CIT(A) after considering relevant submissions of the assessee and also taken note of nature of expenses claimed by the assessee, opined that when the assessee had no permanent establishment and further, functioning by outsourcing its activities to sister concerns, the AO has erred in not allowing payment made to M/s. Sundaram Finance Ltd., for reimbursement of various expenses incurred by them on behalf of the assessee. He, further noted that the AO had disallowed expenditure in the hands of the assessee even though, the assessee made it clear that it does not have any personal office or similar such permanent establishment to carry out business. Therefore, he opined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Ltd., network of branches and manpower for its business and accordingly, the expenses incurred towards services rendered in respect of administrative, infrastructure, supervision, accounting, etc., has been shared on the basis of revenue earned by three companies. The assessee has filed all evidences to support payment of reimbursement to M/s. Sundaram Finance Ltd. Therefore, the ld.CIT(A) after considering relevant facts has rightly deleted addition made by the AO and his order should be upheld. 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee is in the business of distribution and marketing of insurance, financial products, loan and other invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g expenses merely for the reason that said expense was not supported by evidences, more particularly when the assessee has filed agreement between the parties and debit note raised by M/s. Sundaram Finance Ltd. Further, it is not a case of the AO that expenditure incurred by the assessee is not genuine. In fact, the AO has not questioned genuineness of expenses, but what was doubted is necessity and rationale behind incurring expenditure. It is a well settled principle of law that AO cannot question rationale behind incurring any expenditure. We further noted that in the subsequent financial year relevant to assessment year 2014-15, the AO has accepted the claim of the assessee towards reimbursement of shared cost and service expenses to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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