TMI Blog2021 (10) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... nd further, it had availed services of M/s. Sundaram Finance Ltd., through network of its branches across the country, the AO was erred in disallowing 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. 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 2.19 crores paid to M/s Sundaram Finance Ltd (SFL) also includes expenses towards administration, infrastructure, supervision, accounting etc. 2.3. The ld.CIT(A) ought to have appreciated the fact that payment to M/s SFL towards manpower and branch network cost is in addition to manpower and other costs paid to M /s Aparajitha Dynamic Synergies P Ltd. 2.4 The ld.CIT(A) erred by allowing assessee s claim in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of financial products filed its return of income for assessment year 2013-14 on 28.09.2013 admitting total income of ₹ 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 expenditure, the assessee has submitted an agreement dated 14.03.2013 between M/s. Sundaram Finance Ltd., and assessee, as per which, all expenditure related to business activity of the assessee was incurred by M/s. Sundaram Finance Ltd., and the same has been allocated on the basis of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioning 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 that expenditure incurred by M/s. Sundaram Finance Ltd., and shared among assessee and other group concerns is incurred for business purpose of the assessee and hence, deleted additions made by the AO. Aggrieved by the CIT(A) order, the Revenue is in appeal before us. 5. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 investment products, has carried its business activities through various branches of M/s. Sundaram Finance Ltd. The assessee had entered into a cost sharing agreement with M/s. Sundaram Finance Ltd., as per which, income generated from aforesaid business is directly booked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred 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/s. Sundaram Finance Ltd. Therefore, we are of the considered view that when expenditure was considered as genuine and further, it was incurred wholly and exclusively for the purpose of business, then there is no reason for the AO to disallow said expenditure without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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