9911796707
TMI Blog2021 (12) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. Asst. Commissioner of Income Tax (hereinafter referred to as ld. AO). 2. The first ground raised by the Revenue is challenging the action of the ld. CIT(A) in deleting the non-apportionment of expenses in respect of its share with holding company. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a public limited company engaged in the business of merchant banking. During the year, the assessee company paid sharing fees to IDFC Securities Ltd., holding company of the assessee, amounting to Rs. 23,62,37,605/-. The holding company was a SEBI registered Member of BSE and NSE. The holding company was engaged in the business of broking serving various Foreign Institutional Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had wrongly misunderstood the fact by stating that assessee had only shared the gross revenue and had claimed the entire expenses as deduction in its books. This is factually incorrect. Accordingly, the disallowance of Rs. 3,44,24,282/- ( being 50% of expenses incurred on collaboration project of Rs. 6,88,48,564/-) on account of non-apportionment of expenses is hereby directed to be deleted as the ld. CIT(A) had rightly understood the fact and modus operandi adopted by the assessee. Accordingly, the ground No.1 raised by the Revenue is dismissed. 4. The ground No.2 raised by the Revenue is challenging the action of the ld. CIT(A) in deleting the disallowance on account of apportionment of bad debts to holding company. 4.1. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any fees in respect of the same with the holding company. Hence, the presumption of the ld. AO that fee had been shared with holding company is factually incorrect and hence, there is no question of sharing of bad debts written off with the holding company. We find that the ld. CIT(A) had rightly appreciated the contention of the assessee that it had availed services of holding company only in respect of some assignments and not for all the assignments carried out by the assessee. 4.2. The assessee had furnished the ledger account of Sterlite Technologies Ltd., for F.Yrs. 2009-10 and 2010-11 and also the details of fee shared with the holding company in F.Yrs. 2009-10 and 2010-11. From the same, the ld. CIT(A) observed that fee receivable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,75,76,919/- to its employees including the key management persons. Considering the huge expenditure on bonus, the assessee was asked to justify the reasons for giving bonus to employees, further giving specific reasons for performance achieved by the company, specific work done by them, copy of Board Resolution in this regard, copy of Form 16/16A, terms and conditions of employment, total cost of the company per annum. The assessee vide letter dated 27/03/2015 furnished the copy of TDS certificates in case of some of the employees. The ld. AO observed that some of the employees were paid bonus in Crores of rupees and they were all in top managerial position which demonstrates the conflict of interest. The ld. AO also observed that in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for retention of key talent. The assessee also pointed out that similar bonus payments were made in earlier year to the tune of Rs. 22,72,40,000/- which worked out to 28% of net investment banking companies of Rs. 81,39,57,873/-. Whereas during the year under consideration, the assessee has paid bonus of Rs. 25,75,76,919/- which works out to 25% of net investment banking fees of Rs. 103,05,99,770/- since the persons to whom the bonus was paid had significantly contributed to the growth in the performance of the company. The assessee company has chosen to pay bonus for retaining their talent and to encourage them. It was also pointed out that similar payments made in the A.Y. 2010-11 were duly allowed by the ld.AO as an expenditure incu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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