9911796707
TMI Blog2022 (9) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the addition made by the AO amounting to RS.1,34,91,235/- on account of disallwoacne of expenses u/s 40(1)(i) of Income Tax Act, 1961 on accountof overseas group charges. 2. Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in restricting the addition of Rs.28,63,982/- made by the AO u/s 40(1)(ia) of the Income Tax Act to Rs.1,22,708/- thereby giving a relief of Rs.27,41,274/- on account of payment to local vendors." 3. Apropos Ground No.1 : Brief facts of the case are that the assessee company was incorporated on 07.09.2006 and is engaged in the business of providing management, public relationship consultancy and other similar services to its overseas group companies and to the Indian clients. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following finding :- "In the present case, total group charges of Rs 1,63,55,218/- has two components: (i) overseas group charges of Rs 1,34,91,235/- and (ii) domestic payments of Rs 28,63,982/- in respect 'of payment to local vendors on behalf of group ,entities. Ld AR has submitted that during AY 2015-16, the Appellant has made the payments in respect of the SUPR0rt services amounting to Rs1,34,91,235/- to its affiliate entities, located in United Kingdom ('UK'), Belgium,' United Arab Emirates ('UAE\ United States of America ('USA') and Singapore towards allocation of costs/ expenses incurred on ,various' corporate administration, finance support, human resources, and marketing and legal support func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Assessing Officer on account of disallowance of expenses u/s 40(a)(i) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act? 3. Briefly stated, the facts of the case are that the assessee claimed expenses of Rs.1,09,06,277/- on account of 'Group charges' under the head 'Other expenses.' Since no deduction of tax at source was made before making such payment, the Assessing Officer called upon the assessee to explain as to why the disallowance be not made u/s 40(a)(i) for default in making deduction of tax at source u/s 195 of the Act. The assessee submitted that 'Group charges' were the assessee's share in the overall group expenses incurred by the foreign group companies for corporate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax in the hands of the nonresident recipient, the question of applicability of section 195 does not arise. Recently, the Hon'ble Supreme Court in DIT(LT.) VS. A.P. Moller Maersk A/S (2017) 392 ITR 186 (SC) has held that once payment is in the nature of reimbursement of expenses, that is, it is a cost sharing arrangement, it cannot be income chargeable to tax in the hands of recipient. Similar view was earlier taken by the Hon'ble Bombay High Court in DIT VS. Wizcraft International Entertainment P. Ltd. (Bom) (2014) 364 ITR 227 (Bom) holding that payment by way of reimbursement of expenses is not taxable in India. In view of the fact that the amount paid by the assessee to non-residents is not chargeable to tax in their hands and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not dispute the proposition. 8. Upon careful consideration, we find that the issue is covered in favour of the assessee by a series of ITAT order in assessee's own case. Respectfully following the precedent, we uphold the order of ld. CIT (A) on this issue. 9. Apropos Ground No.2 : Ld. CIT (A)'s observation on this issue is as under :- "8.3 Ground No. 2(d): Disallowance of Domestic payments of Rs. 28,63,982/- u/s 40(a)(ia) of the Act in respect of payment to local vendors on behalf of group entities: 8.3.1 In this regard, Ld. AR has submitted as under: * The break-up of aforesaid payment of Rs. 28,63,982/- made to various resident parties and the corresponding TDS made by the Appellant is enclosed as Annexure 4. * We wish to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
