×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
08-01-2019, Visteon Automotive, Section 40A(2)(b), 43B, Tribunal Pune
These two appeals by the assessee relate to the assessment years 2009-10 and 2011-12. For the sake of convenience, we are proceeding to dispose them off by this consolidated order.
A.Y. 2009-10 :
2. The first two grounds are general in nature, which do not require any adjudication.
3. Ground Nos. 3 to 5 are in respect of confirmation of disallowance of Rs.27,68,317/-.
4. The facts apropos this issue are that the assessee claimed to have paid a sum of Rs.27,68,317/- to its holding company TACO, one of the joint venture partners (50% share) and similar amount of Rs.27,68 317/- was also paid as Royalty to the other holding company, namely, Visteon International Holding Inc, Joint Venture. The assessee claimed that sum of Rs.27.68 lakhs was paid to TACO in view of the services rendered by them under the Administrative Services Agreement (ASA). The assessee was called upon to explain the nature of services received from TACO. In response, the assessee stated that ASA charges were payable in respect of services rendered by TACO towards support and guidance in the operational areas of ; ‘Human Resources’; ‘Marketing and Sales’; `Finance’; ‘Legal and Taxation’; and `IT support’. The AO required the assessee to adduce evidence to substantiate the factum of having received the services from TACO, but the assessee failed to do so. Since such payment was made to TACO, a related concern in terms of section 40A(2)(b), the AO held that no amount was to be allowed as deduction as the assessee could not adduce evidence of having received any services from the company. The ld. CIT(A) did not change the position.
5. Having heard both the sides and gone through the relevant material on record, it is seen that the assessee claimed to have availed services from TACO and in lieu of that paid ASA charges. The nature of services stated by the assessee before the authorities below is ‘Human Resources’; ‘Marketing and Sales’; `Finance’; ‘Legal and Taxation’; and IT support etc. It is a fundamental rule that a deduction can be allowed towards service fees if the assessee proves the receipt of services from the service provider. If there is no evidence of services, there can be no deduction in respect of such payment. We have perused the nature of services being ‘Human Resources’- Recruitment, Training, Performance Evaluation, Employees benefit and relationship administration; `Marketing and sale’ - Customer relationship, Pricing, Strategy of business Planning; ‘Finance’- Support in financial decisions, Capital expenditure evaluation, Internal Audit; `Legal and Taxation’- Consultation; and `IT support’- Setting up of IT and communication. On going through the nature of services, it becomes patent that there has to be substantial evidence in the form of e-mails and other documents for rendition of such services. In the absence of the assessee having produced any evidence to demonstrate that it availed the services provided by TACO, we cannot accept the claim of the assessee.
6. The ld. AR contended that though the evidence was not available at the material time during the course of proceedings before the authorities below, such evidence could be now furnished to the AO. In the given facts and circumstances of the case, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct the AO to examine the assessee’s claim in respect of evidence of services. In case, the assessee still fails to furnish the evidence to the satisfaction