2021 (1) TMI 37 - AT - Income Tax

Disallowing 50% of payments as consultancy fees - HELD THAT - As decided in favour of assessee 2020 (8) TMI 833 - ITAT MUMBAI applying the principle of consistency as has been held by the Hon ble Supreme Court in the case of Radhasaomi Satsang 1991 (11) TMI 2 - SUPREME COURT , in allowing such claim to the assessee in earlier as well as in subsequent years, we hold that there is absolutely no case made out by the revenue for disallowing this sum during the year under appeal.

Summary

Issues:
- Cross appeals filed by the assessee and revenue against the order of Commissioner of Income Tax (Appeals)-6, Mumbai for AY 2007-08 & 2008-09.
- Disallowance of establishment and other expenses, and non-granting of DIT relief.
- Dispute over the allowance of 50% of payments made to M/s. Vaishnavi Corporate Communications Pvt. Ltd. as consultancy fees.

Analysis:
1. The appeals were clubbed due to identical issues. The assessee, engaged in investment holdings and consultancy services, filed returns for AY 2007-08. The AO completed the assessment, which was subsequently rectified. The case was reopened multiple times, leading to adjustments in total income under normal provisions and u/s. 115JB of the Act.

2. The dispute primarily revolved around disallowing establishment expenses and non-granting of DIT relief. The AO disallowed a specific amount relating to payments made to M/s. Vaishnavi Corporate Communications Pvt. Ltd. The assessee appealed before Ld CIT(A) and obtained partial relief.

3. The core issue in the appeals was the allowance of 50% of payments to VCCPL as consultancy fees. The AR for the assessee argued that a similar issue was decided in the assessee's favor in a previous ITAT judgment. The AR highlighted the group's structure and the nature of services rendered by VCCPL to the assessee and other Tata group companies.

4. The DR, however, contended that VCCPL did not provide consultancy services and cited a Supreme Court judgment. The ITAT analyzed the agreement between the assessee and VCCPL, noting the list of Tata companies covered under the agreement and the services provided. The ITAT found that VCCPL had indeed rendered services to the assessee, which were in line with the agreement terms.

5. Referring to the earlier ITAT decision in the assessee's own case, the ITAT allowed the assessee's appeal on the consultancy fees issue. The ITAT emphasized the consistency in allowing such claims and dismissed the revenue's grounds for disallowance. Consequently, the ITAT dismissed the revenue's appeals and partly allowed the assessee's appeals.

6. The ITAT pronounced the order, upholding the decision in favor of the assessee based on the previous judgment. The ITAT dismissed the revenue's grounds and allowed the assessee's appeal regarding consultancy fees. The jurisdictional issues raised by the assessee were not pressed and, therefore, dismissed.

This detailed analysis highlights the progression of the case, the key issues involved, arguments presented by both parties, and the final decision rendered by the ITAT based on precedent and legal interpretations.