2022 (9) TMI 646 - AT - Income Tax

Disallowance of payment made on account of Administrative Service charges - CIT-A deleted the addition - HELD THAT - Under the head Human Resource and Development , the assessee has referred to various e-mails exchanged during the year between it and TACO concerning with the human resource development. Such detailed e-mails have been placed on record in second and third paper books. We have examined some of the e-mails on test-check basis and found the same to be pertaining to the assessee s business. Similar is the position regarding e-mails received for rendition of Legal and taxation advisory services; Vendor management services; Internal audit; IT support services/IT Infrastructure; and Monitoring of operations etc. Such email exchanges amply demonstrate the receipt of services by the assessee. In that view of the matter, it is difficult to accept the AO s point of view that the assessee did not receive any services. Once the factum of receipt of services is established, the next question is about the deductibility of payment of Administrative Service charges to TACO on legal basis. It is seen that the AO made similar disallowance in the case of the assessee for the A.Y. 2009-10. The matter finally travelled to the Tribunal 2019 (9) TMI 852 - ITAT PUNE has upheld the action of the CIT(A) in deleting the disallowance. The ld. AR submitted that the AO himself did not dispute the deductibility of such expenses from the A.Ys. 2010-11 to 2015-16 and allowed the deduction for the same. Our attention was also drawn towards the orders passed by the Tribunal in other group companies wherein the payments made to TACO towards Administrative Service charges have been allowed by the Tribunal. - Decided against revenue.

Summary

Issues:
Deletion of addition of Rs.2,64,61,769 on account of Administrative Service charges paid to Tata Autocomp Systems Ltd.

Analysis:
The appeal by the Revenue challenged the deletion of the addition of Rs.2,64,61,769 made by the CIT(A)-5, Pune for the assessment year 2016-17. The only issue raised was regarding the payment made by the assessee to Tata Autocomp Systems Ltd. (TACO) for Administrative Service charges. The assessee, a Joint Venture between TACO and GS Yuasa International Limited, Japan, engaged in the business of manufacturing and selling batteries, claimed the deduction for Administrative Service charges. The Assessing Officer (AO) disallowed the deduction due to lack of evidence of receipt of services and the assessee incurring administrative expenses. However, the assessee provided detailed documents showing the services received in areas like Human resource development, Finance, and Product pricing. The AO contended that the services were general and did not require technical knowledge, leading to the disallowance of Rs.2.64 crore, which was later deleted by the CIT(A).

Upon hearing the submissions and examining the evidence, the Tribunal found that the emails exchanged between the assessee and TACO demonstrated the receipt of services in various aspects such as Human Resource and Development, Legal and taxation advisory services, Vendor management services, Internal audit, IT support services, and Monitoring of operations. The Tribunal concluded that the AO's denial of the deduction based on lack of evidence was unfounded, as the emails substantiated the receipt of services by the assessee.

The Tribunal also considered the legal basis for deductibility of the payment of Administrative Service charges to TACO. It noted that similar disallowance made by the AO in a previous assessment year was overturned by the Tribunal, and the AO had allowed such deductions in subsequent years. Additionally, the Tribunal highlighted that payments to TACO for Administrative Service charges were allowed in the case of other group companies by the Tribunal. Relying on these precedents, the Tribunal upheld the view taken by the CIT(A) and dismissed the appeal by the Revenue. The order was pronounced in the Open Court on 10th June, 2022.