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TMI Blog2016 (7) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses before the AO and hence he has made the adhoc disallowance. The basis of allocation was furnished by the assessee before the Ld DRP. However, the DRP has taken the view that the assessee has not substantiated the reimbursement, when the assessee itself has incurred a sum of 30.21 crores towards employee cost. These observations show that the claim made by the assessee has not been properly explained by the assessee to the satisfaction of the tax authorities. Under these set of facts, in the interest of natural justice, we are of the view that the assessee should be provided with one more opportunity to explain the claim made by it. Accordingly, we restore this issue to the file of the DRP/AO for considering the same afresh. Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of its group concern. 2. The facts relating to the above said issues are stated in brief. The assessee is a foreign company incorporated in United Kingdom. It has opened a branch office in India. It provides telecommunication networking services which includes network design and management, project management and implementation, network management, providing lease circuit and trading of equipment and maintenance. 3. The first issue urged by the assessee relates to adhoc disallowance of 30% of expenses claimed by the assessee. The assessee had reimbursed a sum of ₹ 1.59 crores to its sister concern named M/s Cable & Wireless Networks India Private Limited (CWNIPL) and claimed the same as deduction. It was explained that the certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, such basis of allocation of employee cost cannot be faulted. 3.4 However we find that total reimbursement of such cost is ₹ 1,59,16,201/- but the assessee has also debited similar expenses in Schedule 13 of the accounts ₹ 30,21,73,000/-. It has not been explained if all the employees of group are on the pay-roll of another group company and employee how additional salary cost to exceeding ₹ 30.22 Crores is debited in the accounts. The assessee has also not produced the copy of accounts of the group companies to show that the other group company is not a loss making company, and that no tax has been avoided by resorting to such reimbursement of expenses. 3.5 In any case is having its own pay roll of employees. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of its group company. The AO noticed that the assessee had received a sum of ₹ 2.92 crores as reimbursement from two of its sister concerns named M/s Cable & Wireless UK and Cable & Wireless Worldwide Pte Ltd. According to the assessee, it paid rental and circuit charges on behalf the above said group companies and the same was received back from them as reimbursements. Since these transactions do not pertain to the assessee, they were not routed through the Profit and loss account also. These transactions were disclosed in the Notes to the financial statements as related party transactions. The AO took the view that the assessee has procured Circuit services and in turn provided the communication facilities to its group conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'I'I'O and no adjustment has been made. The assessee has argued that no services has been provided to the group companies and only the costs has been recovered on actual basis and therefore this cannot be re-characterize as Royalty/FTS and assessed in the hands of the assessee as income. The assessee has also placed/ reliance on WNS Global Services (UK) Ltd t2013i 32 taxman. Corn 54 (Bombay). 4.2 We have considered the facts of the case and the submission made. However, we find that the issue involved in this case is not cost reimbursement simplicitor as argued. It is a case where the assessee has taken the services of Telecom companies in India for communication network called international Private Leased Circuit (IPLC) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered by it and hence the observation made by the tax authorities that it has procured circuit facilities and then provided the services to its group concerns is wrong. When a specific query was put to Ld A.R as to whether there was any written document to support his claims, he submitted that he would file the same within two or three days. 8. However, we notice that the assessee has not furnished any document after the conclusion of hearing. The main contention of the assessee is that there was a mere arrangement between the telecom companies and the assessee, as per which the bill for rent and circuit charges utilized by the group companies shall be raised upon the assessee. We notice that the above said services have been availed from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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