9911796707
TMI Blog2016 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals) - 14, Mumbai [hereinafter referred to as 'the learned CIT(A)'], under section 250 of the Income-tax Act, 1961 (Act) and based on the facts and circumstances of the case, Pinebridge Investments Capital India Private Limited (PICIPL) (hereinafter referred to as 'the Appellant') respectfully submits that the learned CIT(A) erred in upholding the order of the Assistant Commissioner of Income-tax, Circle 6(1) (hereinafter referred to as 'the learned Assessing Officer'). In passing the aforementioned order, the learned CIT(A) erred on the following grounds: 1. In disallowing the salary expenditure amounting to Rs. 31,227,390 incurred by the Appellant during the financial year ended 31 March 2009, inter alia on the basis that the same was not incurred for the business purposes of the Appellant but for and on behalf of AIG Capital Corporation, USA (AIGCC). Further, and without prejudice to the above, the learned CIT(A) erred in not appreciating the fact that salary expenditure was reimbursed by AIGCC and the said reimbursement amount was offered to tax based on mercantile system of accounting while calculating the total income for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ended 31st March, 2009 pertaining to the salary cost and other expenses such as staff welfare expenses, routine administrative expenses incurred for the employees such as traveling, conveyance of employees of the assessee. It was submitted that the total amount of Rs. 78,324,357/- has been included in the total income chargeable to tax in the return of income filed by the assessee for the assessment year 2010-11. Thus, the assessee submitted that total amounting to Rs. 31,227,390/- was reimbursed by AIGCC to the assessee in the subsequent financial year ended 31st March, 2010 which has been included in the total income for the assessment year 2010-11 and suffered taxation. It was observed by the A.O. that the expenses incurred were not in connection with the business activity of the assessee as the same was reimbursed to the assessee by the parent company i.e. AIGCC in the subsequent year. The A.O. disallowed expenses amounting to Rs. 31,227,390/- by holding that the expenses are not allowable expenses as the same were not incurred for the business purpose of the assessee but for business purposes of others i.e. AIGCC and hence same were reimbursed by AIGCC. It was held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business activities and were neither capital in nature nor personal in nature. The assessee submitted that it is an undisputed position that the assessee is engaged in business of investing in Indian companies since assessment year 2007-08 which is accepted by Revenue. It was submitted that AO has failed to appreciate the facts of this case and erroneously concluded that the expenses were incurred for the activities of the assessee's parent company i. e. AIGCC. The salary expenses and other administrative expenditure incurred by the assessee which were later reimbursed by AIGCC were incurred for the purpose of conducting the business activity of the assessee and not for the business purposes of AIGCC and hence should be allowed as deductible under section 37(1) of the Act in computing the total income of the assessee. It was also submitted that the A.O. has erred in holding that the assessee is following mercantile system of accounting and the reimbursement amount pertaining to financial year 2008-09 should be offered to tax in the said financial year and not in financial year 2009-10, the year in which the reimbursement was received. It was submitted that the reimbursement agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofession' , the assessee submitted before the ld. CIT(A) that the assessee was an NBFC registered with the RBI undertaking investment activities and was engaged in the business of making investments. The assessee had, interalia, earned interest income on fixed deposits amounting to Rs. 1,262,666/- for the previous year ending 31-03-2009. It was submitted that interest income of Rs. 12,62,666/- on fixed deposits was earned in the normal course of business of the assessee and the same was offered to tax as business income which is chargeable to tax under the head income from profits and gains from business or profession in accordance with the provisions of section 28 to 44C of the Act. The assessee submitted that during the previous year ended 31st March 2009, it was registered as an NBFC and was in the business to promote, acquire or invest by way of capital or debt in securities of any body corporate, trusts, societies or partnerships, in shares, government bonds, money market instruments and other types of securities. It was submitted that as per the object clause in the Memorandum of Association of the assessee company , the principal business of the assessee is to promote, acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the parent company AIGCC has reimbursed such cost of salary and expenses related thereto w.r.t. 'CFG management employees' on cost basis without markup vide agreement dated 13-05-2010 and the said amount was received in financial year 2009-10 and offered for taxation in the assessment year 2010-11. It was submitted that the assessee entered into an expenses reimbursement agreement with AIGCC on 13th May, 2010 and the assessee received the reimbursement amount for the assessment year 2009-10 only in the assessment year 2010-11 which was offered for taxation by the assessee in the return of income filed with the Revenue for assessment year 2010-11. The copy of the said expenses reimbursement agreement is placed on record vide paper book page No. 109 to 114. The agreement was w.e.f. 1.4.2008 and the parent company has agreed to reimburse the salary and other expenses incurred in connection with assessee's employment of 'CFG management employees' w.e.f. 01-04-2008 at cost and without mark up, and the same was offered for taxation in the assessment year 2010-11. Thus the assessee has rightly claimed the expenses in the impugned assessment year 2009-10 keeping in view factual mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of balance sheet for the assessment year 2010-11 wherein the said amount of reimbursement of expenses to the tune of Rs. 3,12,27,390/- for the previous year ended 31-03- 2009 had been reflected in the P&L account for the year ended 31.3.2010(pb/page9) as income earned by the assessee. The reimbursement of said expenses which has been elaborated vide Schedule 13 in the audited financial statement which is as under:- "Reimbursement of expenses The Company entered into an Expense Reimbursement Agreement, as executed on April 26, 2010 with effect from April 1, 2008 with AIG capital Corporation (AIGCC), being the holding company holding 99% of its shares, whereby AIGCC reimbursed expenses on account of salary and other expenses of certain managerial personnel employed by the Company for the sole purpose of managing and administering its consumer finance subsidiaries with effect from April 1, 2008. The agreement was approved by the Board of Directors in their meeting held on March 26, 2010. The amount of reimbursement for the year April 1, 2008 to March 31., 2009 aggregating to Rs. 31,227,390 (Previous year Rs. Nil) has been disclosed in the Profit and Loss Account under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated costs from AIGCC under expenses reimbursement agreement dated 13-05-2010 as the right to receive reimbursement of said 'CFG management employees' salaries and other related costs from parent company AIGCC got vested in favour of the assessee only on signing of 'expenses reimbursement agreement' on 13- 05-2010. The decision of Hon'ble Bombay High Court in the case of Shrikant Textiles v. CIT, 1970-(BOI)-GJX-0035-Bom squarely applies to the instant case of the assessee and supports the assessee's contentions. Thus in our considered view, the assessee has rightly offered as income the reimbursement received from AIGCC of the expenses with respect to salaries and other related costs thereto w.r.t. 'CFG management employees' received in the previous ended 31-03-2010 for taxation in the return of income filed with Revenue for assessment year 2010-11. In our considered view the said expenditure of Rs. 3,12,27,390/- towards salaries and other expenses related thereto w.r.t. 'CFG management employees' incurred by the assessee during the previous year ended 31-03-2009 is an allowable revenue expenditure for the assessment year 2009-10 which is hereby directed to be allowed as revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
