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TMI Blog2012 (11) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... e were not exclusively incurred for purposes of business activities as carried out by the appellant. The basic premise for sustenance of this disallowance at 31.50 Lacs is factually not correct. The addition sustained of 31.50 Lacs should be deleted. - 2.Upholding the disallowance made of ₹ 9,56,624/- in respect of travelling expenditure. The addition sustained of Rs..9.56 Lacs should be deleted. 3. Upholding the disallowance of ₹ 4,42,775/- made u/s.43(B) of the Income Tax Act in respect of the unpaid Service Tax, on fees, which were not collected by the appellant. The addition made should be deleted. Grounds of Revenue s Appeal: On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in treating the sum of ₹ 1,05,00,000/- paid as consultancy fees to Boston Consultancy Group (BCG) as Revenue expenditure ignoring the fact that the said brand development expenditure being an expenditure of such a nature that would result in a benefit of an enduring nature. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance of expenditure paid to BCG to 30% of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the business. The A.O. has also referred to Supreme Court in alembic Chemical Works, 177 ITR 377. 6. Without prejudice to his contention that expenditure is in the nature of capital expenditure, the A.O. has given some reasons why even otherwise the payment was not allowable as a business expenditure. These are as under:- a) The assessee company is mainly providing human resources support and professional services as per the agreement enetered into with the group companies. None of the agreements entered into with the group concerns mention about paying of professional fees for creating value for the group as such as envisaged in the agreement with the BCG. b) It is seen from the details furnished that any additional expenditure incurred on behalf of the said group companies is separately recovered from them under the head reimbursement of expenses . c) The professional fees paid to BCO is towards the synergy of operations and management of the entire operating companies of the Hinduja Group in India and consolidating the aspiration, perception and belief of the key stake holders, being family members, business units, etc. Realignment of the management performan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of business and has to be allowed. 7. On the disallowance of 30% sustained by the Commissioner (Appeals), he submitted that any value addition to the family is value addition to the group and the expenditure cannot be segregated on such terms. On the issue of services rendered to the Hinduja Hospital, he submitted that the expenditure is linked with the profession of the assessee and though the Hinduja Hospital is not a client of the assessee as on date, it may, in future, obtain the services of the assessee and, hence, expenditure, if any, attributable to the services rendered to Hinduja Hospital cannot be disallowed. He relied on the following case laws:- CIT v/s Crompton Engineering Co. Ltd., [2000] 242 ITR 0317 (Mad.); and CIT v/s Abbott Laboratories (I.) Pvt. Ltd., [1993] 202 ITR 0818 (Bom.). 8. The learned Departmental Representative, Mr. V.V. Shastri, representing the Revenue, on the other hand, opposed the contentions of the learned Counsel and submitted that the expenditure was for brand development which would result in a benefit of enduring nature and has to be treated as capital expenditure. He relied on Para-5.7 of the assessment order placed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order, summarized the agreement as follows:- 12. I have considered the submissions. According to the agreement of the appellant company with the operating companies namely, Ashok Leyland, etc. the appellant company would advice and guides the operating companies in the following areas:- i) Identify business and opportunities; ii) Group / P.R. relations / communication strategy; iii) Corporate Governance; iv) Internal audit matters; v) Assisting in marketing strategy. 13. The BCG report is on the following main issues; i) Development and common management style; ii) Lead and support the business unit growth and expansion in India; iii) Develop the role of family to manage and control the units in the group. iv) Enhance the value of the operating units, vis- -vis, the appellant company and the family. 13. A perusal of the above clearly demonstrates that the expenditure incurred was for the purpose of business. The first appellate authority was right in coming to a conclusion that the Assessing Officer s observations that the expenditure was incurred was to build a brand Hinduja is incorrect. The Commissioner (Appeals), vide Paras-17 and 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees paid to the firm for re-location of plant / equipment and utility services at existing facilities is in the revenue field or capital field. This case law does not help the assessee on the issue of services rendered by Boston Group to Hinduja Hospital for which the assessee made payments. Similarly, the Hon ble Madras High Court s judgment in CIT v/s Carborandum Universal Ltd., [2009] 177 Taxman 347 (Mad.), was on the question whether the expenditure by way of consultancy fees was in the capital field or in the revenue field. Similar is the case in CIT v/s Cromption Engineering Co. Ltd., [2000] 242 ITR 317 (Mad.). In view of these discussions, we hold as follows:- Ground no.1 of the assessee s appeal is partly allowed; and The disallowance is restricted to 10% of the payment made to Boston Consultancy Group. Thus, the assessee gets relief partly. 3. The Tribunal has restricted the disallowance to 10% of the payment made to M/s. Boston Consulting Group. It was the contention of the Ld. A.R that as the issue is covered by the aforementioned decision, an order may accordingly be passed. 4. On the other hand, Ld. D.R relied upon the assessment order. 5. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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