ITAT allows payment of administrative service charges to TACO

ITAT allows payment of administrative service charges to TACO

CA Ayushi Goyal | Jun 13, 2022 |

ITAT allows payment of administrative service charges to TACO

ITAT allows payment of administrative service charges to TACO

The issue in this case is against the deletion of addition of Rs.2,64,61,769/-, being, the payment made by the assessee to Tata Autocomp Systems Ltd. (‘TACO’) on account of Administrative Service charges.

In this matter, the assessee is a Joint Venture between TACO and GS Yuasa International Limited, Japan. It is engaged in the business of manufacture and sale of batteries used in Automotive and Inverter. During thecourse of assessment proceedings, the Assessing Officer (AO) observed that the assessee claimed deduction of Rs.2,64,61,769/- on account of Administrative Service charges paid to TACO. On being called upon to justify the deduction and substantiate the receipt of Administrative Services, the assessee sent voluminous documents via post, which the AO has acknowledged in the assessment order. The assessee provided details of the areas in which the services were received, namely, Human resource development; Finance; and Product pricing etc. The AO observed that no documentary evidence was produced by the assessee to substantiate the claim of receipt of the services. He further noticed that the assessee itself incurred administrative and other expenses. The AO also took note of the fact that the payment to TACO was in lieu of the services at the start up phase and Operational phase and that the services in the Operational phase were general in nature not requiring any technical or professional knowledge. He also did not concur with the assessee even on the contention that the Tribunal has allowed deduction of Administrative Service charges paid to TACO in the hands of other group companies.

On appeal, CIT(A) deleted the addition made by the Assessing Officer.

Aggrieved thereby, the Revenue has come up in appeal before the Tribunal.

ITAT observed that the AO has denied the claim of deduction primarily on the ground that the assessee did not furnish any evidence. However, 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 by the assessee. It has 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. Vide order dated 12-07-2019, the Tribunal in ITA No. 1128/PUN/2016 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.

Accordingly, ITAT approve the view tajen by the ld. CIT(A) and the appeal filed by the revenue is dismissed.

To Read Judgment Download The given PDF Below

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