Management charges paid to HO do not come within purview of section 44C

Lloyd’s Register Quality Assurance Ltd. Vs DCIT (ITAT Mumbai)

Undisputed facts are, the Assessing Officer by treating the management charges as Head Office expenses has restricted the claim of the assessee to 5% of the total adjusted income in terms of section 44C of the Act. Whereas, learned Commissioner (Appeals) relying upon the order passed by him for assessment year 2008–09 and 2010–11, has restricted the disallowance under section 44C of the Act to 50% of the amount paid by the assessee. However, as could be seen from the facts on record, while deciding identical issue in case of assessee’s Group Company M/s. Lloyd’s Register Asia (India Branch Office), supra, in assessment year 2005–06, the Tribunal has held that management charges paid to the Head Office do not come within the purview of section 44C of the Act. Following the aforesaid decision, the Tribunal in assessee’s own case for assessment year 2008–09 and 2009–10, in ITA no.389–390/Mum./2013, dated 7^thJune 2017, r/w M.A. no.749–750/Mum./2017, dated 6^th April 2018, has deleted the disallowance made under section 44C of the Act. Respectfully following the aforesaid decision of the Co–ordinate Bench, we delete the 50% disallowance made out of management charges under section 44C of the Act.