Case Law Details
ACIT Vs Mitsui & Co. India Pvt Ltd (ITAT Delhi)
ITAT Delhi held that disallowance of staff welfare expenditure on the adhoc basis unsustainable as AO failed to establish as to who the expenses are not incurred for business purpose.
Facts- The assessee company is engaged in the business of general trading of materials & equipment required for industrial projects; commission agent acting as an intermediary between buyers and sellers who want to import, export or engaged in off-shore or domestic trading activities; and provides services i.e. information about the Indian market in general and for specific sectors which fall under the various verticals of Mitsui group.
The case was selected for scrutiny assessment. During the course of assessment proceedings, the Assessing Authority noticed that the assessee company carried out certain international transaction which was referred to Transfer Pricing Officer (“TPO”) for the purpose of transfer pricing adjustment. The TPO passed order dated 23.10.2017 wherein no adverse inference was drawn by the TPO in respect of international transaction.
AO while framing the assessment, noticed that in respect of exempt income, the assessee did not make suo moto disallowance u/s 14A of the Act as it had made in the last year. AO by invoking the provision of Rule 8D(ii) of the Income tax Rules, 1962 made disallowance amounting to INR 1,45,94,554/-. Further, the AO made disallowance on adhoc basis amounting to INR 63,11,221/- out of staff welfare expenses. The AO also made addition of INR 5,12,23,226/- in respect of remuneration paid to Mitsui & Co. India Pvt. Ltd. on the basis that the assessee could not substantiate rendition of any service for which remuneration was paid. The AO further made disallowance by invoking the provision of section 40(a)(i) of the Act on the ground that the assessee was liable to deduct tax of INR 12,60,84,939/- at the payment made to Mitsui Japan of INR 51,27,74,699/-. Thus, he assessed the income of the assessee company at INR 89,14,27,020/- against the disclosed income at INR 30,65,23,320/-.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
