Case Law Details

Case Name : ACIT Vs Tata Autocomp GY Batteries Pvt. Ltd (ITAT Pune)
Appeal Number : ITA No. 1207/PUN/2019
Date of Judgement/Order : 10/06/2022
Related Assessment Year : 2016-17

ACIT Vs Tata Autocomp GY Batteries Pvt. Ltd (ITAT Pune)

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Introduction: The appeal by the Revenue, arising from the CIT(A)-5 Pune’s order, focuses on the deletion of an addition related to Administrative Service charges paid by the assessee to Tata Autocomp Systems Ltd. (TACO). This article delves into the background, assessment, and the subsequent decisions leading to the resolution of the disputed deduction.

Detailed Analysis: The Assessing Officer (AO) initially denied the deduction, emphasizing the lack of evidence for the receipt of services. However, the Tribunal received three paper books outlining the services received from TACO. The provided details, including emails exchanged, covered areas such as Human Resource and Development, Legal and taxation advisory services, Vendor management services, Internal audit, IT support services, and Monitoring of operations. The Tribunal’s test-check revealed the emails pertained to the assessee’s business, establishing the receipt of services.

In assessing the deductibility of the Administrative Service charges, the AO argued that the services were general and did not require technical or professional knowledge. Nevertheless, the Tribunal referred to previous cases, including one involving the assessee for A.Y. 2009-10, where a similar disallowance was made but later upheld by the Tribunal. The Tribunal’s decision affirmed the deductibility of these expenses, aligning with the AO’s stance for A.Ys. 2010-11 to 2015-16 and precedent cases involving other group companies.

Conclusion: The Tribunal dismissed the appeal, supporting the CIT(A)’s decision to delete the addition of Rs.2,64,61,769/- for Administrative Service charges. The order highlights the established receipt of services through detailed documentation and the consistent legal basis for the deductibility of such expenses, as supported by previous rulings and decisions.

The AO has denied the claim of deduction primarily on the ground that the assessee did not furnish any evidence of receipt of services. Three paper books have been filed before the Tribunal. Summary of the services received from TACO with necessary details has been placed at page 116 to 128 of the first paper book. Under the head ‘Human Resource and Development’, the 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 in second and third paper books. We have 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.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal by the Revenue arises out of the order passed by the CIT(A)-5, Pune on 16-05-2019 in relation to the assessment year 2016-17.

2. The only issue raised herein 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.

3. Succinctly, the facts of the case are that 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 the course 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. Ergo, disallowance of Rs.2.64 crore was made, which came to be deleted in the first appeal. Aggrieved thereby, the Revenue has come up in appeal before the Tribunal.

4. We have heard the rival submissions and perused the relevant material on record. The AO has denied the claim of deduction primarily on the ground that the assessee did not furnish any evidence of receipt of services. Three paper books have been filed before the Tribunal. Summary of the services received from TACO with necessary details has been placed at page 116 to 128 of the first paper book. Under the head ‘Human Resource and Development’, the 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 in second and third paper books. We have 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.

5. 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. Our attention was also drawn towards the orders passed by the Tribunal in other group companies wherein the payments made to TACO towards Administrative Service charges have been allowed by the Tribunal. Respectfully following the precedents, we approve the view taken by the ld. CIT(A).

6. In the result, the appeal is dismissed.

Order pronounced in the Open Court on 10th June, 2022.

Download Judgment/Order

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