Case Law Details
ACIT Vs Jones Lang Lasalle Building Operation Pvt Ltd (ITAT Delhi)
Introduction The case of ACIT Vs Jones Lang Lasalle Building Operation Pvt Ltd draws attention to an essential aspect of intra-group service charges, specifically those related to HR and other support services. The crux of the ITAT’s judgement lies in acknowledging such charges as valid business expenses, thereby setting an important precedent for other corporates operating with associate concerns.
Analysis In this case, the revenue challenged the decision of the CIT(A)-36, New Delhi that allowed the business service charges paid by the assessee, Jones Lang Lasalle Building Operation Pvt Ltd, to an associate company for HR-related services as a valid business expense. The Assessing Officer (AO) disallowed the charges initially, noting that the assessee failed to provide adequate supporting documents that services were indeed provided by the associate concern.
However, on appeal, the CIT(A) allowed the assessee to submit additional documents supporting their claim, including a service agreement, transfer pricing study, email correspondence, and a detailed account of the services received. These submissions satisfied the CIT(A) of the genuineness and the arm’s length nature of the charges. The CIT(A) thus allowed the expenses, noting them to be valid under section 37 of the Income Tax Act, as business expenses.
The ITAT, in reviewing the case, agreed with the findings of the CIT(A), particularly highlighting the lack of any adverse comments from the AO on the additional evidences presented. The ITAT also noted a similar situation in A.Y.2018-19 where similar evidence had been accepted by the AO, leading to the allowance of such expenses.
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