Appeals dismissed for expenses in services to M/s Cigna TTK, profit element lacking

The appeals filed by The Assistant Commissioner Of Income Tax for assessment years 2014-15 and 2015-16 were dismissed. The deletion of the addition of expenses incurred for services rendered to M/s Cigna TTK was upheld, emphasizing the absence of evidence of actual profit and the importance of real transaction prices over market prices. The decision followed the precedent set in a previous year's case, where it was determined that no profit element existed in the transaction and fictional income should not be added without evidence of actual profit.

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Issues involved:
Two appeals filed by The Assistant Commissioner Of Income Tax for assessment year 2014-15, 2015-16 involving the deletion of addition of expenses incurred for services rendered to M/s Cigna TTK, justification of no profit element in the transaction, and the appreciation of functions performed by the assessee company.

Issue 1 - Addition of Expenses:
The learned assessing officer added 20% of expenses incurred by the assessee for services rendered to M/s Cigna TTK, questioning the absence of profit element and the nature of services provided. The AO held that the assessee should have charged a mark-up on the services provided to its sister concern, considering the commercial decision and mutual agreement between the parties. The AO noted that the assessee received advances less than 50% of the actual expenditure, indicating a profit element in the activities performed by the assessee. The AO treated the 20% mark-up as income of the assessee and added it to the total income.

Issue 2 - Justification of No Profit Element:
The learned CIT - A, following the decision of the ITAT in a previous year, directed the AO to delete the addition, stating that the transaction was not expenditure in the hands of the assessee and that no income was earned beyond the vendor agreement terms. Referring to legal precedent, the CIT - A emphasized that unless there was evidence of actual profit, fictional income should not be added to the return. The coordinate bench affirmed the CIT - A's decision, highlighting the importance of real price over market price in transactions.

Issue 3 - Appreciation of Functions:
The learned departmental representative argued that providing services without charging a mark-up was incorrect, emphasizing the technical nature of the services. However, the authorized representative cited a previous decision in favor of the assessee for the same issue in an earlier year, claiming that the issue was squarely covered in favor of the assessee. The coordinate bench, considering the previous decision, directed the AO to delete the addition, confirming the CIT - A's order.

The appeals for assessment years 2014-15 and 2015-16 were dismissed based on the decision to delete the addition of expenses incurred for services rendered to M/s Cigna TTK, following the precedent set in a previous year's case. The coordinate bench's decision in the earlier year's case was upheld, emphasizing the absence of evidence of actual profit and the importance of real transaction prices over market prices.

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