ITAT ruled in favor of taxpayer regarding expenses claimed under...

ITAT ruled in favor of taxpayer regarding expenses claimed under contractual arrangement with Max Life Insurance. The disputed amount, though related to service tax, was determined to be a legitimate business expense under Section 37. The payment was made to secure commission income from insurance auxiliary services, not as service tax liability which belonged to Max Life under reverse charge mechanism. The tribunal rejected AO's contention, noting that Service Tax Rules 1994 Section 2(1)(d) placed liability on Max Life. The contractual arrangement to share costs was deemed legal, not prohibited by Section 37's Explanation, and qualified as allowable business expenditure. Appeal allowed.