TaxTMI 
TaxTMI 
2012 (6) TMI 79
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....e-tax Act of service fees paid to M/s Carborundum Universal Ltd. (CUMI) on the ground that CUMI is a tax paying entity having positive income and there was no attempt by the assessee to evade tax. The grievance of the Revenue is that the CIT(A) has not appreciated the fact that the assessee has failed to prove that CUMI has rendered any services to the assessee and has accepted the explanation of the assessee that CUMI rendered services in the nature of business strategy and review, HR and IR policies, financial matters, legal and taxation, which is too general in nature 3. The second ground raised by the Revenue is with regard to the deletion of the disallowance made u/s 40A(2) of the Income-tax Act of sales commission paid to CUMI on the....
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....ce/clarification in direct and indirect taxation matters. After considering the said details filed by the assessee, the AO held that the explanation given by the assessee is very general in nature and does not specify any services which needed specific expertise. He also observed that the assessee company was already having a team of professionals looking after every area such as financial matters are looked after by the CFO and other matters are looked after by other professionals. As regards the corresponding agreement between the assessee and the CUMI, the AO held that the corresponding agreement is very brief and does not give any indication that it has been prepared by an expert. He held that these corresponding agreement/reports do no....
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....eleting the addition. The CIT(A) has also observed that the assessee has deducted appropriate taxes at source before remitting the amount to CUMI as evidenced by the TDS certificate submitted to the appellate proceeds. Observing that CUMI is a tax paying entity having positive income for the period under consideration, he held that there was no attempt by the assessee to evade tax and hence, there could be no disallowance u/s 40A(2) of the Income-tax Act. He accordingly deleted the disallowance of service fee and also sales commission paid to CUMI. 7. Aggrieved, the Revenue is in appeal before us. 8. The learned DR Smt. Susan Thomas Jose strongly supported the order of the AO and submitted that the assessee and CUMI being associate enterp....
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....vices rendered by its associate enterprises CUMI before the authorities below. He has drawn our attention to page No.132 of the paper book to justify assessee's submissions to the assessing authority along with all the details which were furnished before the AO. He has also drawn our attention to pages 140 to 142 of the paper book, which is a copy of the agreement between the assessee and the CUMI for the payment of service fee @ 1.5% on value of the products manufactured and sold by the assessee. He has also drawn our attention to pages 11 to 62 of the assessee, which are the copies of various email correspondence between the assessee and CUMI to demonstrate the nature of services rendered by CUMI to the assessee. At pages 63 to 65 are the....
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....owever as already held by the Hon'ble Gujarat High Court in the case of Coronation Flour Mills, whether under the provision of sec. 40A(2) of the Income-tax Act, where an assessee incurs any expenditure in respect of which the payment is required to be made or has been made to any person referred in clause (b) and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to - a) the fair market value of the goods, services or facilities for which the payment is made; b) the legitimate needs of the business of the assessee; or c) the benefits derived by or accruing to the assessee on receipt of such goods services or facilities; Then the Assessing Officer shall not allow as a deduction so mu....