TaxTMI 
TaxTMI 
2012 (8) TMI 518
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....ance of Rs.20,00,000/- made by the Assessing Officer towards reimbursement of expenses after invoking the provisions of Section 40A(2(b). The CIT(A) has given part relief for Rs.10,00,000/- against which both the parties are in appeal. 2. The relevant facts in brief are that the assessee company is a wholly owned subsidiary of Innovsource Solutions Pvt. Ltd. and is engaged in the business of providing staffing service. The Company's parent i.e. holding company is engaged in providing recruitment services. The Assessing Officer on going through the audited accounts, noticed that the assessee has claimed reimbursement of expenditure of Rs.51,01,810/- which was sharted by the parent company. Before the Assessing Officer detail submissions a....
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.... at page 2 & 3 of the appellate order. The sum and substance of the said arguments are that :- i) The assessee is conducting the business activities from the premises which have been taken on rent by the parent company and the expenses shared are mainly overhead expenses. The expenses pertaining to both the parent and the assessee company have been identified as per the agreed norms given in the memorandum of understanding and such identified expenses were only to be shared and then it was subject to reimbursement. ii) The only expenses benefiting both the companies were identified and was shared as per the mutually agreed terms and such a sharing of expenses arose since the resources were belonging to the parent company which was inc....
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....------------------------------------------------------------------ Salaries and Wages Rs. 33,98,293/- Rent, rates and taxes Rs. 1,91,910/- Printing and stationery Rs. 85,049/- Travelling and conveyance Rs. 77,636/- Electricity charges Rs. 1,09,030/- Office upkeep and maintenance Rs. 95,244/- Telephone expenses Rs. 99,460/- Miscellaneous expenses Rs. 21,057/- and found that expenses above the line have not been debited in the profit loss account. This goes to prove the assessee's case that it was sharing expenses with the parent company on these expenses. The expenses below the line was found to be incurred for the branches located in the other cities. Even after acce....
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.... He though strongly relied upon the reasoning and the observation of the CIT(A), however, submitted that the relief given by the CIT(A) at Rs.10,00,000/- is uncalled for on the facts and circumstances of the case. 6. We have carefully considered the rival submissions and also perused the material placed on record and the findings of the CIT(A). Under the provisions of section 40A(2)(a), it is clear that payments which have made to a person specified in sub clause (b) of sub section 2 of section 40A, the reasonableness of the expenditure has to be judged as per the conditions provided therein. Section 40A (2)(a) reads as under :- " (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be ....
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....ruing to the assessee has to be kept in mind. After applying this test, if it is found that the expenditure is excessive or unreasonable, then excess or unreasonable portion of the expenditure is to be disallowed. For invoking provision of Section 40A(2)(b), the Assessing Officer has to bring some cogent material or facts on record that the payment is excessive or unreasonable either having regard to the fair market value of goods and services or legitimate needs of the business. The Assessing Officer has to prove that the transaction is sham or not bonafide or the value of goods and services are not in consonance with the fair market value. 6.1 Here in this case, it is not disputed fact that the assessee is sharing staff, office premise....