TaxTMI 
TaxTMI 
2014 (4) TMI 668
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....ssessee is engaged in financial services business of offering services for discounting bills of exchange. The assessee filed a return of income at Rs. 11,99,832/-. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has paid (a) commission of Rs. 8,33,606/- and (b) compensation charges of Rs. 7,95,000/- to its holding company M/s. Pinnacle Financial Consultancy & Investment Services Pvt. Ltd. The assessee was asked to justify these two expenses. In respect of the payment of commission, the assessee filed a Memorandum of Understanding with its holding company which reads as under: "Both parties above hereinafter called M/s. Pinnacle Financial Consultancy & Investment Services Pvt. Ltd. r....
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.... company. The assessee furnished a list of clients claimed to be provided by its holding company. The AO observed that no details have been furnished to show that these clients have been actually provided by its holding company nor there is any evidence to show that the holding company has offered any service in procuring these clients. The AO went on to rely certain judicial decisions and finally concluded that the assessee has debited expenditure by way of commission which is not an allowable expenditure and disallowed the same. 5. In so far as compensation charges are concerned, the assessee explained that it is using the infrastructure facilities provided by the holding company for its business and in lieu of the facilities provided by....
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.... compensation was paid for these services. The Ld. CIT(A) observed that the assessee was not having any assets i.e. fixed or moveable assets in its balance sheet. The Ld. CIT(A) further observed that in the absence of such assets/infrastructure, the assessee could not have earned total receipts of 45.91 lakhs even on the expenditure side, there were no computer expenses, office expenses, travelling expenses etc. Taking into consideration all these facts, the Ld. CIT(A) agreed with the assessee that office/infrastructure and other facilities of holding company were used for the purpose of its business. The Ld. CIT(A) was convinced that the payment of compensation charges to the holding company was wholly and exclusively for the purpose of bu....