2017 (9) TMI 812

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....rvices to occupiers, owners and investors on a local, regional and international levels, filed its return of income for the AY 2010-11 on 30-09-2010 declaring total income at Rs. 43,72,857. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative attended from time to time and submitted the details called for. The assessment was completed u/s 143(3) on 28-02-2013 determining total income at Rs. 3,26,72,825, interalia making additions towards disallowance of reimbursement of corporate overhead allocation and other expenses, seminar and conference expenses, professional fees, software expenses and foreign travel expenses. Aggrieved by the assessment orde....

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....t sharing agreement has been entered into towards sharing of common expenses of parent company based on the revenue of other group companies. The assessee further submitted that corporate overhead expenses are in the nature of reimbursement of actual expenses incurred by the holding company for rendering certain services to the assessee company including salary and other expenses of certain key management personnel. The management personnel provided technical and managerial support to all group companies and the holding company provide services relating to corporate strategy and corporate support services, etc, to all the companies. The above expenses were getting reimbursed by the holding company from all the group companies by raising bil....

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....s taking vague plea such as similar expenses were also claimed and allowed in earlier years and subsequent years, etc. failed to file any evidence to prove the nexus between reimbursement of expenditure of its holding company and income generating activity of the assessee. It is the duty of the assessee to satisfactorily explain the nature and method of quantification of such expenses, because they are reimbursed to the holding company situated outside India and prove the nexus between sharing of common expenditure and business activity of the assessee. Since the assessee failed to prove the exact details, the AO has correctly disallowed these expenses. However, the CIT(A), further observed that as regards claim of the assessee that the AO ....

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.... the assessee, certain common services are provided by its holding company including expertise of its top management and also strategic advice on its management for which a prescribed formula is provided to share corporate overhead allocation which has been reimbursed by the assessee on actual billing made by the holding company. The Ld.AR further submitted that all these details have been filed before the AO to prove the expenses but, the AO has discarded all evidences to make additions. 7. On the other hand, the Ld.DR strongly supporting the order of the CIT(A) submitted that the assessee has failed to prove primary onus cast upon it to prove the nexus between reimbursement of expenditure between holding company and the assessee compan....

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....opy of agreement between its holding company and other group companies. As per the agreement, the holding company undertook to provide several group services to the other group companies, in particular, employees, certain top managerial persons, who defines on the group companies in respect of strategic business divisions for which the group companies have to share expenses on the basis of a prescribed formula. We further observe that the assessee has listed certain services to be provided by its holding company. The agreement also provides for sharing of certain expenses. On perusal of copy of the agreement, we find that the agreement between the holding company and subsidiary company contains some general conditions of providing certain s....