2019 (1) TMI 591

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....e, other issue relates to charging of interest under section 234/B/C/D of the Income Tax Act, 1961. 3. The ld.counsel for the assessee at the very outset submitted that the only issue requires to be adjudicated is pertaining to admissibility of GBU service charges in all these three years, hence, as far as levy of interest under sections 234B/C/D is concerned, it is consequential. 4. It is pertinent to observe that facts on all vital points are common, therefore, for the facility of reference, we take up the facts mainly from the Asst.Year 2009-10. 5. Brief facts of the case are that the assessee-company at the relevant time was engaged in the business of manufacturing crucibles and its accessories. It is a subsidiary of Morgan Crucible Company PLC, U.K. It has filed its return of income for the Asstt.Year 2009-10 declaring total income at Rs. 1,77,19,563/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act dated 24.9.2010 was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee company made payments to its holding company i.e. Morgan Crucible Company PLC, U.K. viz. ....

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....rm basis (e.g. designing products and positioning products in the perceived markets of the future) or on a short-term basis (e.g. advertising, sales support, aftersales service): d. Strategic planning [long-term planning for the Company's trade in all respects) e. Policy matters (e.g. Policy towards research employment, buying and selling methods, training): f. Public relations (e.g. Press/media relationships, lobbying, union maters, public standing); g. the provision of treasury and banking services and advice; h. the provision of budgetary / financial assistance (e.g. Financial models, computer accounting, budgetary control, cost accounting}; i. the 'provision of special investigation services (e.g. evaluation of new markets or of equipment/processes to be acquired; j. the provision 'of taxation advice; and k. any other service provided under this Agreement. Amongst the services- which the Providers may provide are the allowing: a. training of personnel in financial and/or accounting matters; b. the provision of legal advice; c. the provision of marketing advice, either on a long-term basis (e.g. designing products and positioning prod....

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....ention here that the agreement for payment of Global Business Unit Service Charges which has been claimed . to be made in the year 2008 does not show any specific date of its execution. It has also not been made in a formal manner i.e. no witness has signed it nor it has been notarized either in India or in England. Thus this agreement is only a set of memo of internal correspondence between assessee and its holding company. Therefore, its authenticity about the date and time etc is not verifiable as if could have been changed at any point of time as per mutual consent of the assessee company and its holding company. It also needs to be mentioned here that in the course of assessment proceedings no evidence of any actual services rendered or any cost actually incurred by MCC plc for providing services as per the agreement of GBU Charges could be given except some self serving statements which are basically internal correspondence between assessee company and MCC plc." 6. On similar analogy, the ld.AO made disallowance of Rs. 23,29,676/- and Rs. 90,04,579/- in the Asstt.Year 2011-12 and 2012-13 . Appeal to the ld.CIT(A) did not bring any relief to the assessee. 7. Before us, t....

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.... business, only then, they could be allowed to the assessee. 9. We have duly considered rival submissions and gone through the record carefully. It is pertinent to observe that in order to claim expenditure under section 37(1) of the Act, the assessee is required to fulfill certain conditions viz. (a) there must be an expenditure, (b) such expenditure must not be of the nature described in section 32 to 36, (c) the expenditure must not be in the nature of capital expenditure or personal expenditure of the assessee, and (d) expenditure must be laid out or expended wholly and exclusively for the purpose of business or profession. The expression "wholly" employed in section 37 refers to quantification of the expenditure, while expression "exclusively" refers to motive, objective and purpose of the expenditure. The stand of the assessee before the Revenue authorities was that management charges and GBU charges are the expenditure incurred at two different platforms of organizational structure. The persons who are managing the affairs and to whom management charges are being paid were further under the control of global management head - they were being paid consultancy at the global....