TaxTMI 
TaxTMI 
2020 (12) TMI 719
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....ing adjustment of Rs. 2,61,63,288/- on the ground that the claim of services availed does not get proved without issuing any specific show cause notice to this effect. 2. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPOIAO has erred in making an 100% adjustment of the expenditure on account of regional management charges on the ground that the claim of services availed does not get proved in spite of evidence establishing the fact of receipt of services by the assessee. 3. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPO has erred in determining the Arms Length Price at Rs. NIL in respect of the expenditure on account of regional management charges on the ground that the claim of services availed does not get proved which act ion is without jurisdiction and beyond the domain of the TPO and the correct jurisdiction is with the AO. 4. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPO/AO has erred in determining the Arms Length Price at Rs. NIL in respect of the expenditure on account of reg....
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....facts and in the circumstances of the case and in law, the DRP has erred in directing and the AO has erred in making disallowance of expenditure aggregating Rs. 1,84,946/- debited to Sales promotion expenses incur red on account of purchase of gold coin etc. and distributed as gifts on the ground that details as to whom the gifts were given was not provided and that i t was not possible to ver i fy the genuineness of the expenditure. 12. The appellant craves leave to add, to alter, to amend, to withdraw, to delete the above grounds of appeal or any one of them at the time of hearing." 2. Briefly stated, the assessee company which is primarily engaged in the business of manufacturing/trading of chemicals is a joint venture company wherein 51% of the equity is held by Henkel AG & Co. KGaA, Germany and 49% is held by Chembond Chemicals Ltd., India. The assessee company had filed its return of income for A.Y. 2011-12 on 29.11.2011, declaring its total income at Rs. 17,52,45,539/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the ....
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....horized Representative (for short 'A.R') for the assessee took us through the issues on the basis of which the assessment order had been assailed before us. It was submitted by the ld. A.R that the TPO had exceeded his jurisdiction and worked out the ALP of the regional management services received by the assessee from its AE, viz. Henkel AG & Company KGaA at Rs.nil, as against that shown by the assessee at Rs. 2,61,63,288/-. It was submitted by the ld. A.R that the TPO had inter alia arrived at the ALP of the regional management services at Rs.nil on the ground that the assessee had failed to provide any documentary evidence in support of the same. Rebutting the aforesaid observation of the TPO/DRP, it was submitted by the ld. A.R that the assessee in order to substantiate the factum of having received regional management services from its AE viz. Henkel AG & Co. KGaA had placed on record supporting documentary evidence, viz. copy of the regional service agreement dated 23.11.2010 executed between the assessee and its AE Henkel AG & Co. KGaA, complete details of the regional management charges, copies of the debit notes raised on the assessee by its AE, description of the services....
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....t services by its AE viz. Henkel AG & Company KGaA in lieu whereof an amount of Rs. 2,61,63,288/- was therein paid to the latter. In order to buttress his claim that the observations of the TPO/DRP were contrary to the facts borne from the records the ld. A.R took us through the relevant pages of the assessee's paper book. Further, the ld. A.R assailed the corporate additions/disallowances made by the A.O while framing the assessment, viz. (i) disallowance of professional charges; and (ii) disallowance of sales promotion expenses. It was submitted by the ld. A.R that though the assessee had placed on record the requisite supporting documentary evidence, however, the lower authorities losing sight of the same had therein proceeded with and disallowed the assessee's claim for deduction of the aforementioned expenses. 7. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had failed to place on record documents which would evidence rendering of regional management services by the AE, therefore, the A.O/TPO had rightly worked out the Arm's Length Price (for short 'ALP') ....
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....claim of service availed does not proved. Marketing Assessee has failed to provide the amount paid to AE for availing this service -copy of regional service agreement dated 1.01.2010 -debit notes raised by AE. -email correspondence (annexure 6E of submitted dated 31.12.2014) The assessee has not produced any documentary evidences in support of actual services received. By mere submission of agreement copy, email correspondence and debit notes, the claim of service availed does not proved. Supply chain & Operational support services. Assessee has failed to provide the amount paid to AE for availing this service. No specific documentary evidence submitted by the Assessee. On perusal of the details submitted by the assessee it is observed that assessee has merely enlisted various services to be availed. However, assessee has not submitted a single document in support of services availed from AE except agreement copy and debit note. Human Resources Assessee has failed to provide the amount paid to AE for availing this service -copies of email correspondence (annexure 3A,3B,3C of submitted dated 31.12.2014) On perusal of email details it is obse....
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.... of the proceedings before the lower authorities, viz. (i) copy of regional management services "agreement", dated 23.11.2010 executed between the assessee and its AE i.e Henkel AG & Company KGaA; (ii) details of regional management charges; and (iii). copies of "debit notes" raised on the assessee by its AE towards regional management charges. Apart from that, we find that the assessee vide its letter dated 31.12.2014 had submitted with the lower authorities the statement of "Cost Benefit Analysis" of Regional Management Cost for the year under consideration along with details viz. (i) requirement to avail the regional management services; (ii) description of services received from the AE; (iii) information in relation to the visits by the overseas employees for rendering the services; and (iv) back up documentation substantiating the benefits received by the assessee in lieu of the services provided by its AE. On a perusal of the "Regional Management Agreement", dated 23.11.2010 executed between the assessee and its AE, viz. Henkel AG & Company KGaA, we find, that the details of various services received by the assessee company are therein duly specified. It has been the claim of....
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....ence, we are unable to comprehend as to how the AO/TPO had concluded that the assessee had failed to furnish the requisite documentary evidence which would substantiate rendering of regional management services by the AE, viz. Henkel AG & Company, KGaA to the assessee during the year under consideration. In our considered view, the material placed on record by the assessee does constitute substantial evidence which clearly establishes that the assessee had received regional management services from its AE, viz. Henkel AG & Company, KGaA. We find that the assessee had entered into the regional management service "agreement" with its AE, viz. Henkel AG & Company, KGaA primarily to benefit from the services provided by the latter on the basis of its experienced personnel who were possessed of rich experience in understanding the practical aspects of the nature of business of the assessee along with its service requirement. Fact that the services received by the assessee from its AE had vastly benefitted it can also safely be gathered from the cost benefit analysis of RMC as was submitted by the assessee with the AO/TPO. In the backdrop of our aforesaid deliberations, we are unable to ....
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....ties is difficult, like proving the role of an anesthesian in an operation conducted by a surgeon. There may be an evidence of operation being performed by the Doctor in the form of sutures or scars etc, which can be proved later but the role of an anesthesian before operation and after gaining consciousness is difficult to prove as that is not tangible in nature. Likewise, for the advise given by various group cent res to the group companies in day-to-day manner is difficult to place on record by way of concrete evidence but the way business is conducted, one can perceive the same..." On the basis of our aforesaid observations, we are of a strong conviction that the material placed on record by the assessee to substantiate its claim of having received regional management services from its AE, viz. Henkel AG & Company, KGaA therein clearly establishes the same. We thus are unable to persuade ourselves to subscribe to the view taken by the AO/TPO that the assessee had failed to substantiate its claim of having received regional management services from its AE during the year under consideration. 10. Apart from our aforesaid observations wherein it stands clearly estab....
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....ceedings that the aforesaid amount was paid towards consulting fee pertaining to an acquisition carried out by it. However, as the assessee failed to substantiate its aforesaid claim by placing on record the details of the assets under acquisition, and also, as to how the aforesaid expenditure was incurred for the purpose of its business, the A.O, therefore, disallowed the same. Thereafter, the DRP vide its order passed under Sec. 144C(5), dated 14.11.2015 not finding favour with the contentions raised by the assessee sustained the aforesaid addition. 12. Aggrieved, the assessee has assailed the disallowance of the aforesaid claim of professional charges in appeal before us. It has been the claim of the assessee before the lower authorities, as well before us, that as the aforesaid legal and professional fees incurred by it was neither in the nature of a capital expenditure nor of a personal nature, therefore, the same having been incurred wholly and exclusively for the purpose of its business was allowable as a revenue expenditure under Sec. 37 of the Act. However, the assessee except for raising the aforesaid hollow contention had absolutely failed to substantiate its claim of....