2023 (5) TMI 1440

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.... the case and in law, the Ld. CIT(A) erred in deleting the disallowance being 20% of management fees ignoring the fact that management fees could be paid without knowing the cost of services and such management fees could not have been paid in terms of percentage of revenue. ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciating the fact that the assessee has failed to prove the business exigency of excess expenditure incurred on management fees and that such expenditure is incurred wholly and exclusively for the purpose of the business." 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: the assessee company is engaged in the manufacturing of Ride Con....

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....ssee in ITA No. 251/Pun/2014 by returning the following findings:-" "4.3 I have considered the facts and submissions of the case. The appellant has entered into an agreement with AAPL for provision of various services including usage of "Gabriel" trademark. The fee for the said service has been fixed at 1.5% of, the net sales price. The appellant has relied on the decision in the case of Spicer India P. Ltd. in ITA No. 251/Pun/2014 wherein on similar facts, the ITAT has allowed the charge of management fee (excluding royalty) paid by Spicer @2.85% of sales. The Hon'ble ITAT, in the said decision, has held as under:- "24. In the facts of the present case, the assessee was paying Royalty to Dana Corporation @ 2.85% and was also paying....

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....n the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the above said proposition laid down by the Hon'ble Supreme Court, we hold that the expenditure incurred by the assessee on management fees in order to facilitate smooth running of its business is an allowable expenditure in the hands of assessee. Similar expenditure has been allowed in the hands of assessee in preceding year. Another aspect of the issue is that the said management fees is to be taxed in the hands of recipient and even the service tax has been paid by the recipient, evidence of which is placed in the Paper Book. Once the commercial ex....

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....he services have been rendered by AAPL to the assessee company as per corporate services agreement that "all services of AAPL have been allowed at 1.5% of sales of the assessee". 6. The assessee brought on record the fact that AAPL has agreed to provide use of trade mark and various other corporate/ management services which include wide ranging provisions for giving of all marketing, industrial, manufacturing, commercial and scientific knowledge, experience and skill for the efficient working and management of the company in which it has charges a consolidated bundled fees @1.5% of sales for the use of trademark and all other services referred to above. 7. The assessee has brought on record the entire details of management services rende....