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Facts
The AO disallowed Global Management Charges and back office support charges claimed by the appellant company. The appellant repeatedly sought adjournments before the CIT(A) and did not provide necessary details, leading the CIT(A) to dismiss the appeal. The ITAT heard both sides regarding the disallowance of expenditure.
Held
The Tribunal decided to give the appellant one more opportunity to provide all details before the CIT(A), directing compliance with hearing notices and no further adjournments. The CIT(A) is to reconsider the case based on the new details.
Key Issues
Whether the appellant is entitled to claim expenditure for Global Management Charges and back office support, and whether the CIT(A) was justified in dismissing the appeal due to non-compliance.
Sections Cited
143(3), 37(1), 143(2), 142(1), 115-O, 40(a)(ii), 115P
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Income Tax Appellate Tribunal, Mumbai “D” Bench, Mumbai.
Before: Shri Pawan Singh (JM) & Shri Omkareshwar Chidara (AM)
a) The Ld. AO disallowed the Global Management Charges claimed as expenditure under section 37(1) of the Act stating that only an agreement with DBAG (Deutsche Bank AG) relating to services rendered by the Bank to the appellant company was provided and the basis of services rendered etc. were not provided. b) The Ld. AO was not satisfied with the explanation given by appellant company with respect to back office support charges, cost allocation for Income Tax related charges etc.
Since the expenditure claimed was not provided for the purposes of business, the Ld. AO disallowed the same and added to the returned income of appellant company under section 37(1) of the Act.
Aggrieved by the order of Ld. AO, an appeal was filed by appellant company before Ld. CIT(A) and this first appellate authority posted the case for hearing several times. The order of Ld. CIT(A) states that four opportunities were given to the appellant during the calendar year of 2021
2 Deutsche Investments India Pvt. Ltd. for furnishing written submissions and evidences in support of grounds of appeal
. In response to these four hearing notices, the appellant requested for adjournment and furnishing additional grounds of appeal. Then, NFAC Commissioner of Income Tax (Appeals) issued an enablement of communication window notices on 4.11.2022, but there was no compliance from appellant. During the calendar year 2024 and 2025,
9. (nine) times the notices were sent for fixing hearing. All these times, appellant had requested for adjournment. Since more than four years elapsed, the Ld. CIT(A) went ahead to adjudicate the issues based on the assessment order and grounds of appeal which was not substantiated by appellant company. The Ld. CIT(A) observed that the Ld. AO has issued notices under section 143(2) and 142(1) of the Act alongwith questionnaire calling for relevant details/documents. In his order, Ld. CIT(A) observed that Ld. AO called for the details of expenses of Global Management Charges, and the appellant company has filed a copy ‘Service Agreement’ only, but did not elaborate nor filed evidences relating to nature of expenditure and whether there is business necessity to spend the same. Similarly, the expenditure relating to ‘System Infrastructure Support’ also, the details and nature of expenditure was not explained by appellant company. It was also observed that the appellant company has not provided the details of work carried out by the service provider and did not respond to the query of Ld. AO as to why two different entities were providing similar services. The Ld. CIT(A) further noted that the appellant company went on asking for the adjournments without giving replies to the queries raised by Ld. AO/Ld. CIT(A). Meanwhile, the appellant company has raised two more additional grounds of appeal with respect to Dividend Distribution Tax under 115-O of the Act and requested the appellate authority to direct the AO to allow the deduction relating to Education Cess and Higher Education Cess paid by appellant company which cannot be disallowed under section 40(a)(ii) of the Act. Finally, at page 15 of the order of Ld. CIT(A), NAFC gave table depicting the dates of hearing date fixed and reply filed by appellant asking for adjournment on various dates spanning four years. Finally, the 3. Deutsche Investments India Pvt. Ltd.
Ld. CIT(A) concluded that the appellant is not interested in pursuing the appeal and by placing reliance on the decision of Hon'ble Supreme Court in the case of CIT Vs. B.N. Bhattacharjee and others 10 CTR 354 (SC) and the decision of Hon'ble Madhya Pradesh High Court in the case of Estate of Late Tukojirao Holkar Vs. CWT 223 ITR 480 (MP) and dismissed the appeal of appellant company. As far as the issue of correct TDS credit should be given, the Ld. CIT(A) gave a direction to verify and provide correct TDS as per law. Similarly, with respect to giving credit to correct payment Dividend Distribution Tax (DDT), the Ld. AO was directed to give credit to DDT after verifying the payment made by appellant company. Since, the levy of interest under section 115P is consequential to determination of correct income to be computed, it is consequential and the Ld. AO was directed to follow the provisions of law.
Aggrieved by the orders of Ld. AO and Ld. CIT(A), an appeal was filed before ITAT contending that both the authorities made additions/confirmed the additions in the assessment order without providing reasons for disallowance of expenditure. Before the ITAT, the Ld. AR of the appellant has pleaded before the Bench that one more opportunity may be given to appellant to provide all details and the matter may be remanded to the file of Ld. CIT(A) without explaining the reasons for seeking adjournment several times as mentioned in page No. 15 of the order of Ld. CIT(A) over a period of four years. The ld. DR relied on orders of AO and Ld. CIT(A) and opposed the plea of remitting matter to the file of first appellate authority.
Heard both sides. The fact remains that the required details were not filed before the lower authorities by the appellant company. The detailed order of Ld. CIT(A) gives a picture of non-compliance of notices by appellant company. From the assessment order, it is observed that the appellant company is admitting very high incomes of more than Rs. 74 crore and paying relevant taxes. The appellant company has not provided the details of expenditure claimed to the extent of Rs. 4.94 crore only. Hence, to meet the 4 Deutsche Investments India Pvt. Ltd. ends of justice and fair play, the Bench decided to give one more opportunity to the appellant company to provide all details before Ld. CIT(A). The appellant company is directed to comply with the hearing notices of Ld. CIT(A) and should not seek further adjournments. The Ld. CIT(A) is directed to take into account all the required details and pass appellate order afresh. But, as mentioned above, the appellant company has not properly responded to the 15 notices issued over a period of more than 4 years by Ld. CIT(A), the Bench decided to impose a nominal cost of Rs. 10,000/- to Maharashtra State Legal Aid Fund”.
The appeal of appellant is allowed for statistical purposes.
Order pronounced in the open Court on 15/10/2025.