BAUMER TECHNOLOGIES INDIA PVT LTD,MUMBAI vs. DY CIT CIRCLE 1(2)(1), MUMBAI

This appeal is filed by the assessee against the order dated 27.10.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”] for A.Y. 2022-23 arising from the assessment order passed u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 (“the Act”).

The assessee has filed this appeal on the following grounds:-

Brief facts of the case are that the assessee company is engaged in the business of manufacturing of pressure gauges and temperature calibrating systems and rendering related services. The assessee filed its return of income for the year declaring total income of Rs 16,88,24,130/-. The Assessing Officer in the assessment order has observed that the assessee had made foreign remittances aggregating to Rs.8,77,07,756/- towards royalty, commission and fees for technical services to its Associated Enterprises (“AE”) but failed to establish the business necessity for availing such services from foreign entities and had merely furnished agreements without substantiating actual

The Assessing Officer further observed that the assessee had debited CSR expenditure of Rs.40,44,000/- in books of account but did not furnish evidences to substantiate actual incurrence of CSR expenditure. Accordingly, addition of Rs.40,44,000/- was also made while computing total income.

Aggrieved, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the addition made u/s 69C observing that mere furnishing of agreements, Form 15CB and payment through banking channels do not establish actual rendition of services or business rationale for such payments. As regards CSR expenditure, the Ld. CIT(A) directed the Assessing Officer to verify whether the assessee had already added back the said expenditure in computation of income and grant consequential relief if the claim was found correct.

Before us, the Ld. AR submitted that Ground No.2 and Ground No.10 are not pressed. Accordingly, the same are dismissed as not pressed.

As regards Ground Nos.3 to 6, the Ld. AR submitted that the impugned amount of Rs.8,77,07,756/- comprised royalty of Rs.1,93,77,831/-, commission of Rs.60,68,683/- and fees for technical services of Rs.6,22,61,242/- paid to Associated Enterprises. The Ld. AR submitted that royalty was paid under Trademark License and Management Agreement for use of “Baumer” trademark and technology marks. The commission was paid towards referral fee under service level agreement for business sourced through overseas group entity and fees for technical services were paid under centralized

The Ld. AR submitted that all payments were made through banking channels after deduction of taxes at source and were duly supported by agreements, invoices, Form 15CA/15CB and audited books of account. It was argued that section 69C deals with unexplained source of expenditure and once expenditure is duly recorded in books and source of payment stands explained, provisions of section 69C cannot be invoked merely because Assessing Officer is not satisfied with business expediency or necessity of expenditure.

The Ld. AR relied upon the decision of Hon’ble Bombay High Court in the case of PCIT vs. Vishal P. Mehta, Hon’ble Delhi High Court in CIT vs. Radhika Creation [2011] 10 taxmann.com 138, decision of coordinate bench in ITO vs. Growel Energy Co. Ltd., ACIT vs. Matrix Publicities and Media India (P.) Ltd. [2025] 213 ITD 463 and Rupee Finance and Management Pvt. Ltd. vs. ACIT [2008] 22 SOT 174. The Ld. AR further relied upon the principle of consistency laid down by Hon’ble Supreme Court in CIT vs. Excel Industries Ltd. 358 ITR 295 and Hon’ble Bombay High Court in PCIT vs. Quest Investment Advisors Pvt. Ltd. 409 ITR 545.

Per contra, the Ld. DR relied upon the orders of lower authorities and submitted that the assessee failed to establish actual receipt of services and corresponding business benefit derived therefrom.

We have heard the rival submissions and perused the material available on record. The short issue before us is whether expenditure duly recorded in books of account and paid through banking channels can be treated as unexplained expenditure u/s 69C merely because the

We find that the impugned expenditure is duly reflected in audited books of account and audited financial statements of the assessee. The payments have admittedly been made through banking channels after deduction of tax at source and supported by Form 15CA/15CB, agreements and invoices. The Assessing Officer has nowhere disputed of remittances or brought any material on record to establish that the expenditure is bogus or that source of such expenditure remains unexplained.

In our considered view, section 69C primarily deals with unexplained source of expenditure. Once expenditure is duly recorded in books of account and source of payment stands explained, provisions of section 69C cannot be invoked merely because Assessing Officer was not satisfied regarding necessity or business expediency of expenditure. The Hon’ble Delhi High Court in the case of CIT vs. Radhika Creation (supra) has held that where expenditure is duly recorded in books, provisions of section 69C are not attracted. Similar view has also been taken in various judicial precedents relied upon by the assessee.

We further note that the Assessing Officer has not invoked provisions of section 37(1) of the Act to disallow expenditure on account of lack of business purpose nor has any transfer pricing adjustment been made. The entire addition has been made u/s 69C. Even otherwise, commercial expediency has to be examined from the perspective of businessman and not from the viewpoint of the Assessing Officer as held by the Hon’ble Supreme Court in the case of S.A. Builders vs. CIT 288 ITR 1.

Considering the totality of facts and judicial precedents discussed hereinabove, we are of the considered view that addition of Rs.8,77,07,756/- made u/s 69C of the Act is unsustainable. Accordingly, same is directed to be deleted. Ground Nos.3 to 6 are allowed.

As regards Ground Nos.7 to 9 relating to CSR expenditure of Rs.40,44,000/-, we find from the computation of income filed by the assessee that the said amount has already been added back by the assessee as disallowance u/s 37 of the Act while computing total income. The Assessing Officer himself has noted this fact in the assessment order. Therefore, making further addition of the same amount would clearly result in double disallowance, which is impermissible under law. The Ld. CIT(A), therefore, rightly directed the Assessing Officer to verify the claim of the assessee and grant consequential relief. Since the computation of income placed on record clearly evidences that the assessee has already suo motu disallowed the CSR expenditure, we direct the Assessing Officer to delete the addition of Rs.40,44,000/- after due verification from the return of income and computation filed by the assessee. Accordingly, Ground Nos.7 to 9 are allowed for statistical purposes.

In the result, the appeal of the assessee is allowed.