DCIT(IT) 3(1)(2), MUMBAI, MUMBAI vs. LRQA LIMITED, MUMBAI

This appeal filed by the Revenue is against the order of Ld. CIT(A)- 57, Mumbai, vide order no. ITBA/APL/S/250/2024- 25/1066203030(1), dated 28.06.2024, passed against the assessment order by Deputy Commissioner of Income-tax (International Taxation)- 3(1)(2), Mumbai, u/s. 143(3) r.w.s. 144C(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.04.2016, for Assessment Year 2013-14.

Grounds taken by the Revenue are reproduced as under: (1) Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in allowing the payment of Management charges of Rs. 90,81,234/- which was disallowed u/s 40(a) (ia) of the I. T. Act., despite section 40(a) (i) of the Income Tax Act stating that amounts on which taxes were deductible but have not been deducted by the deductor, are not allowable expenses as deduction unless such tax is deducted and paid? (2) Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in not considering the nature of management charge payment, the management charges having been paid at cost plus a mark up 8%, however, no basis of determination of cost being given, the amount having been paid on the basis of debit notes raised at the very end of accounting year, i.e. on 28.03.2011 and 31.03.2011? (3) Whether, on the facts and in the circumstances of the case, and in the law the learned CIT(A) has erred in relying on decision of Hon'ble ITAT in the case of M/s. Lloyd's Register Asia does not the nature of expense non identical in the case of the assessee?.

Through this appeal, revenue has contested on allowing the payment of management charges of Rs.90,81,234/- which was disallowed by the learned Assessing Officer u/s.40(a)(ia) of the Act. Revenue further contests that there is no basis for determination of cost since management charges have been paid at cost plus a mark- up of 8%. According to the Revenue, these amounts have been paid on the basis of debit notes at the end of the accounting year and learned CIT(A) has not considered nature of management charges which had been paid by the assessee.