FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA P.LTD, (FORMERLY KNOWN AS YUTAKA AUTOPARTS PUNE PVT.LTD,),PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 7, PUNE

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal by the assessee is directed against the order passed by the CIT(A)-5, Pune on 24-04-2017 in relation to the assessment year 2009-10.

2 ITA No.1682/PUN/2017 Faurecia Emission Control Technologies India Private Limited

management and administrative support u/s. 40A(2)(b) of the

Income-tax Act, 1961 (hereinafter also called as ‘the Act’).

engaged in the business of manufacture and sale of exhaust

system component viz., silencers, fabricated manifold,

mufflers etc. It started its business operations during the

previous year relevant to assessment year 2002-03. Initially, it

was a joint venture between Yutaka Giken Company Ltd.,

Japan and TACO, each having 50% of equity shares of the

assessee company. The assessee entered into an

Administrative Support Agreement (ASA) with TACO for

services in the start up and operating phase. Under the said

Agreement, it availed support in the business areas of Human

Resources including Pay Roll and benefit administration and

training; Marketing and Sales; Finance; Vendor Development

efforts; Maintaining Industrial relations; Information

Technology and communication infrastructure; Governance in

terms of Code of conduct, Audit and Administration etc. The

assessee company continued to receive services from TACO

even after the later leaving the joint venture. For the said

services, the assessee paid a sum of Rs.32.69 lakhs during the

3 ITA No.1682/PUN/2017 Faurecia Emission Control Technologies India Private Limited

year to TACO, which the Assessing Officer (AO) disallowed

by opining that no services were availed from TACO, being a

person covered u/s. 40A(2)(b) of the Act. The ld. CIT(A)

countenanced the disallowance made by the AO, against

which the assessee has come up in appeal before the Tribunal.

material on record. It is an undisputed fact that TACO, prior

to its leaving the joint venture, was rendering similar services

to the assessee company in terms of Administrative Service

Agreement dated 05-10-2002, a copy of which is available on

page 3 onwards of the paper book. Due to TACO moving out

of the joint venture, an amendment was carried on 25-08-2006

to the earlier Agreement. As per the said amendment deed, a

copy of which is available on page 1 of the paper book, the

assessee continued to receive the services for a period of three

years on the same terms and conditions which were prevailing

in the original agreement. Under the Agreement, the assessee

received support from TACO for Land acquisition and

development; Pay roll and benefit administration; Liaison with

banks and financial institutions; Legal and taxation services;

Human resource planning and training facilities;

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Communication infrastructure and advisory services;

Manpower requirement; Maintaining industrial relations;

Marketing and distribution network; Liaison with Government

authorities and Vendor Development efforts. When the

assessee was paying a certain amount to TACO under the

original ASA from 2002 onwards, the AO accepted the

genuineness of the payment and allowed deduction for the

same. The reason which weighed with the AO in not allowing

deduction for the sum under consideration is that the assessee

could not furnish primary evidence in support of the services.

On a closer examination of the nature of the services, it

emerges that the same are in the nature of a mixture of royalty

for use of the initial input given by the TACO and rendition of

services on a regular basis. In my considered opinion, the

reasons adduced by the AO and the ld. CIT(A) are

unwarranted because the assessee was availing such services

under the original ASA for which a deduction was being

allowed. The only difference that has taken place is that the

TACO moved out of the joint venture company but continued

to render the services at an arm’s length now, as was being

done earlier. Under such circumstances, I do not find any

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reason for not allowing the deduction for the same which was

being allowed in the past.

disallowance under the provisions of section 40A(2)(a) of the

Act. The ld. AR contended that after moving out of the Joint

Venture, TACO is no more a person covered u/s.40A(2)(b) of

the Act. The ld. DR could not controvert this factual position.

It is thus evident that the provisions of section 40A(2)(a) are

not attracted to the facts and circumstances of the instant case.

opinion that the authorities below erred in not allowing

deduction for Rs.32.69 lakhs incurred by the assessee to

TACO. The impugned order is overturned to this extent.

Sd/- (R.S.SYAL) उपा�य� उपा�य�/ VICE PRESIDENT उपा�य� उपा�य�

पुणे Pune; �दनांक Dated : 04th December, 2018 सतीश

ITA No.1682/PUN/2017 Faurecia Emission Control Technologies India Private Limited

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत / Copy of the Order is forwarded अ�ेिषत आदेश आदेश आदेश to :

// True copy //

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 03-12-18 Sr.PS 2. Draft placed before author 03-12-18 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. *