DCIT, NEW DELHI vs. M/S. JUBILANT CAPITAL PVT. LTD., NOIDA

ORDER Appeal by the revenue directed against the orders of the Commissioner of Income Tax (Appeals)- VIII, New Delhi dated 19.9.2013 for the assessment year 2009-10 on the following grounds :- “

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting disallowance of Rs. 26,83,576/- made by the AO out of service charge paid to group company?

2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.”

2 Jubilant Capital Pvt. Ltd. : A.Y : 2009-10 “4. The said finding has been reversed by the Tribunal in the impugned order. The Tribunal, accepting the plea of the assessee, has observed that the services rendered by M/s. Jubilant Enpro Pvt. Ltd. were in the nature of assistance and support services like assistance in relation to obtaining work, submissions of bids and subsequent negotiations, advising current developments, adivisng regarding Visas and labour permits, advice on importation and exportation of material vessels equipments rigs etc. The aforesaid work and obligation undertaken by M/s. Jubilant Enpro Pvt. Ltd. was dependant upon the number of rigs and this would determine cost apportionment of the support services which were given and provided to the recipients. The services were not dependent upon the size of the rigs or the turnover. The contention of the respondent assessee that the apportionment of cost should not be made on the basis of the turnover, but, on the basis of number rigs was accepted. The aforesaid findings are findings of fact and there is no reason or ground to hold that the said findings are perverse. Noticeably, M/s. Jubilant Enpro Pvt. Ltd. had provided services to other sister concerns of the respondent assessee. The amount and quantum paid by the assessee and other group companies is not in dispute. Any disallowance in the hands of the respondent assessee would necessarily mean increase of expenditure incurred by the sister concern, as there is no dispute about the cost incurred by M/s. Jubilant Enpro Pvt. Ltd. Otherwise also, it would result in reduction or lower income earned by M/s. Jubilant Enrpo Pvt. Ltd. The Assessing Officer did not invoke Section 40A(2) of the Act, or hold that the payment made were disproportionate to the market value of the services rendered. Engaging services of M/s. Jubilant Enrpo Pvt. Ltd. had helped the assessee and other group companies to reduce costs, as for the common services they did not engage employees or consultants separately. This is clear from the submission made and findings of the Tribunal that there4 was commonality in the nature of services and therefore, the respondent assessee and toehr sister concerns had established and taken services from one cost centre i.e. M/s. Jubilant Enrpo Pvt. Ltd. The respondent company and others had agreed to pay for the services by way of reimbursement of expenses. In view of the aforesaid position, we do not think, in the present appeals, the first issues requires admission.”

3 Jubilant Capital Pvt. Ltd. : A.Y : 2009-10 3. Thus, the issue as to whether the apportionment of expenditure should be made between the two companies on the basis of per rig month basis or in the ratio of revenue generation, is not more res integra. 4. In the result, we uphold the orders of the First Appellate Authority and dismiss this appeal of revenue. (Order Pronounced in the Court on 14/10/2015).