DCIT 5(1), MUMBAI vs. KATHERINE INDIA P.LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य राजे�� के अनुसार लेखा सद�य राजे�� के अनुसार PER RAJENDRA, AM- लेखा सद�य राजे�� के अनुसार लेखा सद�य राजे�� के अनुसार Challenging the order dt.03.10.2013 of CIT(A)-9,Mumbai,the Assessing Officer(AO)has filed the present appeal. Assessee-company,engaged in the business dealing in telecommunication equipments,filed its return of income on 29.09.2010declaring loss of Rs.3.95Crores.The AO completed the assessment on 19.02.2013,u/s.143(3) of the Act determining the income of the assessee at Rs. (-)3.26 Crores. 2.Effective ground of appeal is about deleting the addition made by the AO,amounting to Rs. 69.42 lakhs under the head management fees.During the assessment proceedings,the AO found that the assessee had debited Rs.69,42,392/-as management fees.He asked the assessee to explain as to why the expenditure should not be disallowed as same was not revenue in nature.After considering the submissions of the assessee,the AO held that the assessee had made the payment in lieu of receiving infrastructure support for corporate development and industrialisation,that same was to be treated as capital expenditure. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that the assessee had entered in to an agreement with a German Company to provide management support infrastructure services, that payments were not in connection with any transfer of Technology or for acquisition of capital asset,that expenditure incurred under the heads salary,tent electricity,that the expenses were for running the business,that the payment was 4.55% of the total turnover,that as per the RBI guidelines limit for such expenditure had been fixed at 5%,that the expenditure did not result in any enduring benefit to the assessee. After considering the submissions of the assessee,the FAA held that the management fees paid by the assessee-company was a routine expenditure,that it was not one time expenditure that would result in enduring benefit lasting for several years,that the expenditure incurred by the assessee was a revenue expenditure.Finally,the appeal filed by the assessee was allowed. 4.Before us,the the Departmental Representative(DR)supported the order of the AO.The AR

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