Fee paid to holding company for advisory service during course of business is allowable as deduction u/s 37 of Income Tax Act: ITAT upholds DRP decision [Read Order]

The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that fees paid to the holding company for advisory services during the course of business is allowed as the deduction under Section 37 of the Income Tax Act, 1961. Therefore the bench upheld the decision of the Dispute Resolution Panel (DRP).

Assessee, Rabo India Finance Ltd has availed the services of Rabobank International, Netherlands and paid the relevant advisory fees to them during the course of the business

During the assessment proceedings observed that assessee claimed fees paid to the holding company for advisory services during the course of business is allowed as the deduction under Section 37 of the Income Tax Act. After concluding the Assessment AO denied the claim and passed assessment order.

Aggrieved by the order, the assessee filed an objection before the DRP which allowed the claim of the assessee and After considering the submissions of the assessee, DRP deleted the addition. Aggrieved by the order, revenue filed another appeal before the tribunal.

During the appeal proceedings Nitesh Joshi counsel for assessee submitted that RIFL requested Rabobank International, Netherlands to provide services relating to certain specialized project undertaken by it in case of advisory services received by RIFL from Rabobank Netherlands the fee was negotiated with the entity, keeping in mind the benefits expected by RIFL from the services.

Thus the transaction is in accordance with the principles of commercial expediency and hence, the same could not  be disallowed under Section 37 of the Income Tax Act.

Gaurav Batham, Counsel for the revenue, supported the order of the Assessing officer.

It was observed by the tribunal that the assessee  Has availed advisory services from Rabobank International, Netherlands and paid the relevant fees. Therefore, assessee has availed the services of Rabobank International, Netherlands and paid the relevant advisory fees to them during the course of the business. DRP has allowed the claim of the assessee under Section 37 of the Income Tax Act.

After considering  the facts submitted by both parties, the two member bench of S. Rifaur Rahman (Accountant Member) and Rahul Chaudhary (Judicial Member) held that fees paid to the holding company for advisory services during the course of business is allowed as the deduction under Section 37 of the Income Tax Act.

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