The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restored the matter to the Assessing Officer ( AO ) concerning the disallowance of Rs. 31.38 lakh under Section 37 of the Income Tax Act,1961.
Schaeffler India Ltd., appellant-assessee,had reimbursed Rs. 31,63,877 to Schaeffler Technology GMBH and CO KG, Germany, for professional services provided by E.Y. Germany, as per an agreement. Schaeffler Germany later recovered the assessee’s share of the cost. A copy of the agreement was submitted to the AO and Commissioner of Income Tax (Appeals) [CIT(A)] during the hearing.
The assessee’s counsel argued that the CIT(A) dismissed the appeal without giving a hearing and upheld the disallowance of the expenses under Section 37 of the Income Tax Act. The Counsel pointed out that neither the AO, Transfer Pricing Officer ( TPO ), nor CIT(A) had found that the expenses were not for the assessee’s business.
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Section 37 of the Income Tax Act allows businesses to deduct expenses that are wholly and exclusively incurred for business purposes, provided the expense is not capital in nature or specifically disallowed by other sections of the Act. Deductible expenses include rent, utilities, salaries, advertising, and professional fees, all contributing to a reduction in taxable income.
The Counsel requested that the matter be sent back to the AO so the assessee could present all necessary documents to support its claim for the deduction.
The two member bench comprising Suddhartha Nautiyal ( Judicial Member ) and Annapurna Gupta ( Accountant Member ) decided to send the matter back to the AO to allow the assessee to provide relevant documents/evidence to support the claim for deduction of the expenses under Section 37 of the Act.
In short,the appeal filed by the assessee was allowed for statistical purposes.
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