Faurecia Emission Control Technologies India P.Ltd, (Formerly Known as Yutaka Autoparts Pune Pvt.Ltd,), Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 1682/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0662 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.1682/PUN/2017 / ASSESSMENT YEAR : 2009-10 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED, (FORMERLY YUTAKA AUTOPARTS PUNE PRIVATE LIMITED), SALISBURY PARK, 65-80, SHANKAR RAO LOHANE MARG, P&T COLONY, GULTEKDI, PUNE 411037 PAN : AAACA8450A VS. DCIT, CIRCLE-7, PUNE (APPELLANT) (RESPONDENT) / 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. THE ONLY ISSUE PROJECTED IN VARIOUS GROUNDS IS AGAINST TH E CONFIRMATION OF DISALLOWANCE OF RS.32.69 LAKHS PAID BY THE ASSESSEE TO TATA AUTOCOMP SYSTEMS LIMITED (TACO) FOR APPELLANT BY SHRI R.D. ONKAR RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 03-12-2018 DATE OF PRONOUNCEMENT 04-12-2018 ITA NO.1682/PUN/2017 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED 2 MANAGEMENT AND ADMINISTRATIVE SUPPORT U/S. 40A(2)(B) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE ACT) . 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF EXHA UST SYSTEM COMPONENT VIZ., SILENCERS, FABRICATED MANIFOLD, MUFFLERS ETC. IT STARTED ITS BUSINESS OPERATIONS DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03. INITIA LLY, 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 S AID AGREEMENT, IT AVAILED SUPPORT IN THE BUSINESS AREAS OF HUM AN 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 DUR ING THE ITA NO.1682/PUN/2017 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED 3 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. CI T(A) COUNTENANCED THE DISALLOWANCE MADE BY THE AO, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIB UNAL. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT TACO, PRIO R 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 25-08-20 06 TO THE EARLIER AGREEMENT. AS PER THE SAID AMENDMENT DEED, A COPY OF WHICH IS AVAILABLE ON PAGE 1 OF THE PAPER BOOK, TH E 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 ASSESSE E 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; ITA NO.1682/PUN/2017 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED 4 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 ASSESSE E COULD NOT FURNISH PRIMARY EVIDENCE IN SUPPORT OF THE SERV ICES. ON A CLOSER EXAMINATION OF THE NATURE OF THE SERVICES, IT EMERGES THAT THE SAME ARE IN THE NATURE OF A MIXTURE OF RO YALTY FOR USE OF THE INITIAL INPUT GIVEN BY THE TACO AND RENDITION OF SERVICES ON A REGULAR BASIS. IN MY CONSIDERED OPINION, TH E REASONS ADDUCED BY THE AO AND THE LD. CIT(A) ARE UNWARRANTED BECAUSE THE ASSESSEE WAS AVAILING SUCH SERVIC ES 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 ARMS LENGTH NOW, AS WAS BE ING DONE EARLIER. UNDER SUCH CIRCUMSTANCES, I DO NOT FIN D ANY ITA NO.1682/PUN/2017 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED 5 REASON FOR NOT ALLOWING THE DEDUCTION FOR THE SAME WHICH WA S BEING ALLOWED IN THE PAST. 5. IT IS FURTHER RELEVANT TO NOTE THAT THE AO HAS MADE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40A(2)(A) OF TH E ACT. THE LD. AR CONTENDED THAT AFTER MOVING OUT OF THE JOIN T 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) AR E NOT ATTRACTED TO THE FACTS AND CIRCUMSTANCES OF THE INSTANT CAS E. 6. IN VIEW OF THE FOREGOING DISCUSSION, I AM OF THE CO NSIDERED 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. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH DECEMBER, 2018. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 04 TH DECEMBER, 2018 ITA NO.1682/PUN/2017 FAURECIA EMISSION CONTROL TECHNOLOGIES INDIA PRIVATE LIMITED 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-5, PUNE 4. / THE PR. CIT-4, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / 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. *