Commissioner of Income Tax-08 vs Study Overseas Golbal Pvt. Ltd.

The revenue is aggrieved by the order of the Income Tax Appellate Tribunal (ITAT) dated 31.10.2014 whereby it refused to interfere with the decision of the CIT(A) on two issues. It is contended that the disallowance of management fee made by the A 0 to the tune of Rs. 1,34,35,168/- was not justified. Likewise, the ITAT''s reasoning with respect to advertising expenditure of Rs. 28,74,947/- was also questioned.

The assessee started its business in AY 2008-09. It claimed a loss of Rs. 1,64,20,770/-. In its return it claimed a deduction - under section 37 of the Income Tax Act, 1961 on account of payment to the tune of Rs. 1,34,35,168/- on account of management fee expenditure towards use of infrastructure etc. The A 0 conceded that the expenditure was revenue in nature. However, he doubted its genuineness on the ground that the expenditure was not supported by invoice or tangible material. The CIT(Appeals), took note of the fact that the assessee has submitted a detailed note to substantiate the necessity of cross-charge of expenditure incurred by sister concern to it and also demonstrated that the management fee had been incurred only for business purpose. The CIT (Appeals) also took note of the relevant authorities under Section 37. On these grounds, the said expenditure was allowed. The ITAT confirmed the CIT(Appea1s) ''s decision.

We have considered the submissions. As to whether the expenditure was wholly laid out for the business purpose and was driven by commercial expediency cannot be viewed from a narrow lens of revenue officer''s perspective. The element of business activity or expenditure cannot be subjected to objective reasonable standard as the A 0 sought to impose upon it. To that extent, the CIT(Appea1s) decision, in the considered view of this Court cannot be faulted. Since the ITAT reconsidered these aspects, no question of law arises. As against the total amount of Rs. 28,74,947/-, the A 0 allowed depreciation only to the tune of 25% and disallowed Rs. 21,56,21I/-. The CIT(A) took note of the judgment of the Supreme Court on how capital expenditure had to be treated ( Empire Jute Co. Ltd. Vs. Commissioner of Income Tax, AIR 1980 SC 1946 : (1980) 17 CTR 113 : (1980) 124 ITR 1 : (1980) 4 SCC 25 : (1980) 3 SCR 1370 , K.T.M.T.M. Abdul Kayoom and Another Vs. Commissioner of Income Tax, AIR 1962 SC 680 : (1962) 44 ITR 689 : (1962) 1 SCR 518 Supp .). On this ground, the ITAT was of the opinion that the relief as claimed was warranted. So the ITAT too confirmed these findings. No substantial question of law is made out. In view of the above reasons, the appeal is unmerited and accordingly dismissed.