Can Corporate Management Fee be added u/s 40(a)(i) in the income computation statement?

IN THE INCOME TAX APPELLATE TRIBUNAL
“C’’BENCH: BANGALORE
BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

ITA No.654/Bang/2017
Assessment Year: 2010-11

3M India Limited
Concorde Block, UB City
24, Vittal Mallya Road
Bengaluru 560 001
PAN NO :AAACB5724H

APPELLANT

VS

CIT (LTU)
Bangalore

RESPONDENT

Appellant by : Shri Sharath Rao, A.R.
Respondent by : Shri Pradeep Kumar, D.R.
Date of Hearing : 11.08.2021
Date of Pronouncement : 24.08.2021
O R D E R

The assessee has filed this appeal challenging the revision order dated 19.1.2017 passed by Ld. CIT(LTU), Bangalore for assessment year 2010-11 u/s 263 of the Income-tax Act,1961 ['the Act' for short]. The assessee is challenging the validity of same.

2. The Ld. CIT initiated revision proceedings u/s 263 of the Act, after examining the assessment record and coming to the conclusion that the assessment order passed is erroneous and prejudicial to the interest on the revenue.

3. The TPO determined ALP of Corporate Management services at NIL. However, while computing the Transfer Pricing adjustment, he reduced the amount of Rs.2.80 crores voluntarily disallowed u/s 40(a). Accordingly, the transfer pricing adjustment was made for the balance amount only.

4. It is the case of the Ld CIT that, in AY 2009-10 no separate addition due to TP adjustment was made in respect of Rs.2.80 crores (even though the TPO had determined the ALP at NIL), since the assessee had voluntarily disallowed the same u/s 40(a) of the Act. Accordingly, it is the case of the Ld CIT that the disallowance should be considered to have been made u/s 92CA also.

5. In view of the foregoing discussions, we are of the view that the impugned revision order is not sustainable in law. Accordingly, we set aside the same.

6. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 24th Aug, 2021

Please find attached the enclosed file for the full judgement