CIT Vs. MODI REVLON PVT LTD

JUDGEMENT

(1.) THE revenue appeals against order of the Income Tax Appellate Tribunal (ITAT) in ITA Nos. 5/Del/2009, 2063/Del/2009, 155/Del/2009 and 3083/Del/2009 dated 18-12-2009.

(2.) THE following questions of law arise in the present appeals:

(3.) DURING the AY, the assessee paid '.88.98 lakhs to MMPL as consultancy charges under the agreement dated 1-1-1995. This payment to MMPL was for the latter's advice concerning day-to-day conduct of management of the assessee-company in respect of setting up and monitoring of distribution and marketing management, manufacturing of Revlon products according to the latter's internationally applicable specifications and standards, suggesting changes in the product design and the specifications based on market feedback of new products, product advertising policies and campaign, price negotiations of various inputs from the suppliers, etc. The assessing officer alleged that consultancy charges were nothing but an arrangement to siphon off part of the assessee's profits to its sister concern and JVs. The assessing officer allowed '.30 lakhs as directors' remuneration and disallowed '. 58.98 lakhs under Section 40A(2), holding it as unreasonable and excessive. The Commissioner (Appeals) deleted this disallowance holding that the assessing officer wrongly concluded that no services had been rendered by MMPL. The Commissioner (Appeals) held that rendering of services by MMPL was proved from the records, and no disallowance was warranted under Section 40A (2). The revenue's appeal to the ITAT on this score was rejected.