TaxTMI 
TaxTMI 
2012 (10) TMI 17
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....urt has not been accepted by the Revenue and SLP has been proposed." iii."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 16,99,000/- made on account of Advertisement give away without appreciating the facts that the assessee could not substantiate necessity of the expenses when the assessee is paying consignment commission to the GSK for marketing of its products." iv."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of marketing commission paid to GSK made u/s 40A(2)(a) of the Act amounting to Rs. 3,67,67,000/- without appreciating the fact that these marketing commission is excessive and unjustified in view of section 40A(2)(a) of the Income Tax Act, 1961." 2. Following GROUND OF CROSS OBJECTIONS were filed by the assessee (a)The (Commissioner of Income Tax -14) CIT(A) erred in not accepting the contention of the respondent that no expenses have been incurred for earning the exempt dividend income. (b) Without prejudice to the above, it is submitted that section 14A would be applicable only if the AO is not satisfied with the explanatio....
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....ing the appellants. 4. During the assessment proceedings AO held that the appellant could not provide the actual basis of taking 5% or 10% of the total expenses to be allocated to them, that the estimated rate of percentage was only arbitrary and without any basis.AO apportioned the common costs on the basis of turnover of the two companies i.e. GSK and the assessee company. He determined the percentage of expenditure @ 2. 01%.Assessee filed an appeal before the First Appellate Authority (FAA). 4.1. After considering the submission of the appellant company and observations of the AO he held that the action of the AO in determining the percentage of expenditure @ 2.01% on the basis of turnover of the companies- GSK and the assessee company - was not correct, that the percentage of appellant's turn over to that of GSK was not a benchmark for apportioning the expenditure in proportion to the turnover of the companies, that the turnover of GSK and that of the appellant arose from sale of different products, which were distinct in terms of nature, price etc. and hence, not comparable in any way, that both the appellant as well as GSK were assessable to tax at the same rate ....
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....nion, having been formed based on the circumstances available before him. There should be some material available with him for invoking the said section, so as to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder. iii). Before invoking the powers conferred by the section AO should afford an opportunity to the assessee to discharge his burden and satisfy the Revenue that the expenditure incurred by him in connection with purchases or services was not excessive or unreasonable having regard to the fair market value of the goods, services or facilities. iv). Conclusion about incurring higher or excessive price should be arrived at after comparing the market value of the relevant goods/services as at the date of their respective purchases/availingand not at the basis of random periods of the AY concerned. v). If the AO fails to record a clear finding that the expenditure incurred was either excessive or unreasonable, having regard to the fair market value of the goods or services rendered which were of a specific nature, his order is liable to be quashed. 4.4. Taking in to consideration of the above broad principles with regard to S....
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....usiness. As per AO the AR could not substantiate it why such expenses were necessary particularly when the assessee was paying consignment commission to the GSK for marketing of its products. He disallowed the claim made by the assessee. An appeal was preferred before the FAA. After considering the order of the AO and the submissions of the assessee FAA held that that the expenditure was fully supported by sufficient details, that the asessee had submitted complete details of the advertisement giveaways, that genuineness of incurring this expenditure was well proved. He deleted the addition made by the AO. 6.2. Before us, DR relied upon the orders of the AO. AR referred to Pg. No. 67-98, 106, 111 of the Paper Book in this regard.AR submitted that in subsequent assessment years, AO had made no addition on account of free give aways, that AO had not called for details of give aways, that expenses were incurred for the purposes or normal business and same were allowable u/s.37(1) of the Act We have considered the rival submissions. We are of the opinion that order of the FAA does not suffer from any infirmity and hence has to be upheld. The disallowance was made by the AO bec....