TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 75
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....extent of Rs. 1,33,852 is an allowable business expenditure." Briefly stated the facts of the case are that the assessee is a company is in the business of providing services in the field of marketing of consumer products of various multinational companies and accordingly is acting as an intermediary by catering to institutions like canteen stores department (CSD), naval stores, base victualling yards and other various canteens/ stores. For the year under consideration, return of income declaring total income of Rs. 1,29,20,150 was filed on October 29, 2004. The said return was selected for scrutiny assessment. The statutory notices were accordingly issued and served on the assessee. During the course of the assessment proceedings, the Assessing Officer found that the assessee has debited a sum of Rs. 2,38,36,827 towards sales promotion expenses. The assessee was asked to give the break-up of these expenses claimed. The assessee replied as follows : (Rs.) Total sales promotion expenses 2,92,98,187 Less : Reimbursement from clients 54,61,360 Net amount 2,38,36,827 It was explained that out of total expenses of Rs. 2.92 crores, a sum of Rs. 62.31 lakhs is claimed as....
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.... made enquiries with respect to the Bombay Sales Tax and Central Sales Tax Nos. mentioned on the bills and concluded that none of these five parties were assessed to sales tax nor filed sales tax returns. The Assessing Officer also made enquiries from the banks of all the above five parties and observed that all these accounts show voluminous transactions but negligible closing balances. The Assessing Officer also pointed out that the accounts are used to give accommodation entries. Considering the observations in totality, the Assessing Officer finally concluded that the expenses claimed by the assessee were not genuine and went on to disallow on account of sales promotion and reimbursement expenses at Rs. 3,75,49,810. On further perusal of the profit and loss account, the Assessing Officer found that the assessee has claimed Rs. 8,10,520 towards foreign travelling expenses incurred by the directors. The assessee was asked to explain these foreign travelling expenses vis-a-vis nature of the business of the company. The Assessing Officer observed that no details were furnished and further considering the nature of business of the assessee there does not appear to be any business f....
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....ngly allowed the appeal by deleting the addition of Rs. 3,75,49,810. Aggrieved by the findings of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal before us. The learned Departmental representative strongly supported the findings of the Assessing Officer. The learned Departmental representative argued that the Assessing Officer has given specific findings in relation to the payments made to the alleged five parties whose credentials appeared to be doubtful. The learned Departmental representative also argued that the assessee has failed to establish the genuineness of the expenses claimed therefore the order of the Assessing Officer should be upheld. Per contra, learned counsel for the assessee submitted that the Assessing Officer has grossly erred in not understanding the nature of the business of the assessee. Counsel submitted that the assessee is neither a manufacturer nor a trader of goods. The assessee-company is only going liaisoning work for its clients for the supply of their products to various outlets of canteen stores department which is under the Ministry of Defence and operates to cater the needs of the defence personnels. Learned counsel s....
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....es tax returns. (3) The cheques were deposited in the bank account by these five parties, the money has been transmitted to some other bank account on the same day or in most of the cases having huge withdrawals of cash amount on the same date of deposits were found. (4) The invoices furnished by the assessee were prepared by the assessee either during the assessment proceedings or after the survey operations when such invoices were asked to be produced. (5) The assessee failed to produce the alleged five parties to establish the genuineness of the expenses. On a careful consideration of the above observations of the Assessing Officer, we find that the Assessing Officer has not appreciated the facts of the case in their proper prospective. The assessee has debited Rs. 2,38,36,827 under the head "sales promotion expenses" whereas the Assessing Officer has disallowed a sum of Rs. 3,75,49,810. A perusal of the copy of the ledger account of sales promotion shows that the assessee is receiving reimbursement from its clients which are credited to the scheme reimbursement account such reimbursements are made by companies like Cadbury (India) Ltd., Wipro, Colgate Palmolive (India) Ltd.....