TaxTMI 
TaxTMI 
2012 (2) TMI 493
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....002-03) made by the AO on account of provision for warranty for the purposes of computation of income? Whether provision for future warranty expenses is contingent liability or allowable under section 37 of the Income Tax Act, 1961? Whether on the facts and in the circumstances of the case, the Ld ITAT erred in directing the AO to exclude the ?provision for warranty while computing book profits under section 115 JB of the Income Tax Act, 1961?? These issues are covered against the Revenue and in favour of the assessee by the decision of the Supreme Court in Rotork Controls India (P) Ltd. Vs. CIT, (2009) 314 ITR 62 (SC). We may note that there is no dispute that the provision of warranty? has been made on the basis of past experience and ....
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....) on account of advertisement and sales promotion on the ground that the same are revenue in nature?? This issue has to be decided against the Revenue and in favour of the respondent-assessee in view of the decision of this Court in CIT Vs. Salora International Ltd,. [2009] 308 ITR 199 (Del). (see also CIT versus Monto Motors Ltd., ITA No. 978/2011 decided on 12th December, 2011). No substantial question of law is accordingly framed. Issue No.7 Whether disallowance of 10% of advertisement and sales promotion, same being attributable to brand promotion resulting in benefit to parent company is justified? In the assessment year in question, the assessee had a manufacturing unit at Daru Hera near Delhi. The Assessing Officer has held that ....
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....le in the Indian territories, it became essential for the assessee to incur expenditure on advertising to propagate the aforesaid brand name. The benefit thereof had to necessarily accrue to the assessee as well as the main purpose of the advertisement is to augment the sales. The contention of the assessee that it was a commercial practice and commercial expediency has rightly been accepted by the Tribunal. The relevant portion of the judgment of the Tribunal dealing with this aspect is reproduced below : ''17. The assessee-company is itself engaged in the trading of various products under the brand name or logo ''ADIDAS''. The expenditure on advertisements is only in respect of products, which are sold by the assessee-company, and payme....
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....eing sold by him arc certainly to come within the expression ''wholly and exclusively incurred for the purpose of business'', which is to be considered and looked into having regard to the realities of business from the point of view of a prudent businessman and not from the point of view of a tax collector. 20. In the light of the discussions made above and having found that since the assessee had incurred the advertisement and publicity expense with a view to promote its sale of products under the brand name Adidas which were sold by the assessee, the advertisement expenses incurred by the assessee are to be held as incurred to facilitate the assessee's business, and would thus be eligible for deduction while computing the assessee&....
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....eign exchange gain in the profits eligible for deduction u/s 10A/10B is squarely covered in favour of the taxpayer by the decision of Coordinate Bench of this Tribunal rendered in the case of Sujata Grover-74 TTJ 347 wherein it was held that the basic character of receipt on account of foreign exchange remains the same inasmuch as any profit or loss as a result of foreign exchange fluctuation ultimately goes to increase or reduce the figure of export turnover recorded initially by the taxpayer in its books of account. It was held that the income from the foreign currency fluctuation thus is nothing but part of export turnover and is a sort of additional sale price. Respectfully following the said decision of the Tribunal in the case of Suja....
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....e/loss as it directly arises from the business transaction. We do not agree with the contention of the Revenue that the aforesaid income/loss is not income/loss derived from exports. The assessee was required and has made book entries. The book entries have to be in Indian Rupees. For this purpose the foreign currency was converted into Indian Rupees. The export transaction was complete and fruitified when the remittance of sale proceeds in foreign exchange was received and then converted into Indian Rupees. Accordingly necessary entries at that time were made to regularize and show the actual and true income. The aforesaid book entries cannot be compared to deposit of money in banks/FDRs and earning of interests. Examining the said aspect ....