AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 403
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....e Assessment Year ('AY') 2007-08. 2. The Assessee is a joint venture company of HPL India Ltd. (HIL) with a French Company Socomec SA France (SSA). It is engaged in the business of manufacturing switchgears, energy meter components and UPS. 3. The Assessee filed a return of income on 31st October, 2007 for AY 2007- 08 declaring an income of Rs. 3,12,84,020/-. The case of the Assessee was picked up for scrutiny. The Assessing Officer ('AO') noted that the Assessee had debited a sum of Rs. 3,56,12,515 in its Profit and Loss Account (P&L A/c) under the head of 'Selling and Distribution Expenses'. On further enquiry, the AO found that a sum of Rs. 3,00,00,000/- had been paid to HIL as expenses under this head. 4....
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....e the Assessee had not filed any document to prove the genuineness of the expense. 8. The Assessee had claimed an expense of Rs. 55,16,840/- on account of payment of 'technical knowhow fee' to SSA. The Assessee enclosed a copy of the Agreement entered into by it with SSA to substantiate its plea that it was a revenue and not a capital expenditure. The AO, however, rejected the plea and capitalized the amount. After allowing depreciation at 12.5%, the AO disallowed a sum of Rs. 48,27,235/- and added it back to the total income of the Assessee. Liabilities to the tune of Rs, 13,15,648 were disallowed on the ground that they were not genuine since there was no evidentiary support. 9. In the appeal filed by the Assessee, the Commi....
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....greed with the AO and remitted the issue to the AO for deciding afresh whether the expenditure had to be allowed. 11. In the further appeals filed both by the Assessee and the Revenue, the ITAT has impugned by the common order remanded two issues to the AO for re-determination: one regarding the addition of Rs. 13,15,648/- on account of liabilities not being genuine and the other concerning the addition of Rs. 17,76,275/- towards commission on sales. As regards the other items of expenditure, the ITAT: (i) Deleted the addition of Rs. 3 crores on account of 'selling & distribution expenses' on the principles of consistency since in the earlier AYs a similar expense had been allowed. It was also noticed that on subsequent ....
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....urt finds no reason to interfere with the order of the ITAT on these two issues. 14. As regards the disallowance of 'selling & distribution expenses', the Court notices that what weighed with the ITAT was that the assessment for AY 2004-05 was reopened by the Revenue on 31st March, 2011 under Section 148 of the Act. Yet, the reopening did not happen on the issue of genuineness of the selling and distribution expenses but on the ground of the payment of technical knowhow fee. The re-opening of the assessment was not upheld by the CIT (A). The ITAT also dismissed the Revenue's subsequent appeal. For AY 2010-11, after scrutiny, an assessment order was passed under Section 143 (3) of the Act in which a similar claim was allowed. ....
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....xpenditure and the possibility of use of certain facilities for personal purposes could not be ruled out. Therefore, the disallowance was restricted to 20%. The view taken by the ITAT is a plausible one. In the facts and circumstances, the Court is not inclined to frame a question of law on this issue. 18. On the issue of 'incentive in selling and distribution expenses', the ITAT has referred to the details provided by the Assessee of the various dealers, customers in respect of whom payments were made by issuing credit notes. The ITAT has also examined the scheme floated by the Assessee for granting special incentives for achieving certain targets. It was noticed that the AO did not issue notices to the parties whose details wer....