TaxTMI 
TaxTMI 
2016 (1) TMI 179
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....ssessee solely and exclusively for the purpose of business and one cannot walk into the shoes of businessman to judge the necessity of the expenditure incurred, thus the expenditure deserves to be allowed as claimed. 1.2. That the ld. CIT (A) has further erred in ignoring the evidences filed in support of the expenses claimed and also failed to appreciate the fact that the books of accounts were not doubted by the ld. AO and the trading results have been accepted, thus the disallowance made by making general and vague observations deserves to be deleted. 2. On the facts and in the circumstances of the case the ld. CIT (A) has grossly erred in confirming the disallowance of Marketing and Survey Expenses legitimately claimed at Rs. 67,73,510/- by the assessee company without appreciating the nature of expenses and the business module of the assessee company, thus the expenses as claimed deserve to be allowed. 2.1. That the ld. CIT (A) has further erred in disbelieving the submissions made and evidences adduced in the shape of confirmations, invoices, tracking sheets, etc., thus the action of the ld. CIT (A) being unfair deserves to be hold bad in law and the additions uphold de....
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....ssessee carried the matter before ld. CIT (A) who confirmed the order of the AO by observing as under :- "7.3. I have considered the facts of the case; assessment order and appellant's written submission. Identical issue came up in assessment year 2008-09 in the appellant's own case and while deciding appeal by order dated 28.3.2012, my learned predecessor confirmed the addition on identical facts. Relevant extract of the appeal order is quoted below - " I have duly considered the submissions of the appellant. The AO noticed that the appellant had claimed huge expenses of Rs. 3,02,68,784/- (wrongly taken at Rs. 3,82,68,784/-) which were general in nature. The entire expenditure was incurred in cash for which no bills or supportings were available with the appellant. There is no change in this factual position even during the present appellate proceedings. The counsel of appellant has merely submitted an explanation of general nature and these expenses are not supported by independent corroborative evidences. The AO has been very fair and reasonable in making disallowance of Rs. 5,00,000/- out of total expenditure of Rs. 3,02,68,784/- which was not amenable to verification. It w....
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....by the professionals. The assessee is a company. It has separate legal entity as per the Company Law from the Director of the Company. Personal element in case of a company as decided by the various ITAT Benches and by the Hon'ble High Courts, is not possible. The ld. AO has not pointed out any specific bill which is personal in nature. The disallowance made by the AO is general. By considering the past history, the coordinate Bench has deleted the similar additions in A.Ys 2005-06, 06-07 and 08-09 in preceding years. In various decisions of ITAT Jaipur Bench, particularly in ITA No. 519, 520 and 521/JP/2012 held as under :- " 3.6. In our considered view these judgments are fully applicable to assessee's grounds relating to disallowance in all these years. Respectfully following them the department cannot be justified in adopting a flip flop attitude and repeatedly go on disallowing the same type of expenditure year after year. vii. The Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. (supra) is applicable to disallowance retained alleging personal user by the company. Respectfully following it we hold that in the case of assessee being a limited company whic....
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....ames M/s. Anew Marketing and M/s. Perfect 'N' Marketing concerns stated to be worked for assessee company. M/s. A One Marketing (New) stated to be a proprietary concern of wife of Shri Pushpendra Singh namely Smt. Shakuntala Singh. Thus the marketing survey expenses were claimed to have been debited in the names three members of a single family who were residing in the same house at 411-412, Kishan Bagh, Naya Kheda, Amba Bari, Jaipur. They were residing in a adjacent two plots having area of 50 sq. yards each stated to be purchased by Shri Pushpendra Singh few years back through finance from bank. The educational qualification of Smt. Shakuntala Singh is 10th failed. Shri Pushpendra Singh is B.Sc. 1st year in 1996 and Shri Hanuman Singh is B.A. Final year in 1999-2000 as stated by them in their statements. Shri Pushpendra Singh has a two wheeler Hero Puch since 1997, Shri Hanuman Singh has a Splendor Motorcycle since 2006 and both of them do not have any other vehicle including any four wheeler. Presently Shri Pushpendra Singh is running a small restaurant preparing and selling Samosa & Kachori since 2007 on a rental site. As per the AO, these persons were of small means and did no....
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....lly marketing survey have been carried out by them. Self serving contentions of these persons cannot be acceptable in the eyes of law. 8.9. The AO gave show cause on the nature of expenditure claimed under the head Marketing & Survey expenses, on the basis of statement recorded and material collected by the AO and also considered the assessment orders for A.Ys 2005-06 and 06-07 to disallow the expenses claimed in the name of M/s. Harshit Marketing, M/s. Sharma Marketing, M/s. Lakshya Marketing, M/s. Anoop Marketing, M/s. The Indian Institute of Public Opinion P. Ltd. and Ms Asha Sharma. The assessee replied by letter dated 29.12.2009 which has been reproduced by the AO at pages 12, 13 & 14 of the assessment order. After considering the submissions of the assessee, the AO held that assessee has failed to produce even a single new party from whom it claimed to have carried out the survey work and to whom the payments on account of survey work are claimed to have been made. The assessee had squarely failed to put forth even any other reliable document/evidence in respect of the other parties which could bear even a little substance of authenticity. Therefore, he disallowed the total ....
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....rietor of M/s Anoop Marketing was the wife of Sh Hanuman Singh. Smt Kamlesh Kumari, proprietor of M/s Harshit Marketing was the sister of Sh Hanuman Singh. Smt Meena Kumari & Smt Kamlesh Kumari were housewives having no expertise in the line of business for which marketing & survey fees were paid to them. Sh Mukesh Sharma, proprietor of M/s Sharma Marketing was a person of small means, getting a monthly salary of Rs. 21,000/- per month from ICICI Mutual Fund. In the earlier years also, the claim of marketing & survey fess could not be substantiated by the assessee company. The department also took photographs of the office premises of the alleged concerns and these were made part of the assessment order to show that no business activities were carried out by M/s Perfect N Marketing, M/s A One Marketing and M/s Aneu Marketing in AY 2006-07. The office of M/s A One Marketing was stated to be 5, Hotel Rajdoot, M I Road. When the Inspector went to serve summons to the said party, it was not found to be in existence there. The Inspector reported that M/s First F1ight Courier was operating from said office. The results of these inquiries were made available to the assessee company for it....
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....convince them to read its newspaper by giving free samples for a period ranging between 2 to 10 days. As per the alleged procedure adopted between the alleged concerns and the assessee company, there should have been the primary records of door to door survey conducted indicating the date of visit of surveyor, name and address of the house, time of visit and observation of survey and signature of the surveyor and the representatives of the assessee company on such daily working sheets. In fact these daily working sheets should have been produced either by the alleged concerns or their representatives. However these documents have not been submitted by the assessee company during appellate proceedings so as to verify the genuineness of the alleged survey work carried out by these concerns. However it is surprising to note that not a single daily working sheet had been furnished by the assessee to the department obviously for the reasons best known to it. The alleged monthly market survey reports submitted during the course of appellate proceedings were prepared by the temporary employees of the appellant who were paid marketing and survey fees of Rs. 4,39,94,858/-. These reports wer....
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....out the door to door survey if any carried out by them for the assessee company etc. were very pertinent. These Inferences also throw the light over the absence of any business relations of these concerns with the assessee group. Even Smt. Shakuntala Singh (10th failed) Prop. of M/s A One Marketing wife of Sh. Pushpendra Singh was not presented for examination obviously for the reason that her statements might have disclosed the collusion in a more candid manner. The same was also true for Smt Hemanti kumara, Smt Meena Kumari and Smt Kamlesh Kumari. The results of inquiries made by the AO in AY 2006-07 are enumerated as under: i) The proprietors of the alleged concerns were family members. Sh Hanumant Singh & Sh Pushpendra Singh were brothers while Smt. Shakuntla Singh, Proprietor of M/s A One Marketing was the wife of Sh. Pushpendra Singh. The alleged proprietors did not have necessary educational qualifications to render any kind of consultancy services to the appellant company. Smt Shakuntala Singh had not passed even the matriculate examination whereas Sh Pushpendra Singh & Sh Hanuman Singh were college dropouts. Sh Pushpendra Singh was running a small restaurant in a rental....
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.... cheques on the same day. The AO obtained pay-in-slips from the bank but these were unsigned. Therefore it could not be ascertained as to who had deposited the cheques in the bank account of the alleged concerns. Considering the inquiries made by the AO, the claim of the appellant was not found to be genuine. In the case of Emsan Tools Mfg Corporation Vs ITO (207 CTR 577), the assessee claimed deduction of Rs. 12,19,587 as commission for rendering services like liaisoning for procurement of orders, getting material passed and release of payments etc., paid to M/s Vashisht Industrial Products (P.) Ltd. The assessing officer rejected this claim on the ground that the assessee failed to establish that the commission was wholly and ex1usively for the purpose of business of the assessee. This, view was reversed by the Commissioner (Appeals) with the observation that the assessee had paid similar commission in the previous years and that Shri Amarjeet Dhal had confirmed that the payment had been given for the services rendered by Shri P.D. Sharma. M/s Vashisht Industrial Products (P.) Ltd. had used their own resources to get the work done for the assessee-company. On further appeal by....
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..... It was held by Hon'ble Punjab & Haryana High Court that the Tribunal inter alia held that other income of M/s Vashisht Industrial Products (P) Ltd. to whom commission of Rs. 23,20,982 was paid was only Rs. 59,441 which created doubt about payment of commission. Further absence of a written document containing terms of the agreement with a person to whom commission was being paid in lakhs, discrepancies in the statements of the assessee and Sh. P.D. Sharma, Brijesh Kumar, ignorance of the recipient of commission about the rate of commission did not inspire confidence. Seeking cross-examination of the witnesses while filing written arguments before the Tribunal would not improve the case of the assessee when the entire material was disclosed in the order of assessment and first appeal. It was held that the view taken by the Tribunal was certainly a possible view. Similarly the Hon'ble Jaipur ITAT in the case of ACIT Vs Mehru Electrical & Engg Pvt Ltd (128 ITD 247) upheld the disallowance of commission when the assessee could not produce any evidence for rendering of services by the commission agent. In the cited case, the AO noticed that no proof of substantial efforts mode....
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....ed that they had appointed the staff but were not able to tell the complete names or addresses of their staff. Moreover, they were unable to tell the telephone numbers of even a single employee appointed by them. The proprietors of above concerns did not produce even a single bill or any other document submitted to the assessee company for receiving payment. Inspite of repeated opportunities, they could not submit any evidence for having worked for the appellant company. They did not have an iota of evidence to show that they had actually rendered any services to the appellant. The Honourable Delhi High Court in the case of Schneider Electric India Ltd. (304 ITR 360) has upheld the disallowance of commission even though the assessee had submitted debit notes and payment to commission agent had been made by account payee cheques. It was observed as under: "There is absolutely no material on record to suggest that M/s Ram Agencies had procured any sale orders for the assessee. The production of a few bills or payments having been made by account payee cheques cannot by itself show that M/s Ram Agencies had procured sale orders for the assessee. Apart from an internal note, there i....
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.... of tax by a method impermissible in law. In the cited case, there was no evidence regarding any services rendered by the firm except to the assessee. It was held that creation of the firm was a device for siphoning off profits of assessee in form of commission and marketing and sales promotion expenses. In the case of CIT Vs McDowell Co Ltd. (291 ITR 107), commission paid to agents was disallowed as there was no evidence to prove that the commission agents had rendered any services to the assessee. Accordingly it was held that the assessee was not entitled to deduction of commission. No cognizance can be accorded to the fact that the recipients had filed their returns of income wherein the survey fees paid by the appellant had been offered to tax. It was held by Honourable Punjab & Haryana High Court in the case of Mittal Belting and Machinery Stores Vs CIT (253 ITR 341) that if on the examination of the evidence, it was found that there was no genuine transaction between the parties, a pure paper transaction could not have entitled the assessee to claim benefit under the law. Despite the documentation supporting the claim of the assessee superficially, the evidence could not b....
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....ainik Bhaskar in Rajasthan State. The assessee company adopted a system of conducting door to door survey so as to collect the information regarding readers of the newspaper published by it and the readership of the next competitive newspaper in a particular area. The company also wanted to sustain and increase the present readership base and to convert the readers of other competitive newspaper to the newspaper published by the assessee company. Further, assessee company wanted to know the profile of the readers which may ultimately turn into the increase in the advertisement revenue. The purpose of the survey was to identify the area where vigorous marketing and promotion are required to increase the sales and readership of the newspaper and such exercise has ultimately reflected in the random survey conducted by the independent credit/circulation rating agencies like IRS/NRS, whose results are widely accepted in the print media business and other government agencies allotting various licenses. The assessee company had appointed 9 independent parties to conduct the survey in and around the Municipal limits of Jaipur District. The said firms had conducted the survey by their self ....
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....pon the following decisions :- 37 ITR 151 Omar Salay Mohammad Sait vs. CIT 26 ITR 736 Dhirajlal Girdharilal vs. CIT 26 ITR 775 Dhakeshwari Cotton Mills Ltd. vs. CIT 37 ITR 288 Lal Chand Bhagat Ambica Ram vs. CIT 91 ITR 8 CIT vs. Calcutta Discount Company Ltd. The ld. A/R argued that the AO cannot walk into the shoes of the businessman to verify the necessity or the business expediency. He further relied on the case of Empire Jute Co. Ltd. vs. CIt, 124 ITR 1 (SC) and S.A. Builders vs. CIT, 158 Taxman 74 (SC) and argued that it was a business need to incur the expenditure on marketing. Therefore, he requested to delete the addition confirmed by ld. CIT (A). 12. At the outset, the ld. CIT DR vehemently supported the order of the ld. CIT (A) and reiterated the arguments given by the lower authorities that these parties did not have any capacity/expertise to render the required services for which payment had been made by the assessee. Therefore, he requested to uphold the order of ld. CIT (A). 13. We have heard rival contentions and perused the material available on record. The coordinate Bench of the Tribunal in assessee's own case in ITA No. 519, 520 and 521/JP/2012 for A....
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....ion. The raw material in the form of newsprint remains only in the form of newsprint. Neither any manufacturing of newsprint work is done nor any other raw material are mixed in the newsprints. Thus no new article or thing comes up which can be termed as manufacturing of article. He further relied on the order of Hon'ble Supreme Court in the case of CIT vs. Pio Food Packers (1980) 46 ITR 63 (SC), Union of India vs. Delhi Cloth and General Mills (1977) ELT(J) 199 (SC), South Bihar Sugar Mills vs. Union of India (1978) ELT(J)(3) (SC), Empire Industries Ltd. vs. Union of India (1986) 162 ITR 846 (SC) on manufacturing. The assessee itself had not treated the printing and publication activity as manufacture in the past and no additional depreciation has been claimed by the assessee in the past. Therefore, he disallowed the additional depreciation claimed by the assessee of Rs. 54,34,045/-. 15. Being aggrieved by the order of the AO, assessee carried the matter before ld. CIT (A) who had deleted the addition by observing as under :- " 11.3. I have considered the facts of the case; assessment order and appellant's written submission. Against this disallowance, appellant submitted that ....
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....s ground of appeal is allowed." It is not in dispute that facts of this year are same as assessment year 2008-09. Therefore respectfully following the aforesaid appeal order on the identical facts, additional depreciation claimed by the appellant is allowed." 16. Now the Revenue is before us. 17. The ld. D/R vehemently supported the order of AO and argued that these disallowances were made by the AO consistently on the ground that assessee was not in any manufacturing activity. Therefore, additional depreciation claimed by the assessee is not allowable. Thus he requested to confirm the order of the A.O. 18. At the outset, the ld. A/R of the assessee submitted that Hon'ble Tribunal in assessee's own case for A.Y. 2005-06, 06-07 and 08-09 had considered the identical issue and upheld the order of ld. CIT (A). He further argued that 'manufacture' had not been defined in section 32(1)(iia) of the IT Act but same can be referred in section 2(29BA) of the IT Act. The assessee is covered by the definition provided in section 2(29BA) of the Act. He further relied on the decision in the case of CIT vs. Delhi Press Patra Prakashan Ltd. (2013) 355 ITR 14 (Delhi), DCIT vs. M/s. Mathrubhum....