2016 (2) TMI 263

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....2010-2011 & 2011-2012 with regard to confirming the disallowance of sales promotion expenses. ITA No.6429/Mum/2013(AY : 2010-2011) 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in manufacturing of various pharmaceuticals products and having sales within and outside India. During the year under consideration, the assessee had debited an amount of Rs. 4,32,11,406/- under the head „sales promotion expenses‟. Accordingly the details were called for and noticed that an amount of Rs. 22,45,000/- was relating to freebies given to medical practitioners. The AO disallowed Rs. 22,45,000/- by invoking Explanation to Section 37(1) and CBDT Circular dated 1-8-2012. 4. By the....

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....shares of Rs. 10 each at a premium of Rs. 36 pr share to promoter family. Assessee received 10% of warrant price on allotment, that is, Rs. 4.60 per warrant aggregating to Rs. 14,95,000/-. Balance amount was to be received within 18 months as per SEBI guidelines. However, due to fall in share price of company, warrant holders did not avail the option for conversion of the warrants into equity shares within the stipulated time as per SEBI(DIP) guidelines and as per the terms of the issue within a period of 18 months from the date of allotment i.e. 28th Sept., 2009 resulting in violation of terms of the issue and accordingly the upfront amount of Rs. 4.60 per warrant paid by the warrant holder was forfeited by the company. The forfeited amoun....

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....the course of trading transactions and that write back thereof was taken to profit & loss account. In the case of Solid Containers Ltd., it was a case of write back of loan taken for business purposes. Thus, both the cases deal with the amounts credited to profits and loss account which amounts were initially received in the course of trading and business activities, therefore, not relevant to the facts of the present case. In the present case, the amount was received for increase in share capital i.e. capital account and that the forfeited amount was disclosed as capital reserve and not credited to the profit & loss account. The AR has also relied on a number of decisions cited above and also the decision of hon'ble Supreme Court in ca....

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.... the arrangement had been received by assessee, they would have been credited in its account as capital receipt, that being so the forfeited amounts must also be treated as capital receipts. Since the facts of the present case are squarely covered by the decision of hon'ble Supreme Court, therefore, the addition made by the AO. is not sustainable, hence deleted. Ground of appeal is allowed." Against the above order of CIT(A), the revenue is in further appeal before us. 9. We found that warrants were converted into shares, however, money contributions did not contribute these warrants into shares, therefore, their contributions were forfeited which was treated by assessee as capital receipts. The issue is squarely covered by the de....