TaxTMI 
TaxTMI 
2016 (8) TMI 1198
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....additional ground. The Departmental Representiatve (DR) left the issue to the discretion of the Bench. We have gone through the additional Ground of appeal and find that facts are not to be probed in to. Therefore, we admit the said ground. ITA/2812/M/2013: 3. First ground pertains to disallowance of Rs. 2.5 crores under the head payment to sole selling agent. During the assessment proceedings, the AO found that the assessee had sold part of its assets of its PS Plate business to M/s. Technova Imaging Systems (I) Pvt. Ltd.(TISIPL),that a part of the same was utilised to pay M/s. ATE Marketing Pvt. Ltd.(AMPL) as a compensation for early termination of a long term agreement for various products including the product of PS Plate product, that the compensation amount was determined at Rs. 2.05 crores, that it had claimed that same was an allowable expenditure, as it had been incurred in the normal course of business. The assessee relied upon the case of Motor Industries Company Ltd. (223 ITR 112). The AO held that the above-mentioned judgment was pronounced in the year 1996 and pertain to the assessment year 1978-79. He referred to the case of TI Diamond Chain Ltd. (274 ITR 59),w....
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....sis of actual sale done by the sole selling agent, that there was no logical or legal basis for the payment. With regard to the submission of the assessee that section 294A of the Companies Act permitted compensation for loss of office, the FAA held that the section in question prohibited payment of compensation, that the said section was not an enabling section to pay compensation rather it was a restrictive section to restrict payment of compensation not to exceed the remuneration which would have been earned for loss of office. He further held that payment of compensation for termination of agency of graphic division on 30.06.2006 coincided with the date of sale of graphic division, that consideration received on sale of graphic division was a capital receipt, that the compensation paid for termination of agency was capital expenditure, that both the activities were interrelated and gave enduring benefit to the assessee, that directors of the assessee company and the agency company were common, that the expenditure incurred by the assessee was not wholly and exclusively for the purpose of the business considering the provisions of section 294A of the Companies Act. 3.2. Durin....
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....factually correct to hold that the agreement was due to expire in five months from the termination, that the agreement in respect of the sale of graphic division products was to expire on 27.11.2007 i.e. 16 months and 27 days after the termination and not five months as worked out by the AO. We find that the AO and the FAA have questioned the necessity of the payment. In our opinion it is the assessee who has to decide as to how much and as to when certain expenditure has to be incurred or not. The AO cannot sit in the proverbial 'armchair' of the assessee to decide the incurring of expenditure. It is the prerogative of the assessee to run the business in a particular manner. If the expenditure has been incurred, the AO cannot question the justification of incurring of the expenditure unless and until the said expenditure is incurred for the purposes prohibited by the law. The incurring of expenditure is not in doubt. The assessee took a decision, after selling the graphic division, to compensate the sole selling agent as per the agreement. It was a pure commercial decision and the AO had no business to question the intelligence of the assessee in that regard. In the case of Dal....
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....he cost of acquisition was nil, that the receipt of Rs. 10 lakhs had to be taxed as capital gains and not under the head income from other sources. After considering the submission of the assessee and the assessment order, he held that Rs. 10 lakhs received by the assessee was not for transfer of any assettangible or intangible, that the name of the graphic division was also not transferred by the assessee to TISIPL, that the amount in question was not received for transfer of goodwill, that the assessee had incorrectly given the nomenclatures goodwill to the receipt of Rs. 10 lakhs, that it was not clear as to why TISIPL had paid Rs. 10 lakhs to the assessee, that on transfer of any asset owned by an assessee income is assessed under the head income from capital gain, that it was not able to specify as to which asset was transferred to TISIPL, that the AO was justified in assessing the receipt under the head income from other sources. 4.2. Before us, the AR stated that the assessee had sold the graphic division and had offered LTCG for the transaction in question. He referred to pg Nos.179, 159 of the PB and stated breakup of all assets were furnished to the AO during the asses....
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....ssue as to whether a person was an employee or not, that a large number of contract persons would be employed in various private companies and also by govern ment agencies on contract basis, that despite putting up many years of service such persons or workers are never made permanent employees of the respective organisations, that in the VRS , adopted by the assessee, it was mentioned that scheme was applicable to the permanent employees of the company only, that neither the AO nor the assessee submitted the list and evidence of permanent employees. He directed the assessee to furnish the list and evidence of persons being permanent employees of the company. He also directed the AO to allow the deduction accordingly. 5.2. Before us, the AR stated that out of the total expenditure claimed under section 35DDA expenditure of Rs. 12.73 lakhs only pertained to the contract employees, that the AO had not given effect of the order of the FAA till date. Alternatively, it was argued that if the amount was not to be allowed u/s. 35DDA, the same should be allowed u/s.37(1) of the Act, as the amount was spent for business purposes. The DR stated that the payment was for voluntary retiremen....