2017 (11) TMI 860

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....92,210/- brought to tax, on the ground of excessive price support paid by the assessee, is erroneous.   2. The business model, which the Assessee adopts, is premised upon sales of its product i.e. bottlers, its various parts and other articles to its distributors in various parts of the country.   3. For Assessment Year 2006-2007, the Assessee claims deduction for Rs. 50.95 crores on account of price support expenses; its profit and loss account reflected sale turnover of Rs. 358.05 crores. The price support was provided to 21 parties - 18 of them concededly were unrelated. The other three were related parties, of which the transaction in question is concerned with two parties. The Assessing Officer was of the opinion that o....

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....the rival submissions and perused the relevant material on record. It is observed that the assessee gave incentive to its related and non-related bottlers in terms of volume discount. Such amount of price support to the tune of Rs. 50.95 crore was claimed as deduction. From a perusal of the first chart drawn above, it can be seen that the Price support has been allowed to three related parties mentioned at Sl.nos.1,10 and 16 and the percentage of such price support to sales is 12.42% in the case of party at Sl.no.16. Apart from these three related parties, the assessee also paid price support to 18 non-related parties and the percentage of such volume discount ranges from 0% to 32.90%. The ld. AR contended that the magnitude of price suppor....

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.... support amounting to Rs. 50.95 crore, the AO picked up certain items of debits and credits from the same price support account which were categorized by the assessee as provision. The difference between two such totals of debits and credits was disallowed. This disallowance was made on the premise that the provision for price support could not be allowed as deduction. On the contrary, the assessee is paying price support in two ways. While, to some of the parties, the amount is straight away paid and directly debted to this account to others, a monthly provision is made on the sales made on the sales made to them during the respective month. Subsequently, such provision is reduced or enhanced with the actual amount of discount. To illustra....