2018 (4) TMI 188

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...., the assessee-company, is a wholly owned subsidiary of M/s.Renault SAS, France and is primarily engaged in rendering engineering and design and sourcing support services & logistic services to M/s.Renault SAS, France. The company also decided to engage in manufacturing of cars in India and initiated activities to set up a manufacturing plant India. In the assessment made for the assessment year 2010-11, the ld. Assessing Officer, inter alia, disallowed promotional expenditure of Rs. 1,29,83,803/-, which represents expenses incurred in relation to the participation in Auto Expo 2010 for promotion of Renault cars. The next issue is relating to assessee's claim of Capital Work in Progress (CWIP). The assessee wrote off CWIP in the statement o....

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....dia Pvt Ltd. at page-82 of paper book filed by the assessee company. Thereafter, the ld.A.R invited our attention to the amended Service Agreement dated 24.12.2008 and sought our attention to Article-2 - Variation of Article 3 Scope of Services - which is extracted as under:- "ARTICLE 2 -VARIATION OF ARTICLE 3 SCOPE OF SERVICES Article 3 of the Service Agreement shall be modified and read as follows:- '3.2 Additional Services. It is agreed that any Additional Services, i.e. services not covered in the scope of Services set out in Section 3.1, as may be required by RENAULT, shall be provided by RIPL, upon mutually acceptable terms (including financial terms) that may be agreed from time to time by the Parties, cons....

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....quest of RSAS is specifically covered in the scope of services provided by the company to RSAS. Therefore, the promotional expenditure is nothing, but the cost of services provided by the company. The expenditure incurred by the company towards such exhibitions and trade fairs were invoiced and compensated by RSAS at cost plus a mark-up, as evidenced by the computation of service revenue as in paper book page-47. Thus, when the mark up on total operating expenses disclosed by the assessee is accepted by the TPO without any adjustments, and the assessee's expenditure is in accordance with the agreement, the disallowance made by the ld. Assessing Officer and sustained by the Ld.CIT(A) is held as unwarranted and hence the addition is deleted. ....

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.... as the write off was made on the ground of commercial expediency. The ld. Assessing Officer did not adjudicate on this claim. Aggrieved, the assessee prayed before the Ld.CIT(A) to allow CWIP expenditure u/s.37 of the Act. The Ld.CIT(A) did not consider the claim on merits, but dismissed the claim solely on the ground that CWIP was disallowed in the return filed by the assessee. In this regard, the ld.A.R relying on the decisions of jurisdictional High Court in the case of C.I.T Chennai Vs. Abhinitha Foundations (P.) Ltd., reported in (2017) 83 Taxmann.com 100(Mad.) and in the case of Ramco Cements Ltd. Vs. DCIT reported in (2015) 373 ITR 146(Mds.), pleaded that even if a claim made by assesseecompany does not form part of original return ....