TaxTMI 
TaxTMI 
2018 (5) TMI 1743
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....ent years 2011-12 & 2012-13 respectively. 2. The assessee has raised several identical grounds in its appeals however the cruxes of the issues are that:- (i) The Ld.CIT(A) has erred in confirming the addition made by the Ld.AO towards disallowance of nomination fees of Rs. 3,14,92,370/- & Rs. 2,76,99,239/- debited to the P&L account for the assessment years 2011-12 & 2012-13 respectively. (ii) The Ld.CIT(A) has upheld the order of Ld.AO for levy of interest U/s.234B, 234C & 234D of the Act for the assessment years 2011-12 & 2012-13. 3. The brief facts of the case are that the assessee is a private limited company engaged in the business of manufacturing plastic and garment hangers, filed its return of income for the ....
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....need to be an accredited/preferred vendor of his final customers. Some retail stores based on our Group's brand image /global presence accredit "Mainetti India" as a preferred vendorconsequent to which the garment manufacturer places his orders with us. In this connection, it is most humbly submitted that the four non-resident companies viz., ASDA Stores Ltd (ASDA), C&A Buying GMBH (C&A) and Gap lnc (Old Navy) & Arcadia Ltd (BHS) are assessee's customers. The assessee has entered into an agreement with these retailers by which they have nominated the assessee as their "sole hanger supplier" to heir garment vendors located in India. By this arrangement, whenever the garment suppliers in India get orders from these non-resident r....
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....s, which was not available prior to the agreement. Further being an accredited vendor to global brands gives us an edge in our business and also to procure fresh businesses/leads. The global competition/spurious products make the business very competitive. At this stage this nomination agreement was a new leg to the business entered into by the assessee with non-resident its retail customers, As mentioned above, by virtue of this agreement not only is business secured bill a continuous return on investment in tools made by the assessee company is ensured. In this connection, attention is drown to the decision of the Hon'ble Supreme Court in the case of SA, Builders Ltd v CIT(A) & Anr [2007] 288 ITR I ....
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....ds such business plan at the time of incurring expenditure for purchase of specialized tools. (iv) There was no tripartite agreement between the assessee, garment manufacturers and the assessee's clients such as the owners of the brand Old Navy, Asda George, C&A, Arcadia etc., with respect to payment of nomination fees. Thus there is no nexus between the expenditure incurred by the assessee and the business of the assessee. (v) It was not prudent on the part of the assessee to incur such expenditure. For the above mentioned reasons, the Ld.AO disallowed the expenditure incurred by the assessee towards nomination fee for both the assessment years. 4.1 On appeal, the Ld.CIT(A) concurred with the view of the Ld.AO and f....
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....dors along with the hangers which are to be supplied by the assessee as per the direction of the assessee's clients and the garment vendors were liable to make payment for the hangers supplied by the assessee. (iv) By this arrangement the assessee has secured business avoiding competition. As a consideration the assessee has to pay certain amount as nomination fee which is to be worked out on a specified percentage on the sale value of the hangers to the assessee's clients ASDS Store Limited and C&A owning the brands such as Old Navy, Asda George, C&A, Arcadia, etc., (v) Due to the arrangement with the assessee's client, the assessee's has made huge investment in tools for manufacturing hangers to the requirement of the as....
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....e not in dispute and is also genuine. More over the clients of the assessee are in a position to influence the purchase price of the hangers purchased by the garment suppliers from the assessee. In these circumstances when the clients of the assessee have insisted the garment suppliers to purchase the hanger from the assessee, it is quite natural that they would expect some benefit out of the transaction. Further the clients of the assessee are in a position to control certain business policies of the garment suppliers because they buy bulk garments from them. Therefore when they charge a nomination fee from the assessee on turnover basis, it is genuine business expenditure incurred by the assessee and cannot be brushed aside by stating tha....