TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 1800
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....inst revenue claimed by the assessee. (iii) The ld. CIT(A) has erred on facts and in law in confirming disallowance of Rs. 35 lacs out of advertisement expenses." Ground taken by Revenue in ITA No. 192/JP/14 (i) "The ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the disallowance of Rs. 1,07,38,198/- made by AO on account of write off of inventories. (ii) The ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the disallowance of Rs. 41,61,559/- made by AO on account of Travelling and conveyance expenses. (iii) That the CIT(A) has erred in law as no details on the facts and circumstances of the case in restricting the disallowance of Rs. 50,00,000/- to Rs. 35,00,000/- made by the AO on account of advertisement expenses. (iv) The ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the disallowance of Rs. 14,20,259/- made on account of Miscellaneous expenses." 2. Regarding the first ground of appeal taken by the assessee, the facts in brief as stated in the TPO's order dated 2.10.2011 are as under: 2.1 The assessee has made payment of ....
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....at the Coordinate Bench of ITAT in assessee's own case for AY. 2007-08 has decided the matter in favour of the assessee. 2.5 The Coordinate Bench in its order dated 11.08.2015 in ITA No. 1087/JP/2011 for A.Y. 2007-08 has given the following findings at para 5 to 5.2 of its order which reads as under: "We have heard the rival contentions and perused the material available on record on this issue. It emerges from the record that assessee submitted following documents: (1) Business services agreement vide its submission dated 27January, 2010 (2) Details break up of services rendered by Singapore & Philippines (3) Balance sheet and Profit and loss Account of P&G Singapore (4) Similar services were provided by the AE to other Indian P & G affiliates. (5) Ledger account of the AE (P&G Singapore) and all debit notes and other support evidences. Besides, we find that the TPO has observed that - (a) The assessee is a start up company which is not correct as it was already an established company came into new regime of P&G business consolidation. Similar services have provided by the AE not only to the assessee but to various other units on a uniform business policy. ....
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....tion also fails under the domain business acumen of the assessee. Considering all the facts as narrated above, and the case laws, we may further add that there is no whisper by lower authorities that the ALP work provided by the assessee suffers from any infirmity. It is not proper to go for an ALP ascertainment without finding any fault with the assessee's working. The TP services provide that the AO himself first record its objections on the merits of the working of the assessee, Without doing so, the ALP determination becomes a questionable exercise. In the entirety of facts and circumstances we hold that the TP adjustment to the ALP as furnished by the assessee is without any justification . The same is deleted." 2.6 Given that there is no change in the facts and circumstances of the case, respectfully following the decision of the Coordinate Bench in assessee own case that A.Y 2007-08, adjustment of Rs. 4,54,29,602/- u/s 93C(3) of the Act in respect of payment for business services to AEs of the assessee is deleted. Hence the ground No.1 of the assessee is allowed. 3. Regarding ground no.2, the assessee has challenged the disallowance of restructuring expenses of Rs. 4,53,7....
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....Coordinate Bench decision for A.Y. 2007-08, disallowance of Rs. 4,53,76,793/- is deleted. Ground No.2 of the assessee is allowed. 4. Ground No.3 of the assessee as well as ground No.3 of the Departmental appeal relates to disallowance of Rs. 50 lacs made by the AO on account of advertisement expenses. The assessee is contesting disallowance of Rs. 35 lacs which has been sustained by the ld. CIT(A) whereas the revenue is contesting the relief of Rs. 15 lacs provided by the ld. CIT(A) to the assessee. 4.1 The facts in brief as per AO's order are that the assessee has debited expenditure of Rs. 68,45,77,760/- under the head "advertisement and sales promotion". Accordingly the assessee was required to furnish nature & details of advertisement expenses debited at Rs. 68,46,77,760/ and TDS compliance made thereupon. The assessee was also required to furnish party-wise details of payment of advertisement of expenses exceeding Rs. 1 lac paid in India and abroad and the mode of such payment. If any agreement/contract executed in this regards with the parties, furnish a copy of the same. Indicate the purpose considering the monopoly status of the products enjoyed. Vide written reply dated....
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....which no TDS was deducted. The Addition made in earlier years out of these expenses was set-aside by ITAT in earlier years to the AO for detailed verification. Therefore the addition made by the AO is not frivolous or arbitrary. Considering the fact that advertisement expenses to the extent of only Rs. 3.5 crores is without deduction of TDS, the disallowance for want of verification is restricted to Rs. 35 lacs which is about 10% of this expenses on which no TDS was deducted and no verification could be made in the absence of complete vouchers. Accordingly disallowance made by the AO is confirmed to the extent of Rs. 35 lakhs." 4.2 We have heard the rival contention and perused the material available on record. As per the assesee, out of the total advertisement expenses of Rs. 68.45 crores, the assessee has deducted TDS on expenses amounting to Rs. 64.83 crores and complete party-wise details showing the name of party, address PAN No. and amount on which TDS has been deducted has been submitted. Further the assessee has given detailed explanation of advertisement expenses and copy of the sample invoices vide its letter dated 19.12.2011 to the AO. Further, as per the assessee all ....
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.... 19.12.2011 which has apparently missed the attention of the AO. In light of that, we are of the considered view that there is no basis for disallowance of advertisement expenses on purely adhoc basis, hence the said addition of Rs. 50 lacs is deleted. Hence the ground No.3 of the assessee is allowed and ground No.3 of the Revenue is dismissed. 5. Now coming to the ground No.1 taken by the Revenue wherein the Revenue has challenged the deletion of disallowance of Rs. 1,07,38,198/- made by the AO on account of write off inventories 5.1 the relevant facts as per AO's order are as under: In the Profit and Loss Account, the assessee has debited expenditure on a/c of Inventories written off of Rs. 1,07,38,98/- under the head "Operating & other expenses". Vide questionnaire dated 18.07.2011 the assessee was required to furnish complete detail of Inventories written off debited at Rs. 1,07,38,198/- alongwith evidences in support of the claim and procedure followed. Please explain as to how Inventory written off can be equated with bad & doubtful debt written off. Vide written reply dated 05.10.2011 (submission-3), AR of the assessee submitted as under: "During the year under con....
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....ory regularly followed by the company on year to year basis. This system of bringing the inventory to the net realizable value is also in accordance with the Indian Accounting Standards-2, which lays down the following accounting system to be mandatory followed by every company with regard to its inventory valuation. The item of inventory written off during the year were originally purchased/ manufactured for sale in the ordinary course of business and were held as regular inventory items in the audited statement of accounts. It is a well settled law that the loss or expenses incurred by the company by following the accounting systems and methods on years to years and which are in accordance with the Accounting standards are allowable expenses. 5.2 The CIT(A) vide his appellate order dated 18.12.2013 in para No. 3.3 has observed that: "I have considered the facts of the case, assessment order and appellant's written submission. The Assessing Officer made the addition in respect of inventory written off on the g round that there are no supporting evidences to justify and establish that the inventories have been actually destroyed. Appellant submitted that this ground is ....
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....e assessee in respect of inventory write off as compared to earlier years. Respectfully following the Coordinate Bench decision in ITA No.188/JP/07 dated 27.05.2011, the disallowance of Rs. 1,07,38,198/- made by the AO on account of inventories write off is deleted. Hence ground No.1 taken by the Revenue is dismissed. 6. The ground No. 2 of the Revenue is regarding disallowance of Rs. 41,61,5589/- on account of Travelling and Conveyance expenses. 6.1 The CIT(A) vide his appellate order dated 18.12.2013 in para No. 4.3 has observed that: "I have considered the facts of the case, assessment order and appellant's written submission. Assessing Officer disallowed 10% of travelling and conveyance expenses on adhoc basis. Appellant submitted that complete details of these expenses were maintained and therefore, there is no question of disallowing these expenses which were incurred wholly and exclusively for the purpose of business. Assessing Officer did not point out the defect or what was missing. Accounts of the appellant were audited and therefore without pointing out any defect, such adhoc disallowance of business expenses is not justified. In the immediate preceding year i.e. ass....