TaxTMI 
TaxTMI 
2015 (12) TMI 1800
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....nditure for enduring benefit, thereby capital in nature as against 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 bri....
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....ch are contained at page 19 to 39 of the assessee's paper book. It was further brought to the notice of the Bench that 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 int....
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....ervices though availed does not yield into any ostensible benefit. Whereas in this case assessee has been able to demonstrate that there are ostensible benefits. Thus this proposition 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 as....
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....accounts. In view of the foregoing we are of the considered view that assessee's claim falls in the category of revenue expenses and deserves to be allowed. This ground succeeds." 3.4 Hence respectfully following 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 mo....
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.... extent of Rs. 3.5 crores on which no TDS was deducted are not fully verifiable. Since appellant did not meet the specific requirement of the AO and just submitted Sample invoices, the AO could not have verified the vouchers in respect of these expenses on 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....
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....ation and due weightage should be given. Further it is noted that the assessee has submitted complete party-wise detail chart on which TDS is deducted. Further detailed explanation on advertisement expenses and sample invoices were also filed vide letter dated 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 ....
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..... During the year under consideration, certain obsolete, damaged and unusable inventory items have been written off in the books of accounts. The company has carried out his adjustment to reflect the current ad true value of inventory in the audited statement of accounts and this is in accordance with the system of accounting and method of valuation of inventory 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....
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.... by the ld. CIT(A) is deleted." 5.4 We have heard the rival contentions and perused the material available on record. It is noted that the assesee has given details about the inventory write off alongwith the ledger codes whereby the identified items of inventory are written off in the books of accounts. Further it is noted that there is no change in the accounting policy which has been followed by the 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 ex....