TaxTMI 
TaxTMI 
2022 (8) TMI 684
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....uring the course of hearing, our adjudication would be as under. Assessment Year 2007-08 3. The cross-appeals for AY 2007-08 arise out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 30.11.2017 in the matter of assessment framed by Ld. Assessing Officer u/s 153A r.w.s. 143(3) on 31.03.2015. The grounds raised by the assessee read as under: - 1. The Order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Sales Promotion expenditure. 2.1 The Appellant submits that it has incurred an amount of Rs.1,79,66,375/- towards Sales Promotion expenditure in the ordinary course of business, hence, disallowance of the same is uncalled for. 2.2 The Commissioner of Income Tax (Appeals) ought to have appreciated that the performance of the appellant company has increased comparatively from the earlier years which is mainly attributable to the Sales Promotions carried out by the appellant, hence, denial of the claim of expenditure incurred towards sales promotion is against the law and uncalled for. 2.3 The Commiss....
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....ction u/s.80IA is intended to be allowable only for such power generating units. 2.5. The Id CIT(A) ought to have considered the fact that the decision of the Hon'ble High Court of Madras in the assessee's case for the AY 2005-06 on similar issue has not reached finality, since SLP filed by the revenue u/s. 261 of the IT Act, 1961 against the same is pending before the Hon'ble Supreme Court of India. 3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned ClT(Appeals) may be set aside and that of the Assessing Officer be restored. RELIEF CLAIMED IN APPEAL The order of the learned CIT (Appeals) may be set aside and that of the Assessing Officer be restored. 4. The assessment was so framed since the assessee was subjected to search action u/s 132 on 11.05.2012 wherein certain incriminating documents were found and seized. The assessee is stated to be engaged in manufacturing of Beer, IMFL, Spirit, Malt, Glass Bottles, Bio-compost, wind / biomass energy & agricultural activities and trading. Assessment Proceedings 5.1 The assessee claimed deduction u/s 80-IA for ....
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....was made in order to promote sales. As a result of this expenditure, there was increase in turnover and therefore, the expenditure was incurred exclusively and wholly for business purpose. Similar expenditure was incurred in the state of Andhra Pardesh and Kerala which was paid through a private marketing agency appointed by the assessee. 5.6 Not satisfied with the reply, Shri T. Krishnamurthy was summoned and another statement was recorded from him u/s 131 on 26.02.2015. It transpired that the there was two type of expenditure-one which was paid to own sales representative on achieving the fixed targets. These sales representatives are on pay roll of the assessee. The second incentive was paid by sales representative to Tasmac Depot Managers & retail employees in cash with the approval of the assessee. However, the payees could not be identified and it was submitted that these were mere reimbursements which would not warrant Tax Deduction at Source (TDS). However, it transpired that these payments were evidenced merely by self-made vouchers without their being any supporting third party vouchers. 5.7 On the basis of these facts, Ld. AO held that the identity of payees was not re....
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....such conditions, the disallowance could not be sustained. Aggrieved, the revenue is in further appeal before us. 6.3 The disallowance of Sales Promotion expenses was confirmed with the following observations: - As can be seen from the replies to the sworn statement these payments even though their nomenclature has been mentioned as such, are not an allowable expenditure u/s. 37 as they are prohibitive. The A.O also correctly disallowed the said expenditure by referring to Explanation 1 to Sub-section 1 of Section 37 of the Act which reads as under: ......" it is hereby declared that any expenditure incurred by an assesses for any purpose which Is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect' of such expenditure" This inference is further strengthened by the fact that there are no vouchers, produced either before the AO during assessment proceedings or before the undersigned during the appellate proceedings evidencing such payments duly signed by the recipients. 6.4 The legal grounds were dismissed as under: - The appellant objects to t....
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....practices notwithstanding the facts that the same were paid in gross violation of provisions of Sec.40A(3) and also in violation of TDS provisions which mandate tax deduction at source on such payment. The argument that these were mere reimbursements could not be accepted in the light of the fact that such payments constitute expenditure for the assessee and has been debited in the Profit & Loss Account. Another argument that there was increase in turnover would also not be relevant, in this regard. In another statement recorded during the course of assessment proceedings, the position as aforesaid was maintained. The statement of Area Sales Manager further confirmed the modus operandi of such payments. 8. Proceeding further, it could also be noted that the assessee is not able to identify the payees of such payments. No details of payees could be submitted and the quantification of the expenditure remained elusive. Nothing was shown that the payments so made were offered to tax by the payees thereof. The only supporting document given by the assessee was self-made vouchers without their being any supporting third-party vouchers. 9. Therefore, on the facts and circumstances of th....
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....e which is an offence or which is prohibited by law". The IT Act does not provide a definition for these terms. Section 2(38) of the General Clauses Act, 1897 defines 'offence' as "any act or omission made punishable by any law for the time being in force". Under the IPC, section 40 defines it as "a thing punishable by this Code", read with section 43 which defines 'illegal' as being applicable to "everything which is an offence or which is prohibited by law, or which furnishes ground for a civil action". It is therefore clear that Explanation 1 contains within its ambit all such activities which are illegal/prohibited by law and/or punishable. This was further held that a narrow interpretation of Explanation 1 to section 37(1) defeats the purpose for which it was inserted, i.e., to disallow an assessee from claiming a tax benefit for its participation in an illegal activity. It is also held that a settled principle of law is that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regi....
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....he assessee has also been dismissed by Hon'ble Apex Court. This being the case, impugned order does not require any interference on our part. The revenue's appeal stands dismissed. Assessment Year 2008-09 14. The only issue in assessee's appeal is disallowance of Sales Promotion expenses which has already been held against the assessee. Accordingly, the assessee's appeal stands dismissed. 15. The first issue in revenue's appeal is grant of deduction u/s 80-IA by Ld. CIT(A). The Ld. CIT(A) has deleted the disallowance on the ground that this addition was not based on any incriminating material found during the course of search action. This issue, on merits, is allowed by us in para-13 considering the earlier favorable decision of the Tribunal coupled with the decision of Hon'ble Madras High Court in assessee's own case. Accordingly, this ground stand dismissed. 16. The other grounds raised by the revenue are with respect to computation of Short-Term Capital Gains and penal interest for belated tax payments. The Ld. CIT(A) has deleted the disallowance on the ground that this addition was not based on any incriminating material found during the course of search action. We find tha....
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....r statistical purposes. Assessee's Appeal: Assessment Year 2011-12 21. Ground No.3 and its sub-grounds are related with disallowance of Sales Promotion expenses which has already been held against the assessee. Accordingly, the corresponding grounds raised in the appeal stand dismissed, 22. The other ground is related with income arising out of slump sale. The assessee reflected loss of Rs.76.40 Crores on sale of Bio-Mass division. However, the gain arising on the same for Rs.28.28 Crores was not considered in the computation. The division was sold to M/s Nanda Energy Ltd. (NEL) at Rs.65 Crores on slump sale basis vide agreement dated 24.05.2010 out of which Rs.12.61 crores was earmarked to discharge the terms lenders of bio-mass division and the balance Rs.52.39 Crores was payable to the assessee. However, in the books of NEL, the addition to fixed asset was shown as Rs.77.80 Crores. As against the same, the assessee computed capital gains considering sale consideration as Rs.68.28 Crores only. In the above facts, Ld. AO added the difference of Rs.9.52 Crores to the income of the assessee. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further appeal before us. 23....