TaxTMI 
TaxTMI 
2015 (3) TMI 1418
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....ure and sale of liquor, filed its returns of income for the assessment years 2003-04, 2004-05 and 2010-11 on 28.11.2003, 30.10.2004 and 11.10.2010 by declaring income of Rs. .15,93,31,700/-, Rs. .5,71,67,785/- and Rs. 12,79,34,101/- respectively. 3. The return of income filed by the assessee for the assessment year 2003-04 was selected for scrutiny and assessment order under section 143(3) of the Income Tax Act was passed on 09.03.2006 by determining the losses at Rs. 14,75,01,475/- [against the loss of Rs. 15,93,31,700/-). Subsequently the Assessing Officer noticed that there was an escapement of income and hence reopened the assessment u/s.147 of the Act by issuing a notice u/s.148 on 26.03.2010. The assessment was completed for the assessment year 2003-04 under section 143(3) r.w.s.147 of the Act and assessed the loss at Rs. 5,86,43,255/-, by disallowing preliminary expenses, service charges and depreciation on intangible assets. 4. Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). 5. In so far as assessment year 2004-05, the assessee had filed return of income and the return filed by the assessee was selected for scrutiny and an assessment under se....
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....ave been deleted by the ITAT of Chennai. The ld. CIT(A), after considering the explanation of the assessee, directed the Assessing Officer to allow expenditure claimed by the assessee as revenue expenses and the relevant portion of the order of the ld. CIT(A) is extracted as under: "4.3.2 I have considered the assessee's submissions carefully. The present issue of disallowance of Service charges / Technical advisory & management fee is a recurring issue and continuation from other assessment years. The Assessing Officer made similar disallowances in other assessment years like A.Y.2008-09. The CIT(A) deleted the disallowances made by the Assessing Officer and allowed the appeals in favour of the assessee. The Hon'ble ITAT also, vide its order in ITA No.1295/Mds/2012 dated 14.02.2013, confirmed the decision of the CIT(A). Since the facts are identical and the payments are in continuation (recurring), the above decision of the ITAT in A.Y. 2008-09, is equally applicable for other assessment years of A.Ys.2003-04, 2004-05 & 2010-11. Therefore, respectfully following the decision of the ITAT in the assessee's own case in A.Y.2008-09, I hold that the payments made by the a....
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....ring and trading of liquor. There can be no doubt that M/s UBL, to whom the payment was made, was also a major player in this business. In fact, holding company of the , namely, M/s Millennium Alcobev Pvt. Ltd. (MAPL) was itself co-owned by M/s UBL along with certain other persons. Therefore, claim of the assessee that it had tremendous benefits on account of its association with M/s UBL cannot be brushed aside. No doubt, assessee had produced some e-mail communication and an agreement entered with M/s IOC for purchase of furnace oil for justifying the benefits it had received through its association with M/s UBL, before the CIT(Appeals). However, in our opinion, these were at best corroborative evidence and were not stand alone evidence. Assessee had during the course of assessment proceeding, produced before Assessing Officer details of the services rendered by M/s UBL. In our opinion, even dehors the records produced by the assessee before the ld. CIT(Appeals), it could reasonably demonstrate the business purpose behind its association with M/s UBL. Assessee might not have been able to produce before the Assessing Officer specific evidence, but nevertheless, M/s UBL had acknowle....
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.... No interference is called for." 15. By respectfully following the decision of the Coordinate Bench of the Tribunal in assessee's own case for the assessment year 2008-09, this ground of appeal raised by the Revenue is dismissed for all the three assessment years i.e. 2003-04, 2004-05 and 2010-11. 16. The next ground is relating to depreciation on intangible assets. Facts of the case in brief are that the assessee has claimed depreciation on intangible assets of Rs. 5,53,51,621/- for the assessment year 2003-04, Rs. 4,15,13,720/- for the assessment year 2004-05 and Rs. 73,88,550/- for the assessment year 2010-11. In the assessment order, the Assessing Officer has observed that the assessee purchased trademarks, licenses and permissions etc. from M/s. Empee Distilleries Ltd, vide agreement dated 28.02.2002 for a sum of Rs. 2200 lakhs. The assessee, as on 31.03.2003, capitalized the said amount, together with the interest portion of Rs. 14,06,508/- on the loan taken for acquiring the trademarks, licenses and permissions etc, and claimed depreciation @ 25%, amounting to Rs. 5,53,51,627/-, in the A.Y.2003-04. This left an opening WDV of Rs. 16,60,54,661/- as on 01.04.2003, on which t....
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....t since the Department is in further appeal, he supported the order passed by the Assessing Officer. 21. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issued involved is with regard to depreciation on intangible assets. Similar issue has came up before the Tribunal for the assessment years 2005-06 to 2008-09 and the ld. CIT(A) deleted the disallowance made by the Assessing Officer and allowed the appeals in favour of the assessee. The Tribunal in its order in I.T.A. Nos. 1208 & 1209/Mds/2012 dated 14.02.2013 for the assessment year 2007-08 and in I.T.A. No. 1295/Mds/2012 dated 14.02.2013 for the assessment year 2008-09 confirmed the orders of the ld. CIT(A). The present assessment years under consideration i.e. assessment years 2003-04 and 2010-11 also, since the facts are identical and the issue is recurring one, the ld. CIT(A), by following the above decisions of the Tribunal allowed the depreciation claim of the assessee for the assessment years 2003-04 and 2010-11. The ld. CIT(A), while deciding the issue has considered the entire issue of depreciation and also extracted the order of the ld. CIT(A) for the asses....
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....ions of section 32 ought to be fulfilled and nothing more. He stated that the appellant had acquired all assets relating to Empee Breweries Ltd vide an agreement dated 28.2.2002 and a Trade Mark Licence agreement dated 28.2.2002. As part of the assets, a sum of Rs.242 crores was paid in respect of trademarks and licences. He argued that Income- tax proceedings are not res judicata in nature and proceedings relating to each assessment year is separate. He relied on various decisions for the above proposition. The asset purchase agreement and the trade mark usage agreements have been produced to prove that the consideration paid for trademarks, licence, permissions etc was Rs.2200.00 lakh from out of total consideration of Rs.3785.2 lakhs. Further, the ld. AR has relied on several case laws which clearly hold that intangible assets are eligible for allowance of depreciation. The schedule for allowance of depreciation has clearly provided the rate of depreciation allowable in the case of intangibles. He also relied on the decision of the Hon'ble Supreme Court in the case of Techno Shares and Stock Ltd v. CIT. 327 ITR 323 (SC) and the Chennai Bench of the Tribunal in the case of ....
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....ause (ii) of section 32(1), trademarks, licence etc or any other business or commercial rights of similar nature being intangible assets acquired on or after 1.4.98 are eligible for depreciation. Once the conditions laid down for making a claim for depreciation are satisfied, the AO has to grant depreciation. The fact that an asset may appreciate and therefore is not eligible for depreciation allowance has not been prescribed anywhere in the Income-tax Act. A restriction which is not there in the Act cannot be inserted to deny the relief envisaged in the statute. When the Act allows depreciation on intangibles including trade mark and licence and when the words of the section are clear and unambiguous, the AO is obliged to allow such depreciation at the applicable rate. I also agree that decision in one year will not operate as res judicata in the subsequent year. An assessment year under the Act is a self-contained assessment period and a decision in one assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subsequent year. Reliance is placed on the decisions of the Hon'ble Supreme Court in the cases of Joint Family of Udayan Chinu....
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....e on these intangible assets, had come up before this Tribunal in assessee's appeal against a 263 revision attempted by CIT for assessment year 2007-08 in I.T.A. No. 1209/Mds/2012. This Tribunal had at para 15 to 19 held that the claim of depreciation was justified. Paras 15 to 19 of the said order is reproduced hereunder:- "15. We have perused the orders and heard the rival submissions. Without doubt, assessee had entered into two agreements with M/s Empee Distilleries Ltd. By virtue of first agreement, copy of which is placed at paper-book pages 1 to 53, assessee had acquired following assets from the said company:- " "Operating Assets" shall mean the assets and includes (a) Plant and machinery : Rs. 1566.24 lakhs (b) Vehicles : Rs. 15.63 lakhs (c) Furniture & fittings : Rs. 1.18 lakhs (d) Computers : Rs. 0.90 lakhs (e) Office equipments : Rs. 1.31 lakhs (f) Trade Marks, licence& permissions, etc.: Rs. 2200.00 lakhs TOTAL : Rs. 3785.26 lakhs Thus, assessee had acquired all the operating assets of the said company and the agreement came into effect on 28th February, 2002. 16. Second agreement, copy of which is placed at paper-book pages ....
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.... opinion, ld. CIT fell in error when he came to a conclusion that assessee had obtained right to use trademark 'morco polo', through the second agreement whereas, assessee had, in fact given a right to use such trade mark to M/s Empee Distilleries Ltd. Ld. CIT misunderstood the second agreement completely. Further, both these agreements were entered in February, 2002. February, 2002 fell in previous year relevant to assessment year 2003-04. Assessee had in its return for assessment year 2003-04 claimed depreciation on the value ofRs. 22 crores for trademarks and licences. Assessment for assessment year 2003-04 was completed under Section 143(3) of the Act and such claim was allowed also. In para 3 of the assessment order for assessment year 2003-04, Assessing Officer had mentioned as under:- "In response to the hearing notice, assessee's representative Shri N. Ranganathan, Company Secretary, appeared and furnished the details. The assessee's representative also produced the bills for addition to fixed assets, copy of agreement between M/s Empee Distilleries and M/s Mc Dowell. After verifying the details filed the assessment is completed as under" Thus, assessee had produced all....
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....e Apex Court held that this was not a reason to quash the order of CIT since assessee would have opportunity before Assessing Officer to put forth her case, when it was taken up pursuant to revisionary proceedings. In our opinion, the facts of this case are entirely different. Assessee here has not argued that any facts mentioned by the CIT in his revisionary order were not communicated to it. On the other hand, what the assessee here says is that the order of CIT itself was erroneous and not that of Assessing Officer." Accordingly, we are of the opinion that depreciation for impugned assessment year, being claim on Written Down Value, could not have been disallowed. CIT(Appeals) was justified in deleting the addition." 23. In the years under consideration 2003-04 and 2010-11, the ld. CIT(A), by following the decision of the CIT(A) [in ITA No.362/10-11/A-III dt. 27.03.2012], which was upheld by the Tribunal in I.T.A. No. 1295/Mds/2012 dated 14.02.2013, allowed the claim of the assessee. Accordingly, we find no infirmity in the order passed by the ld. CIT(A). Accordingly, the claim of depreciation for the assessment year 2003-04 and 2010-11 are allowed. 24. The next ground raise....
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....have been furnished till the date of passing this order. The Assessing Officer further observed that during the course of statement recorded under section 131, Shri Anil Dubey was asked about the relationship of PPPL with the assessee and the exact nature of services rendered by PPPL to the assessee. All he could confirm was that they received payment per crate as commission. There was no mention about the kind of marketing and promotional activities or buying and distributing the gift articles. In response to a specific question about the exact nature of marketing and sales promotion, his answer was vague. The Assessing Officer has asked the Manager of PPPL, to explain the exact nature of marketing and sales promotion done by PPPL and in his reply, he has stated that they visited the Hotels and market the products of M/s. EBL. When the Assessing Officer asked about the payments received by PPPL approximately in the last three years from EBL, Shri Anil Dubey has replied that for the FY 2009-10, it is between 40 to 45 lakhs, for the FY 2010-11, it is around 50 lakhs and for 2011-12, it is around 53 lakhs and for the current year so far, it is around 35 lakhs. Thereafter, the Assessi....
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....ledger copies of those years starting from AY 2006-07. The DDIT(Inv), Kolkata in his letter has stated that as per enquiries conducted by the Inspectors attached to his office, it is found that no such companies, as enumerated in the above letter, were found at their respective addresses. They were also asked to carry out discreet enquiries and report on the present locations of the said companies but this did not yield any positive result. In view of the above, it may be concluded that the said companies are non-existent. So far as purchases in Chennai is concerned, a total of seven bills were furnished, against which the Assessing Officer made enquires through Inspector and found that no such concerns are doing such business and in one case, the person who signed the bill did not know anything about it. Apart from this, discreet enquires were also made to verify the veracity of the assessee's claims. Some people running TASMAC bars were asked about the alleged promotional schemes of the assessee and they expressed ignorance about such gifts being doled out to patrons of the bars. 27. Further, the Assessing Officer has noted that all the payments to PPPL were through banking....
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.... incurred by your Appellant Company. (e) The Assessing Officer cited two High Court decisions to substantiate the reasons for disallowance. Factual Submissions 31. The Appellant Company filed Copies of Account and reconciled the balance in respect of the account with Presidency Projects Private Limited (PPPL) which were duly countersigned by the service provider. All the transactions were only through bank account and there is no instance of any cash payment made. (Account Copies between the Appellant Company and PPPL and also the reconciliation are enclosed). 32. Your Appellant is furnishing a copy of the audited Balance Sheet and Profit and Loss Account of PPPL which clearly provides two types of income - one is a del credre commission and an excess of reimbursement of expenses which is disclosed as an item of income in the enclosed Profit and Loss Account. 33. Your Appellant Company submits that PPPL received payments which can be broken into two - a component of commission for carrying out sales and marketing expenses and secondly a reimbursement of expenditure - PPPL has declared the excess of reimbursement received in its profit and loss account. 34. The aforemen....
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....with Tieup Trading Private Limited duly signed by both the parties is enclosed. (iv) The sales of the Company is Rs.31.85 Crores for the year ending 31st March, 2010 and the transactions between the PPPL and Tie Up Trading Limited is Rs. 0.83 Crores. (v) A perusal of the Account Copy clearly indicate that gift articles were supplied on account of Empee Breweries Ltd and all payments effected by Presidency Projects Private Limited (PPPL) are only through banks. (b) Ganco'ss India Private Limited (i) A copy of acknowledgement evidencing the filing of the Return of Income electronically for AY 2010/ 11 is enclosed. (ii) A copy of the statement of account between Ganco'ss India Private Limited and Presidency Projects Private Limited is enclosed. (iii) A perusal of the Account Copy clearly indicate that gift articles were supplied on account of Empee Breweries Ltd and all payments effected by Presidency Projects Private Limited (PPPL) are only through banks. (c) Millennium Innovations Private Limited (i) A Copy of the acknowledgement evidencing the filing of the Return of Income electronically for AY 2010/11 is enclosed. (ii) A Copy of the statement of Account ....
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....out any basis. 50. Your Appellant submits that the Assessing Officer has not stated in his Assessment Order, the shops visited and the names of any of the employees who were interviewed by the Inspector. 51. Your Appellant Company submits that there are over 6000 TASMAC shops in the state of Tamil Nadu; the Assessment relates to AY 2010/11 and the enquiries were made sometime in 2013 after a gap of three years. 52. Your Appellant Company further submits that the conclusion arrived on the basis of the 'discrete' enquiries appear to be flawed and is without any substance. 53. Your Appellant therefore submits that having regard to the factual submission, on a perusal of the documents attached which clearly indicate the existence of all the parties pointed out by the assessing officer as not existent, the entire disallowance of Rs.13,44,55,019/- made towards Sales Promotion Expenses be deleted and the claim of the Appellant be allowed in full." 30. After considering the submissions of the assessee, the ld. CIT(A) has observed that while using the report of the Inspector/DDIT(Inv), Kolkata against the assessee, the same was not made available to the assessee during the ....
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....s. It is the pure wish and will of the customers/consumers in selecting the brands while buying beer/liquor from the TASMAC shops or outlets. The sales-staff of TASMAC have no role in this regard. 4.5.5.1 Like any other consumable product, beer/liquor brands require great deal of advertisement and publicity. In fact, more than advertisement in traditional ways, the sale of beer/liquor highly depends on the sales promotional activities. The activities should be more of "attractions" rather than "information". The consumers of beer/liquor from TASMAC are mostly common and poor people. Hence, sales promotional activities at individual consumer level will be more effective as they attract the immediate attention of the consumers resulting in the consumers selecting a particular brand. Some of the common promotional activities are distribution of gift items like - key chains, bottle openers, pen stands, TV covers, etc - in bars, near the TASMAC shops, etc. Some of sample pieces of assessee's promotional items like key chains, bottle openers, TV covers, containing the assessee's brand name "Zingaro", produced before me, indicate that there were sales promotional activities unde....
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....l Nadu and supplier to TASMAC. There are several other manufacturers too. For example, M/s. Empee Distilleries Ltd, is another manufacturer of beer/liquor and selling to TASMAC. M/s. Empee Distilleries Ltd and M/s. Empee Breweries Ltd were the sister concerns under the same management till March, 2002, i.e., before the latter was acquired by UB group. Even M/s. Empee Distilleries Ltd had also incurred substantial expenses in the form of advertisements and sales promotion. The only difference between these companies is that M/s. Empee Distilleries Ltd had undertaken (incurred) the sales promotion (advertisement) expenses on its own, whereas M/s. Empee Breweries Ltd had outsourced this task to PPPL. It is also equally important to mention here that even M/s. Empee Distilleries Ltd is also assessed to tax with the present Assessing Officer (i.e. ACIT, Company Circle II(1)) only. In fact the Assessing Officer, while completing the assessment of M/s. Empee Distilleries Ltd in A.Y. 2010- 11, u/s.143(3), had an occasion to examine the issue of sales promotion expenses claimed by M/s. Empee Distilleries Ltd. The Assessing Officer in his assessment orders of M/s. Empee Distilleries Ltd has ....
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....n proper (del credre) and (ii) reimbursement of various expenses in relation to sales promotional activities. The total amount of commission (del credre) and the reimbursement of expenses paid to PPPL during the F.Y. 2009-10 are Rs.58,80,549/- and Rs.13,44,55,019/-, respectively. The assessee has debited the entire expenses of Rs.14,03,35,927/- (i.e. Rs.58,80,549 + Rs.13,44,55,019) in its P&L account of F.Y. 2009-10. However, PPPL, in its annual statements of F.Y. 2009-10, has credited the first portion of Rs.58,80,549/-, i.e. the del credre only. The P&L account of PPPL has not reflected the receipt of 'reimbursements' of Rs.13,44,55,019/- on the credit side. Nor the corresponding expenses - like purchases of gifts articles/promotional materials - were debited, on the ground that these were reimbursed on cost-to-cost basis. 4.5.6.1 The above reimbursement of expenses are not in one go or at the fag end of the financial year. These expenses were being paid (reimbursed) to PPPL regularly and periodically through banking channels, along with the del credre commission payments. The ledger extract of PPPL in the books of the assessee clearly contained the full details of cl....
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....acts in West Bengal, it will be more easy, convenient and economical to procure the materials in West Bengal and transport the same to Tamil Nadu. Therefore, procurement of promotional material from Kolkata parties cannot be viewed as abnormal or non-prudential. 4.5.7.1 In the present marketing conditions, any concerns carry out their business transactions through phone calls, especially in the field of wholesale trading activities. With the internet facilities, laptops and cell phones becoming handy, it has become more and more easy for the business people to carry out their transactions without actually interacting with the customers/clients. Most of the business transactions are taking place through phone calls and e-mails. As a result, the existence of physical markets, place of business and the location of the business persons are increasingly becoming irrelevant. The addresses of the business concerns, for all practical purposes, are totally shifting to the internet. The physical address, therefore, remains as a legal requirement - for the purpose of registrations, etc. and to some extent, for the purpose of receiving dak (postal deliveries). Further, in bigger cities like ....
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....9.2010 Rs.3.69 crores Rs.9,36,250 2 Tie-up Trading P Ltd, Kolkata AABCT0927H Rs.31.85 crores Rs.5,05,500 3 Calcutta Comproscent Infotech Ltd, Kolkata AABCC7506M 24.09.2010 Rs.3.37 crores Rs.13,04,250 4 Millinium Innovations P Ltd, Kolkata AADCM6229P 22.09.2010 Rs.4,95,000 5 PGJ Exports P Ltd, Kolkata AABCP9492M 24.09.2010 Rs.10,01,250 6 Maheswarai Trading, Chennai (Prop: Ganpatlal & Sons - HUF) AAAHG9877R 12.10.2010 Rs.2.06 crores Rs.4,96,080 7 Mamta Creations, Chennai (Prop: Mamta Kankaria) ATNPK4373N 14.10.2010 Rs.2.36 crores Rs.4,13,400 8 Sourav Enterprises, Chennai (Prop: Chandra Prakash Kankaria - HUF) AAJHP0412N 30.09.2010 Rs. 2.81 crores Rs.3,99,090 4.5.7.3 Thus, the above suppliers, who are regularly assessed to tax and filed the returns of income of A.Y. 2010-11 in the regular course within the limits allowed u/s.139(1), cannot be considered as non-existing. Further, the assessee's production of sample pieces of key chains, bottle openers, T.V covers, displaying the logo "zingaro" shows that there were promotional materials purchased and distributed to popularize the "zingaro" brand. Zinga....
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....penses, if any, in the hands of PPPL can be cited as corroborative evidence. In any case, as mentioned above, the suppliers who have supplied the material to PPPL cannot be considered as non-existing. 4.5.8 Another main contention of the Assessing Officer is that the del credre commission and the reimbursement of expenses shown by PPPL in its P&L account of the FY 2009-10 are not tallying with the payments claimed to have been paid by the assessee. The PPPL's P&L account of the financial year 2009-10 reflected the revenue receipts at Rs.2,57,73,981/-, which includes commission receipts of Rs.1,24,31,787/- and reimbursement receipts of Rs.1,33,42,194/-. On the other hand, the total payments claimed to have been paid by the assessee to PPPL during the financial year 2009-10 are Rs.14,03,35,568/-. Thus the Assessing Officer concluded that there were vast variations in the incomes admitted by PPPL in its P&L account and those claimed by the assessee. Therefore, the Assessing Officer opined that not only the amounts of assessee's reimbursement of expenses are not reflected by the PPPL, but even the amounts of commission accounted by PPPL were not fully shown by the assessee. ....
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....eweries Ltd and M/s. Balaji Distilleries Ltd. Further, the ledger copies of the assessee in the books of PPPL clearly showed the receipts of reimbursement of expenses of Rs.13,44,55,019/-. Therefore, no adverse inference can be drawn from the above presentation of the receipts by the PPPL in its books of accounts and/ or P&L account. 4.5.9 Another observation of the Assessing Officer is that the purchase invoices of gift articles and promotional material and ledger account of M/s. Empee Breweries in the books of PPPL contained "A/C EMP". This observation is not well founded. None of the purchase invoices of gift articles or the promotional material, issued by the various suppliers to PPPL, contained the assessee's name or 'A/c EMP'. All these purchase invoices are raised in the name of PPPL only. The assessee's name was not figuring in the said invoices in any manner. However, the ledger account of the assessee, in the books of PPPL, contained the narrations of "gift articles A/c. EMP" and "Promotional A/c EMP" etc. Even the purchase (ledger) account, the ledger accounts of the suppliers, in the books of PPPL, contained similar narrations. In this regard, the asse....
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....l A/c (Emp) Debit Note DN/EMP/008/SPU/09-10 25745.00 Ledger account of Millinium Innovations P. Ltd (supplier) in the books of PPPL: Presidency Projects (P) Ltd, 77/18, Park Street,Ist Floor, Room No.3, Kolkata 700 016. Millenium Innovation Pvt. Ltd Ledger Account Date Particulars Debit Amount Credit Amount 9th April, 2009 Gift Articles on A/c (EMP) 4,99,500.00 14th April, 2009 Gift Articles on A/c(UBL) 4,74,500.00 16th April, 2009 Bank 9,74,000.00 3rd June, 2009 Gift Articles on A/c (EMP) 4,15,500.00 5th June, 2009 Gift Articles on A/c(UBL) 5,05,000.00 10th June, 2009 Bank 9,20,500.00 1st July, 2009 Gift Articles on A/c (EMP) 4,77,500.00 6th July, 2009 Gift Articles on A/c(UBL) 5,41,000.00 10th July, 2009 Gift Articles on A/c(UBL) 4,17,000.00 13th July, 2009 Bank 5,35,500.00 13th July, 2009 Bank 9,00,000.00 3rd Sept 2009 Gift Articles on A/c (EMP) 5,26,000.00 7th Sept 2009 Gift Articles on A/c(UBL) 4,95,000.00 4.5.9.1 Thus, from the above details, it is clear that the narrat....
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.... Therefore, the details in the agreement cannot be viewed adversely. 4.5.11 In view of the above discussions, it can reasonably be concluded that the agreement between the assessee and PPPL, in relation to the sales promotional expenses of the assessee's beer/liquor products, is genuine and entered during the regular course of business. It is also important to mention here that the assessee has been incurring similar expenses in the earlier years claimed in its returns. The Assessing Officer, in his orders u/s.143(3) of the earlier years, examined the said expenses and allowed. EMPEE BREWERIES LTD ITA NO. 1273, 1160,685/13-14 AY 2010/11 Breakup Details of selling and Promotion Expenses for AY 2008/09 to 2010/11 Amounts Details of Selling & Promotion expenses AY 08-09 AY 09-10 AY 10-11 Paper advertisement 8,597 - 80,156 Sales Promotions expenses 9,24,10,099 17,87,82,345 14,03,35,568 Cash Discounts 1,42,73,134 2,10,01,862 2,49,83,292 Freight Outward/Halting/Brkgs Exps 4,46,09,197 6,62,09,768 7,67,54,330 Brand Fees Paid 1,24,62,410 1,64,28,025 2,07,21,735 Total 16,37,63,637 28,24,22,020 26,28,75,081 Thus the assessee's claim of reimburse....
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....ts to TASMAC, who is a monopoly company, there is no necessity for the assessee to incur sales promotion expenditure. He has further stated that if at all sales promotion is required, the assessee has not furnished any detailed explanation as to why it has purchased gift items from Kolkata and the Assessing Officer has rightly doubted the genuineness of the transactions and disallowed the same. Moreover, the Manager of PPPL has not given any clear explanation over the services rendered by PPPL. Therefore, the ld. DR strongly supported the order passed by the Assessing Officer. 32. On the other hand, the ld. Counsel for the assessee has submitted that the assessee had entered into an agreement with M/s. PPPL for the purpose of transportation of goods, loading and unloading and also act as an agent to communicate the scheme to the traders and the assessee has reimbursed the expenses towards sales and promotional activities carried out by PPPL. As per the agreement, PPPL has purchased various gift items and the assessee has made payments through banking channels. Though the Assessing Officer made enquiry with regard to purchase of gift items by issuing a commission under section 13....
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....which are owned by private parties unlike the bars themselves] bars and hotels. The assessee has furnished copies of agreements with PPPL. After perusing the same, the Assessing Officer has observed that the agreement was on a Rs. 20 stamp paper and unregistered and to verify the contents of the agreements, a summon under section 131 of the Act was issued to Sri Anil Dubey, Manager of PPPL at its Chennai Office to furnish the following documents/details: 1. Documents relating to the relationship with the assessee. 2. Details regarding the amounts received from the assessee during the Financial Year 2009-10. 3. Mode of payment of such payments and if through bank, the bank statements evidencing such payments. 4. Evidence for services rendered to the assessee during the FY2009-10. Sri Anil Dubey did not furnish any of the details and stated that since the head office of his company was in Kolkata, all the details were available there and though he appeared in response to the summons on 26.2.13, no details have been furnished till the assessment is completed. The Assessing Officer further observed that during the course of statement recorded under section 131 of the Act, Shri....
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.... section 131(1)(d) to the DDIT(Inv), Kolkata on 18.3.13 to verify and report on the following information: (i) Whether these concerns are actually functioning from the above premises; (ii) If so, business done by the above concerns with PPPL during the Financial Year 2009-10, relevant to the AY 2010-11 and ledger copies thereof and (iii) Whether these concerns were doing business with PPPL for earlier years too and if so, the ledger copies of those years starting from AY 2006-07. The DDIT(Inv), Kolkata in his letter has stated that as per enquiries conducted by the Inspectors attached to his office, no such companies, as enumerated in the above letter, were found at their respective addresses and concluded that the said companies are non-existent. So far as purchases in Chennai is concerned, a total of seven bills were furnished, against which the Assessing Officer made discreet enquires through Inspector and found that no such concerns are doing such business. Further, the Assessing Officer has noted that all the payments to PPPL were through banking channels only has not relevant as that alone does not confer legitimacy to the transactions and make them acceptable. The Assess....
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....m of commission payable to PPPL by the assessee will be of two components (i) commission (del credre) and (ii) reimbursement of various expenses in relation to sales promotional activities. The total amount of commission (del credre) and reimbursement expenses paid to PPPL during the financial year 2009-10 are Rs. 58,80,549/- and Rs. 13,44,55,019/- respectively. The assessee has debited the expenses of Rs. 14,03,35,927/- [ Rs. 58,80,549/- + Rs. 13,44,55,019/-] in its profit and loss account for the financial year 2009-10. However, M/s. PPPL, in its annual statement for the financial year 2009-10, has credited the first portion of Rs. 58,80,549/- i.e. del credre commission only. The profit and loss account of PPP has not reflected the receipts of reimbursement of Rs. 13,44,55,019/- on the credit side nor the corresponding expenses like purchases of gift articles and promotional materials were debited on the ground that these expenses were reimbursed on cost to cost basis. The ld. CIT(A) has observed that the above reimbursement of expenses are not in one go or at the fag end of the financial year. These expenses were being paid (reimbursed) to PPPL regularly and periodically through....
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....urchased the gift items and the same were submitted to the Assessing Officer, what is stated in the report given by the Inspectors, Kolkata as well as Chennai ought to have been given to the assessee. Without supplying the report of the respective Inspectors to the assessee, coming to a conclusion that the transactions are not genuine is not correct and justified. Subsequently, when the assessee has submitted all details of Kolkata parties and Chennai parties and, when the ld. CIT(A) called the remand report, the Assessing Officer failed to issue notice under section 131 of the Act to the parties to find out whether these parties are in existence or not. The ld. CIT(A), after examining the details, gave the findings that the parties who supplied materials to PPPL from Kolkata and Chennai are assessed to tax and have been filing returns of income regularly. Even the returns of income for the assessment year 2010- 11 have been filed by the above mentioned suppliers well within the due dates prescribed under section139(1) of the Act and therefore, cannot be considered as non-existing. The details of parties as extracted by the ld. CIT(A) at page 30. The ld. CIT(A) has further observed....
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....rters at Kolkata, some of the items were purchased from Kolkata. Therefore, there is no basis for the objection raised by the ld. DR. At the time of hearing, the ld. DR has not able to point out any mistake in the order passed by the ld. CIT(A) except stating that he expenses are not required to be incurred by the assessee for the purpose of business and the objection of the ld. DR has already been considered and we find that the ld. CIT(A) has rightly decided the issue and we find no flaw in the order passed by the ld. CIT(A). 40. Further, the ld. CIT(A) gave a findings that similar expenses are also incurred by the assessee for the assessment year 2008-09 of Rs. 9,24,10,099/-, for the assessment year 2009-10 of Rs. 17,87,82,345/- under section 143(3) of the Act. The Assessing Officer has examined and allowed the claim of the assessee. Therefore, when the assessee has produced all the details before the Assessing Officer with regard to payments made to PPPL towards sales promotional expenses, the Assessing Officer was not justified in denying similar claim in the assessment year 2010-11. 41. The ld. CIT(A), after considering the entire facts of the case, came to the conclusion t....