TaxTMI 
TaxTMI 
2023 (6) TMI 1208
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....Assessing Officer noticed that the assessee has claimed expenses on account of 'trade discount' under the head "Selling and Distribution Expenses". The Assessing Officer was of the opinion that the trade discount claimed by the assessee is directly connected to the sales. Therefore, as per the principles of accountancy, this item of expense should have been claimed in the trading account and not in the profit and loss account. 5. The Assessing Officer found that the trade discount is being directly deducted from the sale value of the item and VAT has been calculated on the amount of sales as reduced by the amount of trade discount and, therefore, the assessee company is receiving sales price as reduced by the amount of trade discount and increased by the amount of VAT. 6. The Assessing Officer further noticed that the assessee company, in its trading account, is showing gross sales including trade discount as total sales which are, in fact, not being credited into its books of accounts. Trade discount is not being debited in the trading account though it has direct link to the amount of sales, instead the trade discount has been debited to the profit and loss account. 7. T....
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.... the ld. CIT(A) nor could point out any factual error in the comparable chart mentioned here in above. 16. Per contra, the ld. counsel for the assessee reiterated what has been stated before the ld. CIT(A). 17. After giving thoughtful consideration to the comparative chart, we are of the considered view that the GP rate adopted by the Assessing Officer for A.Y 2010-11 is not comparable with the GP rate of A.Y 2011-12 and 2012-13 under the consideration because the sales is a predominant determinative factor and the same is not comparable as the assessee has accounted the sale at DLP during the A.Y 2010-11 as against the accounting of turnover at MRP during the year under consideration. 18. In our considered opinion, sale is prime component to determine the GP ratio and if the sale factor is not comparable, resulting GP cannot be considered comparable. On totality of facts, we do not find any reason to interfere with the findings of the ld. CIT(A). The common grounds relating to GP addition in A.Y 2011-12 and 2012-13 are dismissed. 19. The next common grievance in all the three appeals relates to the deletion of addition made by the Assessing Officer on account of Scheme....
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....ue that the revenue cannot question the justification/need of the expenses. All that has to be seen is that whether the expenses have been incurred for the purpose of the business and is not of capital in nature. 26. As there is no dispute that the expenses were incurred for the purpose of business and were not of capital expenditure, the same has to be allowed. But, at the same time, the quantum can be questioned for want of supporting evidences as the same were not justified by production of books of account. Therefore, in the interest of justice and fair play, we deem it fit to restrict the disallowance to 10% of the expenditure claimed under this head. We, accordingly, direct the Assessing Officer to restrict the disallowance to 14.92 lakhs in A.Y 2011- 12, Rs. 27.23 lakhs in A.Y 2012-13 and Rs. 30.34 lakhs in A.Y 2013-14. Thus, this common ground is partly allowed. 27. The third issue in A.Y 2011-12 relates to the deletion of addition made by the Assessing Officer on account of overriding commission amounting to Rs. 1,11,16,495/-. 28. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed an amount of Rs. 1,11,16,495/-....
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....e, the same has attained finality. Finding parity of facts, we do not find any error or infirmity in the deletion made by the ld. CIT(A). Deletion stands confirmed. Ground No. 2 in A.Y 2011-12 is dismissed. 37. In the result, all the three appeals of the Revenue in ITA No. 156/DEL/2021, 1437/DEL/2020 and 1438/DEL/2020 are partly allowed. The order is pronounced in the open court on 25.05.2023. ============= Document 1 Particular A.Y. 2012-13 A. Y. 2011-12 A.Y. 2010-11 A.Y. 2009-10 Sale 783610819 749764306 554166162 534348527 Closing Stock 20881291 61098195 50596253 50669762 834492110 810862501 604762415 585018289 Opening Stock 91098195 50596253 50669762 51420259 Purchase 520506229 489211392 395665255 365635255 Trade Discount 115530063 148241553 53113284 81142810 Direct Expense 544129 3625597 2065623 869403 697134487 691674595 501513933 499067997 Gross Profit 131916494 119187706 103242482 85950292 G.P. 16.83% 15.89% 18.66% 16.08. Document 2 Trading Account Particular A.Y. 2012-13 A.Y. 2011-12 A.Y. 2010-11....