TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 880
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....ertaining to the Assessment Years 2009-10. 3. The Appellant has raised following grounds of appeal: "1) The Assessing Officer erred in disallowing the aggregate amount of the additions made to Fixed Assets during the year, amounting to Rs. 4,02,60,698/-, by holding that the original bills were not produced for verification despite the Appellant having filed copies of invoices substantiating the fixed assets acquired during the year and having produced the original invoices for verification. Having regard to the facts and circumstances of the case, the Appellant submits that the said disallowance made by the Assessing Officer is erroneous and requires to be deleted. 2) Without prejudice to Ground No. 1, even assuming though not conceding that any disallowance is justified, the Assessing Officer failed to abide by the directions of the learned DRP and erred in disallowing aggregate amount of the additions made to Fixed Assets during the year under consideration, amounting to Rs. 4,02,60,698/-, instead of disallowing only the depreciation in respect of fixed assets which were not substantiated. 3) The Assessing Officer erred in disallowing the aggregate amount of commission p....
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.... Rs. 5,41,03,846/- as against the correct amount of Rs. 13,84,053/-, Having regard to the facts and circumstances of the case, the Appellant submits that the disallowance is unwarranted and requires to be deleted. Without prejudice to the foregoing, even assuming though not conceding that any amount is to be disallowed, the Assessing Officer be directed to consider the correct figure of advertisement and sales promotion expenses incurred during the year by the Appellant. 9) The Assessing Officer erred in not granting credit for tax deducted at source aggregating to Rs 4,00,84,439/-, without assigning any reasons for the non-grant of such credit. 10) The Appellant objects to the action of the Assessing Officer in initiating penalty proceedings under section 271(1)(b) and 271(1)(c) of the Act." Ground No. 1 & 2 4. Ground No. 1 & 2 raised by the Appellant pertain to the addition of INR. 4,02,60,698/- made by the Assessing Officer in respect of total additions made to the fixed assets during the relevant previous year. 4.1. During the course of assessment proceedings, the Assessing Officer requested the Appellant-Company to provide the details of additions to fixed assets al....
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....on record. We find merit in the contention advanced on behalf of the Appellant that only addition to the extent of depreciation claimed by the Appellant in respect of additions made to the fixed assets during the relevant previous year could have been made by the Assessing Officer. Accordingly, we restrict the addition INR 4,02,60,698/- made by the Assessing Officer to INR 58,04,262/- being the amount of depreciation claimed by the Appellant. 4.7. Further, on perusal of the details of additions made to the fixed assets during the relevant previous year (placed at page 149 to 153 of the paper book), we find that the Appellant had furnished invoices pertaining to some of additions made to the fixed assets during the relevant previous year which are placed at 154 to 206 of the paper- book. We are of the view that in case the Appellant is able to produce the original of the photocopied invoices placed at page 154 to 206 of the paper-book for verification before the Assessing Officer, then the Appellant should be permitted to claim depreciation in respect of the same. Accordingly, we direct the Appellant to produce the originals of the aforesaid invoices/documents for verification befo....
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....lant buys various products from manufacturers and with an extensive distribution network, distributes and sells these products across India. These products are technology-reliant items and have a very limited shelf-life due to constant changes in technology and have to be, therefore, sold within a short span of time. The Appellant is dependent on its dealers all over India for sales and distribution. The dealers, which are independent third parties, are given commission and incentives to stock and sell products. Such commission and incentive payments are, therefore, a business necessity. During the relevant previous year that Appellant had paid commission of INR 5,66,23,282/- which constituted only 0.08% of the total sales. The Learned Authorised Representative for Appellant submitted that commission expenses should be allowed to the Appellant as claimed for the reason that during the assessment proceedings the Appellant had furnished complete details including names, addresses & PAN of the parties to whom commission payments were made, along with the details of commission payments and tax deducted at source. The commission was paid to dealers for services rendered, the nature of s....
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....er was justified in making the disallowance. 5.6. We have considered the rival submission and perused the material on record including the order, dated 07/06/2021, passed by the Tribunal in appeals preferred by the Appellant for the Assessment Year 2005-06, 2006-07 & 2008-09. While allowing Appellant's claim for deduction for commission expenses for the Assessment Year 2005-06, the Tribunal has held as under: "20. We shall now advert to the disallowance of the commission expenditure of Rs. 1,62,05,703/- made by the A.O/DRP. As is discernible from the records, the assessee had during the year under consideration debited Rs. 2,25,96,858/- towards commission expenditure, which comprised of viz. (i) commission paid to various parties in excess of an amount of Rs. 1 lac per party: Rs. 1,62,05,703/-; and (ii) commission paid to parties below an amount of Rs. 1 lac per party: Rs. 62,91,155/-. In the course of the assessment proceedings, the assessee furnished details as regards the names, addresses and the amount of commission paid to various parties during the year. The A.O declined to accept the aforesaid claim of expenditure raised by the assessee for multiple reasons viz. (i) that,....
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....the sales made during the year. The names and addresses were furnished earlier to the A.O and such details along with PAN of dealers where commission payments exceeded Rs. 1,00,000/- is now furnished (a copy of the same is enclosed to this order of DRP). Considering the totality of facts and circumstances of the case, there is not scope to disallow the commission payments, in an ad hoc manner as was done by A.O. The assessee should now furnish confirmation from all the parties where commission paid is Rs. One lakh and above, within a week from the receipt of directions/order of DRP sue motto, Thereafter, A.O can disallow commission paid in respect of parties from whom no confirmation was furnished. In respect of commission payments below Rs. One lakh in each case there is no need to disallow claim without verification as assessee furnished all the relevant details. Hence, the disallowance as proposed by the A.O is not approved. A.O is directed to modify/restrict the disallowance as per directions given herein above. A perusal of the aforesaid observations reveals that, the DRP was convinced that as the commission expenditure was wholly and exclusively incurred by the assessee fo....
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....sessment order by the A.O under Sec. 153A/143(3) r.w.s. 144C(13), dated 31.10.2011. Accordingly, we find force in the contention advanced by the ld. A.R, that keeping in view the aforesaid substantial time gap of 7 years, it was practically not possible on its part to have obtained the confirmations of the said parties. In our considered view, now when the assessee had furnished complete details along with income tax credentials viz. PAN Numbers of the aforesaid parties with the lower authorities, therefore, merely for the stand alone reason that the confirmations of the said parties for transactions pertaining to a period relating to 7 years ago were not filed by the assessee with the A.O, would not justify disallowance of the commission expenditure so claimed by it. Interestingly, we find that on the basis of similar details filed by the assessee in respect of the parties to whom commission below Rs. 1 lac per party, aggregating to Rs. 62,91,155/-, was paid, the claim of the assessee towards commission expenditure to the said extent was accepted by the DRP. In fact, we find that the order of the DRP allowing the assessees claim of commission expenditure of Rs. 62,91,155/- without....
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....for the reason, that the said persons were not found available at their respective addresses after an expiry of a period of 4 years from the date of the transactions under consideration. Now, in the case before us, it is an admitted factual position, as is discernible from the order of the DRP and, had not been assailed by the revenue before us viz. (i) that, the commission expenditure was incurred by the assessee wholly and exclusively for the purpose of its business, which was dictated by business needs and was allowable; (ii) that, the fact that the assessee had deducted tax at source on the aforesaid commission payments substantiated the genuineness of the said expenditure; (iii) that, the commission paid by the assessee was not high in relation to the sales made during the year; (iv) that, the names and address of the parties, to whom commission was claimed by the assessee to have been paid was furnished with the A.O and (v) that, the details along with the PAN numbers of the dealers to whom commission in excess of Rs. 1 lac was paid was furnished by the assessee in the course of the DRP proceedings, therefore, we are of the considered view, that the genuineness of the aforesa....
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....ms of our aforesaid observations." (Emphasis Supplied) 5.7. The facts and circumstances prevailing during the Assessment Year 2009-10 are identical to Assessment Year 2005-06, 2006-07 and 2008-09 as there is no change in the business of the Appellant or its arrangement with the dealers. Further, Appellant's justification for incurring commission expenses on account of business necessity and the reasoning for not having written agreements with the dealers was accepted by the Tribunal in the common order, dated 07/06/2021, passed in appeals for the Assessment Year 2005-06, 2006-07 and 2008-09. For the assessment year under consideration also the Appellant has furnished complete details of the dealers (i.e. name, address & PAN), amount of commission paid and tax deducted at source (placed at pages 213 to 222 of the paper-book) along with Letter, dated 15.02.2013, filed before the Assessing Officer during the assessment proceedings. Confirmations in respect of 56 major dealers pertaining to the aggregate commission of INR.3,43,57,708/- were also filed with the Assessing Officer (placed at 223 to 280 of the paper-book). The commission expenses claimed by the Appellant were only 0.085%....
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....lls, vouchers and other documents during the assessment proceedings. DRP reduce the disallowance in case of Staff Welfare Expenses, Miscellaneous Expenses and Advertisement & Sales Promotion Expenses to 5% of the expenses by placing reliance on the order passed by the Commissioner of Income Tax (Appeals) in appeals preferred by the Assessee against the Assessment Order for Assessment Year 2002-03 to 2004-05 and the order passed by DRP for the Assessment Years 2005-06 to Assessment Year 2008-09. As regards, Travelling & Conveyance Expenses and Repair & Maintenance Expenses, the DRP confirmed the disallowance made by the Assessing Officer holding that the Appellant had failed to furnish relevant details and supporting documents even before the DRP. 6.3. However, on perusal of record we find that the Appellant had provided the following details/information/documents relating to the expenses during the course of assessment proceedings: - Statement given details of travelling and conveyance vide letter dated 21/02/2013 (placed at page 283 of the paper-book) - Statement given details of staff welfare expenses vide letter dated 26/02/2013 (placed at page 286 & 287 of the paper-book) ....
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....ompany, the expenses incurred by the company are mainly purchases made for the goods sold, salary paid to the employees, warehouse rent, freight paid for the goods transported from one warehouse to another warehouse as well as freight paid on imported goods and others. The expenses also include Credit insurance, Property insurance, Marine insurance, Repairs and maintenance of IT system, Employee welfare etc. These expenses are incurred during the course of the business out of business expediency and these are allowable expenses u/s. 37 of the Income tax Act 1961. During the course of Assessments we have provide detail of expenses like Rent expenses along with amount of TDS deducted, Legal and professional charges, security charges, Travelling & conveyance, Staff welfare, Rates and Taxes, Salary & wages, creditors list along with address. We have a staff of around 1000 on our pay roll. The Salaries are paid through the banking system in terms of Bank credit to the employees account. Similarly all the expenses are paid by bank payments and the sample payment register for the month of July'08 has been submitted to you for your perusal. We have strong internal control process of Ve....
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....stems (elaborated above) and the taxes paid to the Government for the transactions are not considered as evidence for the activities conducted by the company. In any case we are submitting the sample sale Invoice copies for the month of July 2008 containing 8 box files for your perusal to appreciate the magnitude of the information solicited. The distribution model of IMIL business entails high turnover & low margins necessitating fiscal discipline and tight control on Receivables & Inventory along with usage of online systems to boost productivity. We need to keep a strict watch on our expenses. Thus we are having robust book keeping Internal Control System to maintain proper books of accounts and hold control on the activities carried on by the organization. The books of our organization is periodically audited by the Statutory Auditors, Internal Auditors and also subjected to Internal Audit/ control by our parent company. We are a Global Business Entity our Books of Accounts needs to be consolidated with the parent company in USA. Our Parent company being one of listed entity in United State of America are required to fulfill the compliance of SOX Audit and control process....
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....the grounds raised by the Appellant and deleted the adhoc disallowance of Staff Welfare Expenses, Miscellaneous Expenses and Advertisement & Sales Promotion Expenses to the extent confirmed by the DRP, and allowed the Appellant's claim for deduction of expenses. 6.8. In view of the above, we hold that the authorities below erred in making ad-hoc disallowance of expenses. Accordingly we deleted the ad-hoc disallowance of (a) Staff Welfare Expenses of INR 20,32,210/, (b) Miscellaneous Expenses of INR 2,79,553/-, (c) Travelling & Conveyance Expenses of INR 78,15,374/-, (d) Repair & Maintenance Expenses of INR 16,22,563/- and (e) Advertisement & Sales Promotion Expenses of INR 27,05,192/-. Ground No. 4 to 8 raised by the Appellant are, therefore, allowed. Ground No. 9 7. Ground No. 9 raised by the Appellant is directed against non- granting of credit of tax deducted at source aggregating to INR 4,00,84,439/-. In order to address the grievance of the Appellant we direct the Assessing Officer to verify the amount of tax deducted at source in the case of the Appellant and provide credit for the same as per law. With the aforesaid directions, Ground No. 9 raised by the Appellant is all....
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....quires to be allowed as claimed by the Appellant in its Return of Income. 6) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in making an adhoc disallowance of Rs. 25,56,212, being 20% of the aggregate repairs and maintenance expenses incurred by the Appellant Company for the year under consideration. Having regard to the facts and circumstances of the case, the Appellant submits that such expenditure requires to be allowed as claimed by the Appellant in its Return of Income. 7) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in making an adhoc disallowance of Rs. 65.88,803, being 20% of the aggregate communication expenses incurred by the Appellant Company for the year under consideration. Having regard to the facts and circumstances of the case. the Appellant submits that such expenditure requires to be allowed as claimed by the Appellant in its Return of Income. 8) The learned Commissioner of Income Tax (Appeals) erred in making an adhoc disallowance of Rs. 51,10,998-, being 10% of the total cash discounts offered by the Appellant. Having regard to the facts....
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....ccordingly, in view of paragraph 5 to 5.8 above, deduction for commission expenses as claimed by the Appellant is allowed and addition of INR 1,96,82,801/- is deleted. Ground No. 1 raised on appeal for the Assessment Year 2010-11 is allowed. Ground No. 2 to 6, and 7&8 13. Ground 2 to 8 pertain to ad-hoc disallowance of the expenses claimed by the Appellant. 13.1. The details of the disallowances of various expenses are as under: Ground No. Nature of expenses Disallowance in Assessment Order under Section 143(3) of the Act Disallowance as per CIT(A) Amount of disallowance challenged in the appeal (INR) 2 Staff Welfare Expenses 25% 5% 15,77,052/- 3 Miscellaneous Expenses 25% 5% 8,35,722/- 4 Travailing & Conveyance Expenses 20% 20% 54,38,609/- 5 Repair & Maintenance Expenses 20% 20% 25,56,212/- 6 Advertisement & Sales Promotion Expenses 20% 5% 19,776/- 7 Communication Expenses 20% 20% 65,88,803/- 8 Cash Discount 100% 10% 51,10,998/- 13.2. The Learned Authorised Representative appearing before us submitted Ground No. 2 to 6 pertaining to ad-hoc disallowance of various expenses raised in appeal for the Assessment Year 2010-11 are identical to ....