TaxTMI 
TaxTMI 
2026 (7) TMI 1080
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the appeal of the assessee without appreciating the facts of the case. 2. Whether on the facts and in the circumstances of the case and in the provisions of the law, the Ld. CIT(Aj is correct in not considering the line of the Article 3 of the Distributorship Agreement that "all other expenses including but not limited to transportation, logistics, loading/unloading, Shipping, Supply/product recall/ return, warehousing, storage, insurance etc., shall be born by the Distributor only. 3. Whether on the facts and in the circumstances of the case and in the provisions of the law, the Ld. CIT(A) is correct in not considering the statement of Sh. Rahul Pujara that 100% reimbursement have been claimed from M/s OMIPL and the same are given by M/s OMIPL. 4. Whether on the facts and in the circumstances of the case and in the provisions of the law, the Ld. CIT(A) is correct in not considering the fact that unsold inventory identified through inactive IMEIs is revalued at costs below the original purchases price resulting into losses of the SADs. For this, Price Drop Notifications were issued by M/s OMIPL. The Cost of price drop was availed by SADs and Dealers. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 8,43,23,780/- debited to its profit and loss account under the price drop expenses head of other expenses in financial statements of relevant FY 2018-19 are not allowed as these expenses are directly related with the assessee company and has been made on behalf of the other company, hence, addition of Rs. 8,43,23,780/- was added in the hands of the assessee. Aggrieved the action of the AO, assessee preferred appeal before the Ld. CIT(A), who vide order dated 31-3-2025 deleted both the additions made by the AO by observing as under:- "..10. Ground No. 12: Disallowance of Advertisement and Brand Promotion (AMP) Expenses Rs. 11,55,11,349/-: The core issue under this ground relates to the disallowance of advertisement and brand promotion expenses incurred by the assessee in the sum of Rs. 11,55,11,349. The AO's basis for disallowance is the presumption that these expenses were reimbursed by OMIPL or incurred for the exclusive benefit of the brand owner, and not for the business of the assessee. The AO refers to Article 3 of the Distributorship Agreement and draws an analogy with after-sales service reimbursements to conclude that the AMP expenses were either reimbursed or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....This statement directly and conclusively contradicts the AO's presumption. The assessee, for its part, submitted sample AMP invoices, advertisement creatives, vendor payments, and newspaper clippings showing that it had independently incurred expenses for dealer-level brand awareness, store-level branding, print advertisements, and trade event promotion. 10.8 Moreover, these promotional materials bear the name of <!HOC" (Hari Om Communication) the trade name of the assessee-alongside OPPO branding, thereby reinforcing the fact that these campaigns were not merely for the benefit of the principal's brand, but directly enhanced the visibility and goodwill of the assessee in its regional network. 10.9 The AO's analogy with after-sales service reimbursements is also misplaced. Clause 4 of the agreement mandates 100% reimbursement of authorised service costs, and such reimbursements are evidenced through specific credit notes. There is no such evidence for AMP expenses. Unlike service support, which is centrally handled and reimbursed, AMP in this distribution model is the independent responsibility of the SAD, funded from its own resources, with compensation factored ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urchase price of SAD for F9 4GB Model 11,187 589 10,598 Purchase price of Distributor No. 1 12,748 1,256 11,492 Purchase price of Distributor No. 2 12,943 1,274 11,669 So on to its other distributors / dealers/RDS ...... ....... ....... 11.4 The total expense of Rs. 8.43 crores claimed by the assessee represents this net margin loss arising on stock already sold to dealers. The assessee submitted credit notes, IMEI reconciliation, ledger extracts, and supporting documentation to substantiate the claim. The AO did not challenge the computation, nor did he point to any fictitious or inflated entries. 11.5 Further, this business model and pricing mechanism were confirmed by Mr. Geng Tongle, Finance Head of OMIPL. In his deposition he affirmed OMIPL reimburses price drop only for stock with inactive IMEIs and only up to the invoice price charged to SAD. He clearly mentioned that we do not track or reimburse what SADs pay to their downstream distributors or retailers. This statement, from the principal company itself, nullifies the AO's assumption that OMIPL bore the entire cost of price drops. 11.6 In a competitive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O has not disputed the genuineness of the AMP expenditure. Even there is no finding that the expenses are fictitious, inflated, or not incurred. The only ground for disallowance is the presumption of reimbursement an assumption now proven incorrect by third-party confirmation. Based on the contractual framework, factual evidence, industry practice, third-party statements, and the clear absence of reimbursement, Ld. CIT(A) has rightly held that the AMP expenses incurred by the assessee were genuine, necessary, and for the purposes of its own business, the hence, the same are squarely allowable under Section 37(1) of the Act. Therefore, the disallowance of Rs. 11,35,11,349/- was rightly deleted by the Ld. CIT(A), which does not need any interference, thus, we uphold the same and reject the ground raised by the Revenue. 7.1 As regards disallowance of Price Drop Expenses amounting to Rs. 8,43,23,780/- is concerned, we note that the AO disallowed the claim of Rs. 8,43,23,780 made by the assessee under the head "Price Drop Expenses," holding that OMIPL had reimbursed such losses based on the IMEI-linked inventory validation process and the terms of Clauses 3.06 and 3.07 of the Agreeme....