TMI Blog2017 (4) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Expediency” is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may have been incurred under any legal obligation, but yet it is allowable as business expenditure, if it was incurred under Commercial Expediency. In our opinion the transport expenses were incurred by the assessee under business expediency. Thus, in view of the above discussion the disallowance of Transportation Charges of ₹ 14,76,363/- claimed as expenses on account of Transport Outward Claim were allowable expenses, which we delete. - Decided in favour of assessee Disallowance on account of rejection of material - Held that:- The rejected material is destroyed by the MNC to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AR) For The Revenue : Shri Saurabh Kumar Rai Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM: 1. This appeal by assessee u/s 253 of the Income-tax Act ( the Act ) is directed against the order of Ld. Commissioner of Income Tax (Appeals) [for short the CIT(A)] 9, Mumbai dated 19.08.2016 for Assessment Year (AY) 2013-14. The assessee has raised the following grounds of appeal: 1. The learned CIT(Appeals) has erred in law and on the facts of the case in disallowing charges ₹ 14,76,363/-. 2. The learned CIT(Appeals) has erred in law and on the facts of the case in ignoring the decision of the Supreme Court in the case of CIT vs. Dhanrajgiriji reported in 91 ITR 544 wherein the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee argued that the assessee is engaged in the business of selfadhesive labels. The assessee debited ₹ 14,76,363/- on account of Transportation Charges. During the year under consideration, the assessee incurred Transportation Charges of ₹ 36,16,807/- and had recovered ₹ 21,40,444/- from its customer as per terms and condition of sales. The assessee has agreement with Unilever Group of Companies, as per agreement the Transportation Charges incurred by assessee were reimbursed by them. The assessee has shown reimbursement of Transportation Charges of ₹ 21,40,444/- that was 60% of the Transportation Charges. As per agreement, the assessee has delivered the material at their site and had to incur the Transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been debited to the Profit Loss Account. The assessee further contended that major sales of assessee are with Unilever Group of Companies, which reimbursed the assessee towards the Transportation Charges as the selling prices consist of the Transportation Charges. The contention of assessee was not accepted by AO holding that assessee failed to produce the evidence that assessee wanted to recover the expenses and that assessee has voluntary chosen not to affect the recovery of these expenses. The AO further concluded that there is no restriction to bear the expenses on account of other parties and even non-business expenses. The ld. CIT(A) while considering the Ground of Appeal confirmed the disallowance holding that the expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see argued with the Pharma Companies, the assessee has to bear the cost of rejected finished goods i.e. self-adhesive label due to quality issue in the paper as label do not stick to bottle and also printing issue. The rejected labels are destroyed by the Pharma Companies to avoid any misuse by other manufacture in this line thereafter customer send their debit notes to the assessee for rejected material. The total turnover of assessee during the year is ₹ 12.29 Crore and rejection were to the tune of ₹ 13,92 Lakhs only. The rejection is around 1.25% of the turnover of the assessee-company. Such rejections were accepted in the past. The rejected material was written off only Profit Loss Account by reducing the amount of reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otes for rejected material. The contention of the assessee was not accepted by the AO holding that the assessee failed to file sufficient evidence in support of their claim that the goods were manufactured, delivered to the buyers and were destroyed after rejection. The ld CIT(A) also concluded that the assessee failed to substantiate as to how the quality and printing issue lead to rejection of the goods. The assessee has not filed any confirmation from such client to support their contention and confirmed the disallowance. We have noticed that the lower authorities have not rejected the books of accounts. No findings were given on the debit notes filed by the assessee before the authorities below. Considering the submission of the ld AR f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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