2013 (5) TMI 252 - AT - Income Tax

Cash discount allowed to the dealers and sub-dealers for promotion of goods - Non deduction of TDS - CIT (A) deleted the addition - Held that - As decided in assessee s own case 2013 (4) TMI 678 - ITAT DELHI goods had been sold to them as principal to principal basis and they were not acting on behalf of the assessee, therefore, there was no agency relationship with them. As per the policy of the assessee company, no commission was payable to the dealers / sub-dealers for promotion of the selling of the goods & this cash discount was for the prompt payment for the goods supplied to them as abetment of cost and not in the nature of commission, therefore provisions of section 194H are not applicable. In favour of assessee. Disallowance u/s 14A - CIT (A) deleted the addition - Held that - Assessee fairly agreed that Rule 8D is applicable for the concerned assessment year. However, he submitted that under Rule 8D the disallowance will be of Rs. 2500/- interest of justice will be served if the matter is remitted to the file of the AO to apply Rule 8D in this case. In favour of revenue statistical purposes. Advertisement expense incurred on purchase of gold items - disallowance as non furnish of satisfactory documentary evidence as it was for wholly and exclusively for business purpose - CIT (A) deleted the addition - Held that - As assessee has submitted additional evidence before CIT(A) pertained to the confirmation of the dealers regarding having receipts of gold coins who in turn has obtained remand report from AO who has not given any adverse comments in this regard - no infirmity in the order CIT(A) - in favour of assessee. Increase in Director s remuneration - CIT (A) deleted the addition - Held that - As AO has disallowed the expense on the ground that the assessee has failed to submit the necessary Resolution for the increase in remuneration. However, the required Resolution was submitted before the CIT(A) as additional evidence who in turn has obtained remand report from AO who has not given any adverse comments in this regard - no infirmity in the order CIT(A) - in favour of assessee.

Summary

Issues involved:
1. Deletion of addition under section 40A(ia) - Rs. 2,62,93,596/-
2. Deletion of addition under section 14A - Rs. 50,000/-
3. Disallowance of advertisement expenses - Rs. 17,86,788/-
4. Disallowance of increase in Director's remuneration - Rs. 15,67,512/-

Detailed Analysis:
1. Deletion of addition under section 40A(ia) - Rs. 2,62,93,596/-:
The Assessing Officer disallowed the cash discount given to dealers and sub-dealers by the assessee under section 40A(ia) for not deducting tax at source. However, the Ld. Commissioner of Income Tax (A) deleted the addition based on an earlier ITAT decision in the assessee's own case. The Tribunal upheld this decision, stating that the cash discount was not in the nature of commission, and hence, the provisions of section 194H were not applicable. The Tribunal found no fault in the Ld. Commissioner's order and dismissed the revenue's appeal.

2. Deletion of addition under section 14A - Rs. 50,000/-:
The Assessing Officer made an adhoc addition under section 14A as the assessee did not disallow expenses incurred to earn dividend income. The Ld. Commissioner of Income Tax (A) deleted the addition, stating that the Assessing Officer did not provide any reason for the disallowance. The Tribunal remitted the matter back to the Assessing Officer to apply Rule 8D for the disallowance, holding that justice would be served by doing so.

3. Disallowance of advertisement expenses - Rs. 17,86,788/-:
The Assessing Officer disallowed a portion of the advertisement expenses incurred on gold items, suspecting it was not wholly and exclusively for business purposes. The Ld. Commissioner of Income Tax (A) considered additional evidence submitted by the assessee, including dealer confirmations, and found no adverse comments by the Assessing Officer. Consequently, the disallowance was not sustained, and the Tribunal upheld this decision.

4. Disallowance of increase in Director's remuneration - Rs. 15,67,512/-:
The Assessing Officer disallowed the increase in Director's remuneration as the necessary documents were not furnished by the assessee. However, the Ld. Commissioner of Income Tax (A) noted that the remuneration was within the permissible limit under the Companies Act and additional evidence in the form of resolutions was submitted. The Assessing Officer did not provide adverse comments, leading the Ld. Commissioner to delete the disallowance. The Tribunal found no fault in this decision and upheld it, stating that the required resolution was submitted and no infirmity was found in the Ld. Commissioner's order.

In conclusion, the appeal filed by the Revenue was partly allowed for statistical purposes, with the Tribunal upholding the Ld. Commissioner's decisions on various issues based on the facts and legal provisions presented during the proceedings.