2013 (8) TMI 1158 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of physician's samples expenses.
2. Transfer pricing adjustments.
3. Ad-hoc disallowances of discount, commission, sales promotion, traveling, conveyance, and vehicle expenses.
4. Set off of long-term capital loss against long-term capital gain.
5. Disallowance of website expenses.
6. Disallowance of product development & clinical trial expenses.
7. Addition due to change in the basis of inventory valuation.
8. Disallowance u/s 14A.
9. Reduction of profits for deduction u/s 80-HHC.
10. Reduction of DEPB incentive for deduction u/s 80IB.
11. Bad debts disallowance.
12. Double taxation and other minor disallowances.

Summary:

1. Disallowance of Physician's Samples Expenses:
The AO disallowed Rs. 4,30,32,095/- claimed for physician's samples due to lack of credible evidence. The CIT(A) upheld the disallowance. The Tribunal restored the issue to the AO for fresh examination following its decision in the assessee's case for A.Y. 2003-04.

2. Transfer Pricing Adjustments:
The AO made an upward adjustment of Rs. 2,82,40,086/- to the ALP. The CIT(A) revised the adjustment to Rs. 1,68,13,382/- and allowed further relief of Rs. 31,26,616/-. The Tribunal restored the issue to the AO for fresh examination, following the decision in the assessee's case for A.Y. 2003-04.

3. Ad-Hoc Disallowances:
- Discount and Commission: The AO disallowed Rs. 5,00,000/- on an ad-hoc basis, upheld by the CIT(A). The Tribunal confirmed the disallowance.
- Sales Promotion: The AO disallowed Rs. 20,00,000/- on an ad-hoc basis, upheld by the CIT(A). The Tribunal deleted the addition following its earlier decision.
- Traveling, Conveyance, and Vehicle Expenses: The AO disallowed Rs. 10,00,000/- on an ad-hoc basis, upheld by the CIT(A). The Tribunal deleted the addition following its earlier decision.

4. Set Off of Long-Term Capital Loss:
The AO disallowed set-off of long-term capital loss against long-term capital gain of Rs. 25,25,719/-. The Tribunal restored the issue to the AO for fresh examination following its earlier decision.

5. Disallowance of Website Expenses:
The AO disallowed Rs. 1,94,400/- for website expenses. The CIT(A) directed the AO to verify if the expenses were for maintenance. The Tribunal allowed the expenses, considering the smallness of the amount.

6. Disallowance of Product Development & Clinical Trial Expenses:
The AO disallowed Rs. 3,91,436/- due to lack of details. The CIT(A) upheld the disallowance. The Tribunal allowed the expenses considering the business nature.

7. Addition Due to Change in Inventory Valuation:
The AO added Rs. 11,00,000/- due to a change in inventory valuation method. The CIT(A) upheld the addition. The Tribunal restored the issue to the AO for fresh examination.

8. Disallowance u/s 14A:
The AO disallowed Rs. 24,11,250/- u/s 14A. The CIT(A) upheld the disallowance. The Tribunal directed the AO to restrict the disallowance to 1% of the total dividend income.

9. Reduction of Profits for Deduction u/s 80-HHC:
The AO excluded certain incomes from business profits for deduction u/s 80-HHC. The CIT(A) partly upheld the AO's decision. The Tribunal restored the issue to the AO for fresh examination following its earlier decision.

10. Reduction of DEPB Incentive for Deduction u/s 80IB:
The AO reduced DEPB income for deduction u/s 80IB. The CIT(A) upheld the reduction. The Tribunal confirmed the reduction following the Supreme Court decision in Liberty India Ltd.

11. Bad Debts Disallowance:
The AO disallowed Rs. 78,63,967/- for bad debts. The CIT(A) allowed the claim. The Tribunal upheld the CIT(A)'s decision.

12. Double Taxation and Other Minor Disallowances:
The AO did not follow DRP directions on certain issues. The Tribunal directed the AO to follow DRP directions and decide afresh.

Conclusion:
The appeals were partly allowed for statistical purposes, with several issues restored to the AO for fresh examination following earlier Tribunal decisions. Some disallowances were confirmed, and others were deleted.