9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (4) TMI 709 - AT - Income TaxAddition being interest on loan disallowed by the AO - Held that - As explained by the assessee that the purpose of borrowing additional funds/loan was that there were addition towards capital for work in progress of ₹ 2,47,76,337/- due to renovation and modernization in assessee s factory premises. The Ld. CIT(A) has noted after going through the audited P&L Account and the Balance Sheet wherein it was discernible that the assessee had renovated and modernized the factory, which fact could not be controverted by the Ld. DR before us and since the amount of loan has been utilized for the purpose of business which qualifies to be allowed u/s. 36(1)(iii)/Sec. 37 of the Act and, therefore, the Ld. CIT(A) has rightly allowed the claim of the assessee which does not call for any interference from our part and, therefore, we dismiss this ground of appeal of the revenue. Addition of legal and professional expenses - Held that - The professionals appointed were experts in their respective fields, and that their services were retained to groom and train the new recruits as no suitable replacement was readily available. We note that the assessee has discharged the initial onus casted upon it to claim the expenditure by submitting the name, address, PAN etc, (of the professionals) the AO could not have added the amounts back without further verification and ought not to have casted any doubt about the genuineness of the expenditure without bringing any adverse material against the assessee. And since the expenditure was for business purpose the expenditure claimed on this count needs to be allowed and it was rightly allowed by the Ld. CIT(A). Addition disallowed on account of foreign tour expenses claimed by the assessee - Held that - CIT(A) has allowed the travelling expense i.e. air ticket of ₹ 3,60,545/-, however, restricted the claim of ₹ 6,39,000/- which was claimed to have been expended on account of boarding and lodging. The Ld. CIT(A) taking into account the element of personal expenditure sustained 20% of the disallowance which works out to ₹ 1,26,000/- and thus assessee got a relief of ₹ 8,64,545/-. Against the action of CIT(A) only revenue is in appeal - Mrs. Zhu Xintian the research manager having visited foreign countries wholly and exclusively for business purposes of the assessee company is entitled to claim the expenditure and we do not want to interfere in the order of the Ld. CIT(A), which is hereby upheld. This ground of revenue appeal is dismissed. Disallowing on account of publicity expenses - non deduction of tds - TDS u/s 194C - Held that - The assessee entered into an agreement with M/s.STP Pharmaceuticals Pvt. Ltd. according to which M/s. STP will manufacture the pharmaceutical products in the brand name Sorbiline by using materials from its own source and sell the same to the assessee on principal to principal basis. Therefore, undoubtedly the provisions of clause (e) of Explanation (iv) of sec. 194C gets attracted in the instant case and as such, the entire expenditure of ₹ 58,77,566/- being paid to M/s.STP Pharmaceuticals Pvt. Ltd for purchase of Sorbiline does not come under the ambit of sec. 194C, therefore, the AO erred on this issue, which has been rightly corrected by the Ld. CIT(A), which calls for no interference, so we confirm the order of Ld. CIT(A). Addition of promotional expenses - distribution of gifts - Held that - Since the assessee has produced bills and invoices for purchase of the SS Dinner set from M/s. Subhalakshmi Enterprises and has made the payment through banking channel, the purchases cannot be disbelieved on a statement recorded behind the back of the assessee and without confronting the assessee company with the adverse material and unless the assessee had an opportunity to cross examine the person who has deposed on behalf of M/s. Subhalakshmi Enterprise, the internal communication received by the AO cannot be a ground to find fault with the veracity of the claim/invoices/bills/bank statement etc. produced by the assessee to discharge the onus to show that it has purchased the gift (SS Dinner set) from M/s. Subhalakshmi Enterprise - the assessee has not given the list of recipients of gifts i.e. distributors/dealers when asked for by the Ld. CIT(A)/AO, therefore, we are inclined to disallow 30% of the claim. The AO is directed to restrict the claim to 30% of its claim and the assessee gets partial relief. Accordingly, this ground of cross objection of assessee is partly allowed.
Issues Involved:
1. Deletion of addition of ?6,50,610/- being interest on loan disallowed by the AO. 2. Deletion of addition of ?28,75,927/- on account of legal and professional expenses disallowed by the AO. 3. Deletion of addition of ?9,90,545/- disallowed by the AO on account of foreign tour expenses. 4. Deletion of addition of ?58,77,566/- disallowed by the AO on account of publicity expenses. 5. Confirmation of addition of ?20,97,900/- claimed by the assessee on account of promotional expenses. Issue-wise Detailed Analysis: 1. Deletion of Addition of ?6,50,610/- Being Interest on Loan Disallowed by the AO: The AO disallowed ?6,50,610/- out of the total interest on loan claimed by the assessee, comparing the interest paid in the current year with the previous year and noting a decrease in turnover. The assessee explained that the additional loan was used for capital work in progress due to renovation and modernization of the factory premises. The Ld. CIT(A) allowed the claim after verifying the audited P&L Account and Balance Sheet, confirming the utilization of the loan for business purposes. The Tribunal upheld the Ld. CIT(A)’s decision, dismissing the revenue’s appeal. 2. Deletion of Addition of ?28,75,927/- on Account of Legal and Professional Expenses Disallowed by the AO: The AO disallowed ?28,75,927/- claimed as legal and professional expenses, comparing it with the previous year’s expenses and questioning the necessity given the reduced turnover. The assessee explained that the expenses were incurred due to the engagement of retired professionals on a retainer basis to handle legal, HR, and other matters. The Ld. CIT(A) allowed the claim, noting the verifiable details provided by the assessee and the necessity of such expenses for business purposes. The Tribunal agreed with the Ld. CIT(A) and upheld the decision, dismissing the revenue’s appeal. 3. Deletion of Addition of ?9,90,545/- Disallowed by the AO on Account of Foreign Tour Expenses: The AO disallowed ?9,90,545/- claimed as foreign tour expenses, questioning the business connection and lack of documentary evidence. The assessee explained that the expenses were incurred by a Research Manager for exploring new sources of raw materials and technologies. The Ld. CIT(A) allowed the air ticket expenses but restricted the boarding and lodging expenses, sustaining 20% of the disallowance. The Tribunal upheld the Ld. CIT(A)’s decision, noting the business purpose of the foreign tour, and dismissed the revenue’s appeal. 4. Deletion of Addition of ?58,77,566/- Disallowed by the AO on Account of Publicity Expenses: The AO disallowed ?58,77,566/- claimed for purchasing physician samples, questioning the business necessity and citing non-deduction of TDS under section 194C. The assessee explained that the samples were purchased from M/s STP Pharmaceuticals Pvt. Ltd. to boost sales, and the transaction was on a principal-to-principal basis. The Ld. CIT(A) allowed the claim, noting that the provisions of section 194C were not applicable as the materials were sourced from a person other than the assessee. The Tribunal upheld the Ld. CIT(A)’s decision, confirming the factual findings and dismissing the revenue’s appeal. 5. Confirmation of Addition of ?20,97,900/- Claimed by the Assessee on Account of Promotional Expenses: The AO disallowed ?20,97,900/- claimed for distributing gift articles, citing lack of agreements, confirmations from recipients, and an internal communication alleging bogus entries. The Ld. CIT(A) upheld the disallowance. The assessee contended that the adverse material was not confronted with them and relied on judicial precedents for natural justice and consistency in allowing similar claims in previous years. The Tribunal noted the failure to provide the list of recipients and confirmations but acknowledged the purchase through banking channels. The Tribunal partially allowed the claim, restricting the disallowance to 30%. Conclusion: The Tribunal dismissed the revenue’s appeal on all grounds and partly allowed the assessee’s cross-objection, providing partial relief on the promotional expenses claim. The order was pronounced on 11th April, 2018.
|
