2021 (8) TMI 236 - AT - Income Tax

Addition of Brand Image expenses - HELD THAT - CIT (A) found that the bill dated 17.09.2011 for an amount of ₹ 20, 48,705/- pertain to the assessment year 2012- 13, hence, disallowed the expenditure to that extent and allowed the remaining expenditure being the amount spent during the year. The disallowance of ₹ 20,48, 705/- has not been contested by the assessee. The ld. CIT ( A) has also verified the list of dealers and their persons who were taken for the foreign junkets in support of the claim of the expenditure while deleting the addition.e hereby decline to interfere with the order of the ld. CIT ( A). Disallowance u/s 14A - During the year, as per the records, the assessee has not earned any dividend income - HELD THAT - Since, no disallowance is called for in the absence of any exempt income earned and claimed by the assessee, we hereby decline to interfere with the order of the ld. CIT (A). Commission payment - AO disallowed the amount holding that it was the provision towards commission and therefore not an ascertained liability - CIT ( A) found that the commission payment was not a provision but paid on the basis of bills dated 02.04.2013 - HELD THAT - Since, the commission amount was an ascertained liability and paid for the services rendered. TDS was also deducted on the commission payment and hence the ld. CIT ( A) taking into consideration, the entire facts allowed the deduction. Since, no contrary material has been brought before us, we decline to interfere with order of the ld. CIT ( A). Disallowance u/s 14A under Rule 8D( ii) and 8D( iii) - Suo moto disallowance made by assessee - A.Y. 2014- 15 - HELD THAT - The Hon ble Supreme Court in the case of Maxopp Investments Ltd. 2018 (3) TMI 805 - SUPREME COURT has obliterated the distinction between investment in the subsidiaries or otherwise. Hence, the matter is referred back to the Assessing Officer for re- computation of the disallowance u/s 14 A, keeping in view the judgment of Hon ble Apex Court and the amended provisions of the Act existing at the time of completion of assessment. Brand Image Expenses - CIT (A) confirmed the addition holding that the assessee company claimed expenses is unreasonable and excessive and has been claimed in order to reduce its taxable income for the assessment year 2014-15 and held that the APL gold khazana scheme do not relate to the current assessment year 2014-15 - HELD THAT - From the facts on record, we find that gold of 5000 gm worth ₹ 1,34,85,900/- has been purchased on 01.04.2013, 22.04.2013, 21. 12.2013 pertaining to the assessment year 2014-15. The gold has been purchased from GR Tangamaligai Jewellers Pvt. Ltd. which has not been disputed by the revenue. The list of gold distribution has been given at page no. 15 of the order of the ld. CIT ( A) mentioning the sales volume in metric tonnes and the quantity of gold in grams given as incentive. The revenue ought to have enquired whether the incentive of gold varying from 1073 to 1500 gms has indeed been bestowed as incentive, if so, what is the treatment given in the hands of recipient s books of accounts. The assessee has provided details of all the dealers who have been given tickets to cruise trips which were not inquired by the revenue to prove any deformation in the information provided. Instead of doing so, the revenue held that the expenses of ₹ 8. 73 crores are unreasonable and excessive which is beyond the purview of the revenue. Since, the fact of incurring of expenses and its genuineness has not been in dispute, we hereby decline to accept the reasoning of the ld. CIT (A)

Summary

Issues involved:
1. Disallowance of Brand Image expenses
2. Disallowance under section 14A of the Income Tax Act, 1961
3. Provision towards commission disallowance
4. Additional depreciation claim under Plant and Machinery
5. Deduction claims under sections 35AC and 80G

Issue 1: Disallowance of Brand Image expenses:
In ITA No. 4553/Del/2017 for A.Y. 2013-14, the revenue raised grounds against the CIT(A)'s decision to restrict the addition of Brand Image expenses. The revenue contested the reduction of the addition made by the AO, disallowing expenses under various heads. The CIT(A) examined the bills and disallowed expenses pertaining to the assessment year 2012-13. The Tribunal found no rebuttal by the revenue and declined to interfere with the CIT(A)'s order.

Issue 2: Disallowance under section 14A of the Income Tax Act, 1961:
In ITA No. 4553/Del/2017, the AO disallowed an amount under section 14A based on the investment shown in the balance sheet, despite no exempt income earned by the assessee. The CIT(A) upheld the assessee's claim, and the Tribunal declined to interfere with the order, as no exempt income was earned and claimed by the assessee.

Issue 3: Provision towards commission disallowance:
The AO disallowed a commission payment holding it was a provision, but the CIT(A) found it was a payment for services rendered. The Tribunal upheld the CIT(A)'s decision, noting the payment was an ascertained liability for services rendered, and TDS was deducted. No contrary material was presented, leading to the Tribunal declining to interfere with the order.

Issue 4: Additional depreciation claim under Plant and Machinery:
The matter was referred back to the AO for re-computation, considering the judgment of the Supreme Court and amended provisions. Both parties agreed to refer the issue to the AO for examination on factual and legal aspects.

Issue 5: Deduction claims under sections 35AC and 80G:
Both parties agreed to refer the matter to the AO for examination, and the AO was directed to take a decision in accordance with the provisions of the Act.

In conclusion, the Tribunal dismissed the revenue's appeal for A.Y. 2013-14, dismissed the CO of the assessee for the same year, and allowed the assessee's appeal for A.Y. 2014-15. The orders were pronounced in the open court on 30/07/2021.