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2018 (9) TMI 1406 - AT - Income TaxDirect Marketing Agent s Commission - allowable busniss expenses or not - Held that - Hon ble Supreme Court in the case of Taparia Tools Ltd. 2015 (3) TMI 853 - SUPREME COURT after considering its decision in the case of Madras Industrial Investment Corporation 1997 (4) TMI 5 - SUPREME COURT has held that notwithstanding the accounting treatment followed by an assessee, expenditure incurred during the year has to be allowed in full irrespective of the action of the Assessee of amortizing it . No infirmity in the order of CIT(A) for allowing deduction of Direct Marketing Agent s commission paid to the Direct Marketing Agent. As the facts and circumstances in all the three assessment years i.e., 2007-08, 2008-09 and 2011-12 are same, following the reasoning given hereinabove, the ground taken by the Revenue is dismissed. Disallowance of provision for leave encashment u/s.43B(f) - Held that - CIT(A) has confirmed the disallowance in view of the decision of Hon ble Supreme Court wherein SLP filed by the Department was accepted against the order of Calcutta High Court in case of Exide Industries Ltd.. 2007 (6) TMI 175 - CALCUTTA HIGH COURT . As the issue is pending before the Hon ble Supreme Court with regard to allowability of claim of provision for leave encashment, we direct the AO to decide the issue only after the decision of Hon ble Supreme Court on this issue. We direct accordingly. Disallowance of provision for post retirement benefits u/s.43B(b) - Held that - Thus issue is squarely covered by the decision of Delhi High Court in the case of Ranbaxy Laboratories Ltd., 2011 (3) TMI 1032 - DELHI HIGH COURT as held that the pension scheme of the assessee did not envisage any regular contribution to any fund or trust or any other entity. The pension scheme provided that pension would be paid by the assessee to its employee on his or her attaining the retirement age or resigning after having rendered services for a specified number of years. Thus, where the liability on this account accrued from year to year, it was payable on retirement/resignation of the eligible employees. It could not be disallowed under section 43B. where the liability on this account accrues from year to year, the same is payable on retirement/ resignation of the eligible employees. - decided in favour of assessee Disallowance u/s. 40(a)(ia) - non-deduction of TDS on account of reimbursement of advertisement and training expenses incurred by the assessee s dealers - Held that - TDS is required to be deducted in respect of alleged expenditure incurred by the assessee. AO as well as CIT(A) has recorded a finding that assessee has failed to show that these are mere reimbursement of expenses and no evidence was filed to show that TDS has been deducted by the parties to whom reimbursement has been made at the time of payment made by them. The finding so recorded by AO and CIT(A) has not been controverted by learned AR by bringing any material on record. Accordingly, we do not find any reason to interfere in the findings so recorded by lower authorities. Hence ground taken by assessee is dismissed. Disallowing administrative expenditure u/s.14A by invoking Rule 8D(2)(1) - Held that - Referring to contention of learned AR that the Assessing Officer s invocation of Rule 8D(2)(i) is patently erroneous. If at all any disallowance is called for it can be made only under Rule 8D(2)(iii) of the Rules, PROVIDED THAT the conditions of Rule 8D(2) iii) of the Rules are met, we restore the matter back to the file of the AO with a direction to compute disallowance of administrative expenses in terms of 8D2(iii). Claim of adjustment on account of delinquency support receipts - contention of learned AR that this ground arises on account of a rejection, by the Assessing Officer, of the Assessee s claim for such relief during the assessment proceedings for AY 2013-14, which were concluded on 30 March 2016 - Held that - As the Assessee s claim was rejected in AY 2013-14, the Assessee has raised an additional ground in AY 2008-09, because a part of the Assessing Officer s rejection of the claim made by the Assessee in AY 2013-14 pertains to AY 2008-09. No merit in the above contention of learned AR, however, learned AR is free to raise ground while filing an appeal for the A.Y.2013-14. We direct accordingly.
Issues Involved:
1. Deduction of Direct Marketing Agent (DMA) commission. 2. Disallowance of expenses on issue of Non-Convertible Debentures (NCDs). 3. Disallowance of expenditure under Section 14A of the Income Tax Act. 4. Disallowance of provision for leave encashment under Section 43B. 5. Disallowance of post-retirement benefits under Section 43B(b). 6. Disallowance of expenses under Section 40(a)(ia) due to non-deduction of TDS. 7. Additional ground for claim of adjustment on account of delinquency support receipts. Detailed Analysis: 1. Deduction of Direct Marketing Agent (DMA) Commission: The Revenue challenged the CIT(A)'s decision to allow the entire DMA commission as a deduction in the years under consideration, arguing that the assessee had amortized the expenditure in its accounts based on a matching principle. The CIT(A) allowed the entire DMA commission based on the Delhi High Court decision in Citi Financial Consumer Finance Ltd. and ITAT Ahmedabad Special Bench in Ashima Syntex. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in Taparia Tools Ltd. which held that expenditure incurred during the year should be allowed in full, irrespective of the accounting treatment. Thus, the Revenue's appeal on this ground was dismissed for the assessment years 2007-08, 2008-09, and 2011-12. 2. Disallowance of Expenses on Issue of Non-Convertible Debentures (NCDs): The Revenue contended that the CIT(A) erred in deleting the proportionate disallowance of expenses on the issue of NCDs. The CIT(A) relied on the Rajasthan High Court decision in Udaipur Mills Ltd., which was upheld by the Supreme Court. The Tribunal found that the issue was settled in favor of the assessee by the Supreme Court in Taparia Tools Ltd., which held that expenditure incurred during a particular year must be allowed in full. Consequently, the Tribunal upheld the CIT(A)'s decision to allow the NCD issue expenses for the A.Y. 2008-09. 3. Disallowance of Expenditure Under Section 14A: The assessee challenged the disallowance under Section 14A read with Rule 8D of the Income Tax Rules, arguing that there was no nexus between the expenses incurred and the exempt income. The Tribunal restored the matter to the AO to compute the disallowance of administrative expenses under Rule 8D(2)(iii), provided the conditions of the rule are met. 4. Disallowance of Provision for Leave Encashment Under Section 43B: For A.Y. 2007-08, the assessee contested the disallowance of provision for leave encashment under Section 43B(f). The Tribunal observed that the issue was pending before the Supreme Court in the case of Excide Industries Ltd. and directed the AO to decide the issue after the Supreme Court's decision. 5. Disallowance of Post-Retirement Benefits Under Section 43B(b): The assessee argued that the provision for post-retirement benefits was based on actuarial valuation and not a contribution to any fund, thus not covered under Section 43B(b). The Tribunal agreed with the assessee, citing the Delhi High Court's decision in Ranbaxy Laboratories Ltd., which held that such provisions could not be disallowed under Section 43B. The Tribunal found no merit in the disallowance made by the lower authorities. 6. Disallowance of Expenses Under Section 40(a)(ia) Due to Non-Deduction of TDS: The assessee claimed that the disallowed expenses were reimbursements and not income, thus not subject to TDS. The Tribunal upheld the disallowance, noting that the assessee failed to provide evidence that the expenses were mere reimbursements and that TDS was deducted by the parties receiving the reimbursement. 7. Additional Ground for Claim of Adjustment on Account of Delinquency Support Receipts: The assessee raised an additional ground for claim of adjustment due to the rejection of a similar claim in A.Y. 2013-14. The Tribunal found no merit in this contention and directed the assessee to raise the ground while filing an appeal for A.Y. 2013-14. Conclusion: The appeals were allowed in part, with specific directions provided for each issue. The Tribunal upheld the CIT(A)'s decisions on DMA commission and NCD expenses, directed the AO to revisit the disallowance under Section 14A, and provided guidance on the disallowance of leave encashment and post-retirement benefits. The disallowance under Section 40(a)(ia) was upheld, and the additional ground for delinquency support receipts was dismissed.
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