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TMI Blog2012 (10) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance u/s 40A(9) - Held that:- The assessee company is continuously depositing employees’ share to Provident Fund (Account 10, Pension) from financial year 2004-05, 2005-06, 2006-07 and 2007-08. The DR did not dispute the fact that this payment has been complying the statutory requirements of the assessee and this kind of payment has not been disputed in the earlier years by the authorities below. Therefore, the findings of the AO cannot be sustained. CIT (A) rightly held that the demand was made on account of statutory liability of the assessee, therefore, the action of the Assessing Officer was misconceived - in favour of assessee. Non deduction of TDS - advertisement and business promotion expenses - Held that:- The assessee company had given discount by its principal manufacturer during the financial year under consideration against the various promotional schemes and as per trading account submitted by the assessee before the authorities it is apparent that the assessee has shown purchases of vehicles after deducting the discount from the billing amount. But that the CIT (A) has not discussed and given a finding in this regard that how the discount given by the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest on loan liability, on reduction of claim, depreciation, on account of pension fund, on account of HHM Scheme payment and on account of dividend tax and the Assessing Officer also disallowed the payment of service tax contribution and finalized assessment at total taxable income of Rs.30,87,082/-. 4. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax(A)-XXI which was partly allowed by deleting the additions made by the Assessing Officer. Now, revenue is in appeal before this Tribunal with the grounds mentioned hereinabove. Ground No. 1 5. Apropos ground no. 1 related to payment of service tax, ld. DR submitted that this addition was deleted ignoring the fact that the said payment was in nature of penalty and, therefore, it was not an allowable expenditure. The assessee s representative replied that the liability of service tax incurred by the assessee on the payment received by it from the banks and financial companies to whom services are stated to be rendered by the assessee for which the assessee received the payment after deduction of tax at source. Therefore, the Commissioner of Income Tax(A) rightly deleted the addition. He sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong appreciation of the factual position. The perusal of the documents accompanying this note make the position clear as to the liability of service tax incurred by the assessee on the payments received by it from the banks and finance companies to whom the services are stated to be rendered by the assessee for which it received the payment after the deduction of tax at source. The amount received by the assessee according to the revenue authorities was exigible to tax as per the Custom and Excise Act on which demand was raised by the revenue authorities as per provisions contained in Section 68 of the Finance Act, 1964. The deduction of Rs. 2, 36, 547/- was therefore, permissible being the appellant's liability which was duly discharged during the accounting period in question. There was absolutely no justification on the part of the AD to make disallowance Rs.2,36,547/- which deserves to be allowed. " 5.2 I have gone through the findings of the AO and submission of the Id. AR and I am inclined to accept the explanation of the ld AR that liability of service tax incurred by the assessee on the payment received by it from the banks and finance companies to whom the services ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings of Commissioner of Income Tax(A). Hence, ground no.2 is also dismissed. Ground No. 3 11. Apropos ground no.3, ld. DR submitted that the Assessing Officer has disallowed the claim of Rs.1,23,654 by invoking the provisions of section 40A(9) of the Act. The assessee s representative before us submitted that the payment was made by the assessee on account of statutory liability and it had been allowed in earlier years for the assessee. Therefore, there was no substantial cause for taking a new view in the year under consideration. He finally submitted that the view taken by the Assessing Officer was misconceived and it was corrected by the ld. Commissioner of Income Tax(A). 12. During the course of appellate proceedings before the Commissioner of Income Tax(A), the assessee s submissions through letter dated 20.9.2010 was as under:- This amount is shown in schedule. J under the head remuneration and other benefit which inter alia contained pension fund amount of Rs.1,23,654/-. A perusal of this Schedule shows along with other amounts as PF, Administration Charges, Insurance Fees. In the earlier years also pension fund have been claimed and allowed as expenditure al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of advertisement and business promotion expenses on various schemes initiated by the manufacturer. He further submitted that the Assessing Officer rightly noted that the expenses were incurred by principal manufacturer and subsequently charged from the assessee dealer by way of debit notes. The DR finally submitted that the expenses were neither incurred by the assessee dealer nor there was any bill in the name of the dealer and since the assessee company had not deducted tax at source on HHM pension, therefore, the Assessing Officer rightly disallowed the demand by invoking the provisions of Section 40(a)(ia) of the Act. 16. The assessee s representative submitted that principal manufacturer Hero Honda company introduced different schemes to increase turnover of the business from time to time for promotion of the same and expenditure incurred in different ways for and on behalf of the authorized dealers. The AR further submitted that in this backdrop, the expenditure of Rs.9,82,037 was incurred on account of HHM scheme by principal manufacturers for the benefit of both the principal and its dealers and for this purpose, the amount incurred on the schemes was collected from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 During the course of appellate proceedings Id. AR of the assessee has submitted as under:- "It is common ground that the appellant is an authorized dealer of Hero Honda and its accessories and also runs service stations. There is cut throat competition in the business in which the appellant has engaged itself. The Principal, Hero Honda of which the appellant is the (authorized dealer is always in the look out to increase the turn over of the business. With this need in view, different schemes are introduced from time to time for the promotion of sale of their products and expenditure is incurred in different ways for and on behalf of the authorized dealers. The scheme introduced is application to all the various dealers all over India and is for the promotion of the business. It is in this background that an expenditure of Rs.9,82,037/- was incurred on account of HHM Scheme and debited to the P L A/c. The burden of this scheme is ultimately not to be on the authorized dealer because it is to inure to the benefits both of the principal and its dealers and for this purpose the amount spent on the scheme is in a way reimbursed to the authorized dealers in the form of discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee before the authorities below which is available from page no. 46 to 50 and 68, it is apparent that the assessee has shown purchases of vehicles amounting to Rs.14,52,63,900.69 after deducting the discount from the billing amount. But we observe that the ld. Commissioner of Income Tax(A) has not discussed and given a finding in this regard that how the discount given by the principal manufacturer by way of deducting the same in the sales bills raised against the assessee and the debit notes raised on assessee by the Principal (Manufacturer) to collect the payment made by principal manufacturer on account of advertisement and sales promotion expenses is co-related and deserves to be allowed as the expenditure incurred by the assessee for advertisement and sales promotion. Ld. Commissioner of Income Tax(A) has not given any findings on the Assessing Officer s observations in this regard. We have no hesitation to hold that the impugned order in this regard is slipshod and cryptic, therefore we find it appropriate to restore this issued to the file of Commissioner of Income Tax(A) for adjudication. Ground no. 4 is disposed of in the terms as indicated above. 20. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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