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TMI Blog2014 (3) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the year, in which it was incurred – the addition made by AO set aside. Deletion of shortage of closing stock – Held that:- CIT(A) held that the Assessee has furnished the details of shortage of such 3,558 units of items and informed that out of such short items, 3394 items were issued to the distributors on free of cost basis for display and training purpose - The appellant company also furnished details with name and address with location of its distributors across the country, numbering 94 in all - The appellant has furnished proper item-wise record of such items which were provided to the dealers for display/training - some of the items may have been damaged or lost during transit, therefore such a shortage due to damage or loss is not considered reasonable keeping in view the magnitude of such shortage, being 0.12% of the total sales and hence cannot it be held as an unusual loss - the shortage of 164 units on account of damaged or lost items as a normal loss in the course of business of trading of sanitary-ware items across India to various distributors - no contrary material has been found or placed on record by the revenue and otherwise the conclusion drawn by CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms as having being sold out of the books on which average sale price of Rs.2,328/- was applied and accordingly an addition of Rs.82,83,024/- on this account was made. 4. The assessee took up the matter in appeal and it was submitted that the expenditure incurred on advertisement and sales promotion activities during the financial year under consideration was primarily in nature of advertisement in magazine, media, designing and printing charts for posters banners, catalogues participation in exhibition, display at showrooms event management and so on. The detailed nature and breakup of this expenditure was also submitted by the assessee. It was further contended that the A.O. had failed to appreciate that the expenditure incurred on advertisement and sales promotion are routine operational expenses, which has been incurred by the assessee with the sole intention to create the awareness of the products offered by the company in order to boost its sale and to earn better margins. This expenditure on advertisement and sales promotion has neither led to creation or acquisition of any capital asset nor resulted in any benefit of enduring nature. This expenditure has been incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held as short as under: S.No. Particulars No. of units 1 Goods issued to distributors for training and display purposes 3,394 2 Goods damaged or lost in normal course of 164 business and identified on physical verification of the closing stock 164 Total 3,558 Ld. Counsel for the assessee pleaded that issue of goods to the distributors for display in their showrooms is a routine business activity in the sanitary- ware industry, where the products such as bath fittings, taps etc. are required to be prominently displayed. The Ld. Counsel for the assessee also furnished item-wise breakup of goods issued to the distributors/dealers for display purpose. It was also submitted that after excluding 3,394 items of goods issued for display/training to the distributors, the actual shortage was of only 164 items, which were either damaged or lost in the normal course of business, which were identified on physical verification of the closing stock. The Ld. Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.9,13,82,290/- were incurred, which led to steep rise in sales to Rs.136,91,57,822/-. On careful perusal of each such item incurred during the year, I find that such expenses were routine operational expenses for the purpose of sale promotion. None of these expenditure could be held to be instrumental in creating permanent assets or enduring benefits to the appellant company. The justification of these expenditure could be gauged by the fact that company's turnover rose from Rs.31.9 crores in the current year to Rs.136.91 crores within 2 years, during which period also similar further expenditure was incurred. The Hon'ble Jurisdictional High Court in the case of M/s Casio India ltd. (ITA No.10 of 2011) and CIT vs Citi Financial Consumer Fin. ltd. (ITA No.1S20 of 2010) has held that the expenditure on publicity and advertisement is to be treated as revenue nature allowable fully in the year, in which it was incurred. Keeping in view the useful test laid by the Hon'ble High Court in the case of M/s Empire Jute Co. Ltd. vs. CIT (124 ITR 1), I held that in incurring the above referred advertisement and sales promotion expenses, the appellant has not obtained advantage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose price ranges between Rs.56 to Rs.14018/-, depending upon the items. The appellant has claimed that such items were either damaged or lost during the transit to the dealers, which in its view was in the normal course of business. I find that the appellant had sold Rs.1,37,185/- units during the year against which the items that were damaged or lost were merely 164 in number which is around 0.12% of total units sold. Since, the company has 94 distributors across the country, it is not unlikely that some of the items may have been damaged or lost during transit, therefore such a shortage due to damage or loss is not considered reasonable keeping in view the magnitude of such shortage, being 0.12% of the total sales and hence cannot it be held as an unusual loss. In view of the above, I hold the shortage of 164 units on account of damaged or lost items as a normal loss in the course of business of trading of sanitary-ware items across India to various distributors. Further, the Ld. AO had gathered no evidence, whatsoever, in support of his contention that such items were sold outside the books. In view of the same, this ground of appeal is also decided in favour of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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