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TMI Blog2014 (12) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ade u/s 40A(2)(b) at Rs. 9,06,670/- by the Deputy Commissioner of Income Tax, Ahmednagar Circle, Ahmednagar. That the payments made to the relatives were reasonable and hence the same be allowed in full. 3. That the learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of expenditure made under the head incentives and commission amounting to Rs. 13,99,440/- by Deputy Commissioner of Income Tax, Ahmednagar Circle. The incentive and commission payments are in the course of business and for business and hence the same be allowed in full." 3. In brief, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, interalia, engaged in the business of a dealer of Swaraj Tractors and Trailors. For the assessment year under consideration, it filed a return of income declaring total income of Rs. 51,17,262/- which was subject to a scrutiny assessment u/s 143(3) of the Act on 21.12.2009 whereby the total income was assessed at Rs. 99,79,507/- by making certain disallowances which are a subject-matter of appeal before us. Ostensibly, the additions/disallowances made by the Assessing Officer were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paper Book, wherein the list of customers to whom the discount have been allowed, is placed. It has also been pointed out that giving of discounts and offering other incentives to the customers to buy the Tractor is a normal business practice and in this context, he had referred to pages 89 to 90 of the Paper Book to point out certain advertisement in Newspaper showing offer of discounts and other incentive schemes on sale of Tractors. With regard to the expenditure of discount of Rs. 25,56,135/-, it has been explained that a sum of Rs. 20,83,000/- has been allowed by way of payments by cheque/DD and a sum of Rs. 1,04,500/- is paid in cash and the balance of Rs. 3,63,635/- is through journal entries. Such details of the mode of payment of discount to the customers has been enumerated at pages 91 to 94 of the Paper Book. Another point raised by the assesse4e is that the discount offered by the assessee through the vouchers is not more than the discount which has offered by the assessee on the sales where the sale bill itself has been prepared on the basis of the net sale price. On pages 95 to 96 of the Paper Book, assessee has provided a Tabulation giving details of the selling pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een doubted by the incometax authorities. The doubt of the income-tax authorities is based on the reason that such discount has not been allowed in the sale bill but by way of a separate voucher. The assessee has refunded a portion of the sale price received by it and the same has been explained to be discount allowed to the customers. Factually speaking, the aforesaid mechanism adopted by the assessee to give discount to the customers is not in dispute. The relevant material, namely, copies of bank loan sanction letters, sale bills, copy of discount vouchers, ledger account of customers, etc. were produced by the assessee and the same have been verified by the Assessing Officer. The plea setup by the Revenue is that it is an illegal practice and therefore such expenditure is not to be allowed. While asserting so, the Revenue has not made out any particularly illegality. No infraction of law has been made out by the Revenue. The net effect of the entire exercise is that the customers have been allowed discount on sale effected by the assessee. The assessee company has further explained that the business of Tractors is a competitive business where the main customers are farmers who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had furnished the relevant details which justified that the payments made were reasonable in comparison to the market prices. 13. On the other hand, the Ld. Departmental Representative appearing for the Revenue has referred to the orders of the authorities below in support of the case of the Revenue. 14. We have carefully considered the rival submissions. One of the items of expense in question relates to rent paid to Late Mr. D.M. Bhansali and Smt. Tarabai D. Bhansali of Rs. 1,14,000/- with respect to a property taken on rent. In this context, it has been explained that the property was admeasuring 4000 sq.ft. and the rent paid was Rs. 9500/- per month for the last ten 10 to 15 years and it is quite reasonable as compared to prevailing market rent. In this context, it has also been pointed out by the assessee before the lower authorities that in the immediate neighborhood a similar property was leased out at the rate of Rs. 5 to Rs. 8 per sq.ft. and therefore the rent paid by the assessee was quite reasonableness. We find that the assessee had given specific instance in the vicinity, whereby Kopergaon Peoples Co-op. bank Ltd. has leased out a premises to LIC and Bank of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to page 108 of the Paper Book to demonstrate that the prices charged by the sister concern are comparable to prices charged by the said concerns to other customers. In this context, in respect of purchases from Bhansali Trailors Pvt. Ltd., the relevant copies of bills are also enclosed in the Paper Book at pages 109-118. Similar details have been given by the assessee in the Paper Book at page 119 with respect to the purchases from Bhansali Agricultural Equipments of Rs. 9,00,962/-. The aforesaid material was very much before the lower authorities and we find that there is no rebuttal of the assertions made by the assessee. Therefore, we are unable to uphold the invoking section 40A(2)(a) of the Act in the present case with respect to the expenditure incurred by the assessee on account of purchases from sister concerns. The order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the addition. 18. The last item of expenditure subjected to a disallowance u/s 40A(2)(a) of the Act is relating to Travelling expenses of Rs. 1,31,665/-. This amount represents reimbursement of travelling expenses incurred by the Managing Director of the assessee company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that while allowing the expenditure in assessment year 2009-10, the Assessing Officer had recorded statements of four persons to whom commission/incentives was paid by the assessee and such persons have also been paid commission/incentives in the current assessment year also. Therefore, there was no justification for the lower authorities to have disallowed the expenditure incurred during the year under consideration. The relevant material has been placed in the Paper Book at pages 170 to 178. 21. On the other hand, the Ld. Departmental Representative reiterated that complete confirmations from the recipient of commission/incentives were not furnished by the assessee and therefore the lower authorities were justified in disallowing the expenditure. 22. We have carefully considered the rival submissions. At the outset, it may be noted that the factum of the assessee incurring expenses by way of commission/incentives in the course of carrying out in business of Tractor and TVS bike stands established. The verification exercise carried out by the Assessing Officer in the course of assessment proceedings for assessment year 2009-10 supports the assertions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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