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TMI Blog2015 (10) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... and distribution expenses - ITAT examined the scheme floated by the Assessee for granting special incentives for achieving certain targets - Held that:- It was noticed that the AO did not issue notices to the parties whose details were furnished. The ITAT was satisfied that in the absence of any exercise undertaken by the AO to verify the payments to such parties, there was no justification for the disallowance. The Court finds nothing legally erroneous in the approach of the ITAT in the matter. If the details were furnished by the Assessee were not verified by the AO for their genuineness by making enquiries, there was no basis for disallowing the expenses. The Court, accordingly, declines to frame a question of law on this issue. Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , energy meter components and UPS. 3. The Assessee filed a return of income on 31st October, 2007 for AY 2007- 08 declaring an income of ₹ 3,12,84,020/-. The case of the Assessee was picked up for scrutiny. The Assessing Officer ('AO') noted that the Assessee had debited a sum of ₹ 3,56,12,515 in its Profit and Loss Account (P L A/c) under the head of 'Selling and Distribution Expenses'. On further enquiry, the AO found that a sum of ₹ 3,00,00,000/- had been paid to HIL as expenses under this head. 4. A copy of an Agreement dated 18th March, 2006 entered into by the Assessee with HIL was produced. Copies of the invoices raised by the HIL and evidence of payments made by Assessee were produced. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical knowhow fee' to SSA. The Assessee enclosed a copy of the Agreement entered into by it with SSA to substantiate its plea that it was a revenue and not a capital expenditure. The AO, however, rejected the plea and capitalized the amount. After allowing depreciation at 12.5%, the AO disallowed a sum of ₹ 48,27,235/- and added it back to the total income of the Assessee. Liabilities to the tune of Rs, 13,15,648 were disallowed on the ground that they were not genuine since there was no evidentiary support. 9. In the appeal filed by the Assessee, the Commissioner of Income Tax (Appeals) [CIT (A)] asked the Assessee to substantiate its claim of 'selling and distribution expenses'. The Assessee produced photocopies of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and the Revenue, the ITAT has impugned by the common order remanded two issues to the AO for re-determination: one regarding the addition of ₹ 13,15,648/- on account of liabilities not being genuine and the other concerning the addition of ₹ 17,76,275/- towards commission on sales. As regards the other items of expenditure, the ITAT: (i) Deleted the addition of ₹ 3 crores on account of 'selling distribution expenses' on the principles of consistency since in the earlier AYs a similar expense had been allowed. It was also noticed that on subsequent payments of TDS by the Assessee, the AO had in the earlier AYs allowed similar claims. (ii) Restricted the disallowance of ₹ 9,89,454/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es', the Court notices that what weighed with the ITAT was that the assessment for AY 2004-05 was reopened by the Revenue on 31st March, 2011 under Section 148 of the Act. Yet, the reopening did not happen on the issue of genuineness of the selling and distribution expenses but on the ground of the payment of technical knowhow fee. The re-opening of the assessment was not upheld by the CIT (A). The ITAT also dismissed the Revenue's subsequent appeal. For AY 2010-11, after scrutiny, an assessment order was passed under Section 143 (3) of the Act in which a similar claim was allowed. 15. The Court further notes that even in AYs 2004-05 to 2006-07, the Assessee had justified the payments with reference to similar Agreements with HIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricted to 20%. The view taken by the ITAT is a plausible one. In the facts and circumstances, the Court is not inclined to frame a question of law on this issue. 18. On the issue of 'incentive in selling and distribution expenses', the ITAT has referred to the details provided by the Assessee of the various dealers, customers in respect of whom payments were made by issuing credit notes. The ITAT has also examined the scheme floated by the Assessee for granting special incentives for achieving certain targets. It was noticed that the AO did not issue notices to the parties whose details were furnished. The ITAT was satisfied that in the absence of any exercise undertaken by the AO to verify the payments to such parties, there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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