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TMI Blog2015 (10) TMI 2255X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 15,75,358/- claimed by the assessee as expenses for employee cost, administrative expenses and finance charges of a beverage unit. 3. Brief facts of the case are that the Assessing Officer observed that the assessee has incurred an amount of Rs. 15,75,358/- (excluding depreciation) on the beverage business which was not in operation since assessment year 2002-03. The Assessing Officer observed that in the assessment year 2004-05, depreciation was disallowed on beverage unit on the ground that it has not carried out the business operation since 2002-03 and the Tribunal upheld the same vide order dated 19/07/2007 in I.T.A.No.99/PNJ/2007. Therefore, he disallowed the business expenditure for beverage unit claimed by the assessee. 4. On a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Mumbai ITAT held that expenditure incurred by the assessee in maintaining its unit is allowable, even though no manufacturing was carried out during the year. The appellant in its submission has distinguished the facts as being different from the case of M/s. J. K. Traders vs. CIT. The content of assessee's submission is reproduced as under: "On the outset the appellant wishes to clarify that the appellant has not relied upon the decision of J. K. Traders vs. CIT. The said decision has been relied upon by the Commissioner of Income Tax in his order under section 263. In the above mentioned letter, the appellant has distinguished the said case as the facts differ. The appellant reiterates that in the above ease, the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow about in case any further information/documents required prior to completion of the appellate proceedings." I have tried to understand the facts of this case in the light of both the decisions, i.e. M/s. Vazir Glass Works and M/s. J.K.Traders, one being in favour of the appellant and the other, against it. In the instant case, the appellant had to suspend its manufacturing because of a dispute and the appellant had no option but to maintain its manufacturing facilities as in absence of maintenance, the plant itself would rust and re-starting the same will become difficult and costlier. The depreciation has already been disallowed and accepted by the appellant. Since, the upkeep of the factory was essential for the assessee, in my opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oft drinks and therefore, operations of the unit were temporarily suspended and the assessee was trying to resolve the dispute to recommence the business. Hence, expenditure for maintaining the plant and machinery and staff and incurring statutory expenditure was essential. Therefore, the expenditure incurred was revenue in nature and rightly allowed by the Commissioner of Income Tax (Appeals). 7. We find that it is not in dispute that in the instant case, the business of beverage unit was temporarily suspended since assessment year 2002-03 and the assessee was making efforts to settle the dispute with Pepsi Ltd. for whom the assessee was doing bottling work and had to incur expenditure in question for maintaining the unit in operational c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, the assessee made commission payment to newspaper vendors of Rs. 1,36,43,978/- and advertising agents of Rs. 2,76,00,979/-, aggregating to Rs. 4,12,44,957/-. The Assessing Officer found that the assessee had not deducted TDS from the above payments and therefore, by invoking the provisions of sec. 40(a)(ia) of the Act, he disallowed deduction for the same and added it to the income of the assessee. 10. On appeal, Commissioner of Income Tax (Appeals) allowed deduction to the assessee and while doing so, he held that tax was not deductable at source on the amount of trade discount allowed to the advertising agency and directed the Assessing Officer to delete the disallowance of Rs. 2,76,00,979/-. Further, he held that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile services to them. There was no relationship of principal and agency. On the contrary, it was expressly stated that the relationship was that of principal to principal. Secondly, the distributor or channel partner had to pay consideration for the product supplied and it was treated as sale consideration. There was a clause, which specifically stated that after such sale of products, the distributor or channel partner could not return the goods to the assessee for whatever reason. What was given by the assessee to its distributor or channel partner was a trade discount. It was not commission. (ii) That the assessee sold pre-paid cards and vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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