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TMI Blog2016 (5) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the assessee was as per accounting practices followed by the assessee. Before us, Revenue has not brought any material on record to controvert the finding of ld. CIT(A). - Decided against revenue Disallowance of claim of foreign travel expenses - Held that:- CIT(A) while deleting the addition had given a finding that the assessee had furnished compete details of employees who had travelled abroad, duration of visit, countries visited, nature and amount of expenses and purpose of travel. He has also noted that the evidences placed on record include the correspondences made with the travel agents and the expenses were reasonable as compared to the total turnover of the company. Before us, Revenue has not brought any material on record to controvert the finding of ld. CIT(A).- Decided against revenue Disallowance of web designing charges - Held that:- CIT(A) while deleting the addition on account of web designing charges has given a finding that no asset has been created but web designing is only a tool for facilitating the business of the assessee as it provides the means for managing the information about the assessee. With respect to trade mark expenses, he has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medabad erred in law and on facts in deleting the disallowance of depreciation made on non compete fees. 2) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad erred in law and on facts in deleting the disallowance of claim of reduction of ₹ 5,18,761/- from stock of Packing material and ₹ 27,17,342/- from stock of finished goods. 3) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad erred in law and on facts in deleting the disallowance of claim of foreign travel expenses at ₹ 3,20,467/-. 4) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad erred in law and on facts in deleting the following expenses which were Revenue in nature. a) Web Designing charges ₹ 7,30,340/- b) Trademark expenses ₹ 13,200/- c) Survey (PR) expenses. Rs.45,81,723/-. 5) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad erred in law and on facts in deleting the disallowance made u/s.40(a)(ia) of ₹ 36,60,9817-. 4. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noncompete fee. The decision of ITAT, Pune Bench and Chennai Bench relied by the appellant appears to be quite logical as the payment of non - compete fee to another person to reduce the competition, tantamounts to a right and is, therefore, a capital asset which is intangible in nature. This asset is eligible for depreciation u/s. 32(1)(ii) of the Act. Further, the claim of depreciation has been allowed in earlier two assessment years also, The disallowance made by the A.O. is, therefore, directed to be deleted. The ground of appeal is accordingly allowed. 6. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us. 6.1 Before us, ld. D.R. supported the order of A.O. On the other hand, ld. A.R. reiterated the submissions made before the A.O. and ld. CIT(A) and supported the order of ld. CIT(A). 7. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while deciding the issue in favour of assessee has noted that non-compete fee was capitalized as an intangible asset in F.Y. 2006- 07 and the depreciation claimed on it was allowed in A.Y. 2007-08 2008-09. He further placed reliance on the decision of Chennai Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck of finished goods and it was not an actual write off. The appellant has submitted that the amount of ₹ 5,18,761/-was reduced due to shortage found at the time of physical verification, discontinuation of product, non-moving materials and there were the name of earlier company Carnation Nutra Analog Foods Ltd. printed on this packing materials. The appellant has submitted a list indicating stock of packing material which also gives the detail of the stock that was written off. Regarding the stock of damaged goods, it has submitted a detailed annexure containing location of the goods, quantity rate and value of the stock written off. The write off is duly supported by the procedure followed by the appellant company and is, therefore, fully allowable. There is no .requirement of any technical or audit committee before the write off. Regarding the write off of ₹ 27,17,242/-, the appellant has given a complete list of the items which were made for write off and it was mentioned that the list was for the provision of damaged goods and on that basis, the write off has actually been made and the goods have been reduced from the overall stock statement. The appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on record to controvert the finding of ld. CIT(A). We, thus, find no reason to interfere with the order of ld. CIT(A). Thus, this ground of Revenue is dismissed. 12. Ground no.3 is with respect to deleting the disallowance of claim of foreign travel expenses. 12.1 A.O., on verification of the details of travelling expenses, noticed that assessee has incurred ₹ 3,20,467/- on account of foreign tour. On perusing the details of expenses, A.O. noticed that assessee had only submitted the details of payments and the explanation of the assessee was general in nature and had not furnished any details of the persons/parties with whom the representatives of assessee had met for business promotion nor had furnished any tour report of the meetings held. A.O. was therefore of the view that in the absence of details/proof, the claim of assessee cannot be allowed. He, therefore, disallowed the expenses on account of foreign travel expenses of ₹ 3,20,467/-. 13. Aggrieved by the order of A.O., Assessee carried the matter before the ld. CIT(A) who deleted the addition by holding as under: 5.3 Decision : I have carefully perused the assessment order and the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not brought any material on record to controvert the finding of ld. CIT(A). We, thus, find no reason to interfere with the order of ld. CIT(A). Thus, this ground of Revenue is dismissed. 16. Ground no.4 is with respect to deleting the expenses considered to be capital in nature. 16.1 A.O. noticed that assessee has claimed expenses on account of web designing charges (Rs.7,30,340/-), trademark expenses (Rs.13,200/-) and survey (PR) expenses (Rs.45,81,723/-). A.O. was of the view that the expenses incurred for web designing was towards development of a new website and therefore, the expeneses were capital in nature. With respect to the expenses of trademark expenses, he was of the view that acquisition of trade mark was capital in nature and expenses related to its acquisition should be treated as capital expenses. With respect to expenses incurred on market survey, he was of the view that survey gives assessee better input to devise its strategy for future expansion and development of business and therefore, the expenses on survey gives enduring benefit as the benefit flows in various years and therefore, expense is of capital in nature. He, accordingly, disallowed the aggre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antage derived is of revenue in nature. Therefore, the expenditure is held to be revenue in nature. (iv) Survey expsnses : The A. O. has treated the expenses as capital as it was held by him that it gives enduring benefit and an expenditure can be treated as attributable to capital when it is made not only once for all but with a view to bringing in existence an asset or an advantage for an enduring benefit of trade. The appellant has relied on the decision of KJS India Pvt. Ltd. [45 SOT 70 (Del.)]. It has been submitted by him that the expenses incurred on market survey should be treated as revenue expenditure as it would enable the appellant to conduct the business more efficiently. After considering the submission given by the appellant, I am of the considered opinion that the expenditure incurred on survey should be treated as revenue in nature for the reason that the survey expenses have been incurred to improve the efficiency of the business by finding out customers preferences for sugar substitute, market research for butter margarine, evaluation of cosmetic product, software support and maintenance etc. The appellant company is a consumer related company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to deleting the disallowance made u/s.40(a)(ia) of the Act of ₹ 36,60,981/- on account of gift articles and promotional articles. 20.1 A.O. noticed that assessee had incurred expenses of ₹ 36,60,981/- on account of gift articles and while making payment, assessee did not deduct TDS. The submission of the assessee that it was not required to deduct TDS as it was purchase of goods on principal-to-principal basis and it was not a contract for carrying out any work, was not found acceptable to the A.O. as he was of the view that expenses on gift articles contained the Logo of the assessee and for acquiring gift and promotional articles, assessee had given work contracts to the vendors who had supplied the goods as per the specification given by the assessee and the goods supplied by the vendors cannot be supplied to anyone and therefore, the nature of contract entered by the assessee with the vendors was in nature of works contract and therefore, assessee was liable to deduct TDS u/s.194C of the Act and the failure of which would result in disallowance of expenses u/s.40(a)(ia) of the Act and thus, he disallowed the expenses u/s.40(a)(ia) of the Act and made addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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