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TMI Blog2016 (4) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees of the Appellant Company. 2. Confirming the disallowance of Rs. 50,96,657/- out of 'Sales Promotion Expenses' and in any event enhancing the disallowance by Rs. 36,90,771/- without giving the Appellant an opportunity of being heard. 3. Confirming the disallowance for Foreign Travel expenses amounting to Rs. 2,85,610/- 4. The appellant reserves the right to add, alter, amend, amend withdraw any of the 'Grounds of Appeal' mentioned above at the time of appeal hearing. 4. The Revenue in ITA No.1 618/PN/2012 has raised the following grounds of appeal:- 1. The order of the learned CIT (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The Commissioner of Income-Tax(Appeals) erred on facts and In circumstances of the case and in law, in holding that the initial Assessment Year for the purpose of claiming deduction u/s 80IA(2) of the Act, was the first year in which the assessee made such claim after exercising the option, ignoring the provisions of section 80IA(2) according to which the first year was the year in which the assessee started generating electricity. 3. The Commissioner of Income-Tax (Appeals) erred on facts and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only on actual basis. Accordingly, the deduction claimed amounting to Rs. 7,86,853/- was disallowed. 7. Before the CIT(A), the claim of assessee was that the same provided by it was on the basis of actuarial valuation, therefore, the provisions of section 43B(f) of the Act were in-applicable. It was further argued that the leave encashment was not a statutory liability unlike PF, ESIC, etc. and so long as leave encashment was of contractual liability between the employer and employee, the provisions of section 43B(f) of the Act were in-applicable. The CIT(A) on the other hand, was of the view that under section 43B of the Act, deduction in respect of certain types of expenditure is allowable, in computation of income of the assessee, only in the year in which the same amount is actually paid, irrespective of the year in which the liability to pay such amount had arisen, in accordance with the method of accounting regularly employed by the assessee. The types of expenditure include the sum payable by the assessee by way of tax, duty, cess or fees, and contribution to provident / superannuation/ gratuity funds for welfare of the employees. The Finance Act, 2001 amended section 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said enhancement has been made without giving the assessee an opportunity of being heard. 14. The brief facts relating to the issue are that, during the year under consideration, the assessee had claimed expenditure to the tune of Rs. 41,96,741/- under the head 'sales promotion expenses'. The total expenses claimed by the assessee under the head 'sales promotion expenses' was Rs. 1,37,93,473/- which included the items on account of Gifts totaling Rs. 41,96,741/-. The assessee allocated the expenditure incurred on sales promotion on behalf of sister concern Serum Institute India Ltd. to the tune of Rs. 45,00,075/- and claimed the expenditure of Rs. 92,93,398/- in its Profit & Loss Account. The Assessing Officer in the first instance considered the claim of expenditure to the tune of Rs. 41,96,741/- and held that the same was not allowable as it related to gifts. In respect of balance expenditure, the Assessing Officer was of view that the allocation made to Serum Institute India Ltd., a group company whose sales were Rs. 985.77 crores as against the total sales of the assessee at Rs. 36.16 crores, was not correct. The explanation of the assessee in this regard was that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,501/-. Accordingly, the remaining sales promotion expenses of Rs. 87,87,426/- i.e. Rs. 1,32,87,501/- - Rs. 45,00,075/- was held to be attributable to SIIL and the same was held to be not allowable in the hands of assessee. Thus, the addition made on this count of Rs. 50,96,657/- as revised by the order passed under section 154 of the Act was enhanced to Rs. 87,87,426/-. 16. The assessee is in appeal against the order of CIT(A). 17. The first plea raised by the assessee before us is that the CIT(A) has worked out the disallowance incorrectly. In the first instance, he allowed the gift articles of about Rs. 41 lakhs and then disallowed Rs. 92 lakhs i.e. 95% of Rs. 92 lakhs i.e. Rs. 87 lakhs has been disallowed in the hands of assessee. He further, pointed out that the turnover criteria applied by the CIT(A) was wrongly worked and the claim of the assessee was that the balance expenditure be allowed in the hands of assessee. He further pointed out that the CIT(A) had allowed the total expenditure of Rs. 41 lakhs, then only balance expenditure has to be considered under the head 'sales promotion expenses'. In respect of the nature of expenditure, the learned Authorized Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r verifying the nature of expenditure incurred by the assessee to the tune of Rs. 95,96,732/-. The Assessing Officer shall determine the expenditure allowable in the hands of assessee and the amount apportioned to the sister concern SIIL after affording reasonable opportunity of hearing to the assessee. The ground of appeal No.2 raised by the assessee is thus, allowed for statistical purposes. 21. The ground of appeal No.3 raised by the assessee is not pressed and hence, the same is dismissed as not pressed. 22. The only issue raised by the Revenue is against the order of CIT(A) in holding that for the purpose of claim of deduction under section 80IA(2) of the Act, the same is to be allowed from the year in which the assessee first exercised its option ignoring the provisions of section 80IA(2) of the Act, according to which the first year was the year in which the assessee started generating electricity. Consequent order of CIT(A) in this regard was that where the assessee exercised the option, only the losses of year beginning from initial assessment year are to be brought forward and not the losses of earlier years. 23. The learned Authorized Representative for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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