9911796707
TMI Blog2018 (4) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... fields, and that their services were retained to groom and train the new recruits as no suitable replacement was readily available. We note that the assessee has discharged the initial onus casted upon it to claim the expenditure by submitting the name, address, PAN etc, (of the professionals) the AO could not have added the amounts back without further verification and ought not to have casted any doubt about the genuineness of the expenditure without bringing any adverse material against the assessee. And since the expenditure was for business purpose the expenditure claimed on this count needs to be allowed and it was rightly allowed by the Ld. CIT(A). Addition disallowed on account of foreign tour expenses claimed by the assessee - Held that:- CIT(A) has allowed the travelling expense i.e. air ticket of ₹ 3,60,545/-, however, restricted the claim of ₹ 6,39,000/- which was claimed to have been expended on account of boarding and lodging. The Ld. CIT(A) taking into account the element of personal expenditure sustained 20% of the disallowance which works out to ₹ 1,26,000/- and thus assessee got a relief of ₹ 8,64,545/-. Against the action of CIT(A) only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 - - - Dated:- 11-4-2018 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Revenue Shri Arindam Bhattacharjee, Addl. CIT, Sr. DR For the Respondent Shri Ravi Tulsiyan, FCA ORDER Per Shri A.T.Varkey, JM This appeal filed by the revenue and the Cross Objection filed by the assessee are against the order of Ld. CIT(A)-10, Kolkata dated 10.11.2015 for AY 2011-12. Since both the appeal and the Cross Objection have been heard together, we dispose of the same by this consolidated order. 2. First we take up revenue s appeal. Ground no. 1 of revenue s appeal is against the action of the Ld. CIT(A) in deleting the addition of ₹ 6,50,610/- being interest on loan disallowed by the AO. The assessee has claimed to have paid interest on loan of ₹ 9,20,283/-. The AO noted that the assessee in the previous year had paid only interest of ₹ 2,69,673/- when the turnover of the company was at ₹ 22,81,48,862/- whereas in this year, the assessee s turnover came down to only ₹ 20,92,31,782/- and it has claimed abnormal amount of ₹ 9,20,283/- which was not acceptable to him. So, he compared the increase in interest payment clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to AO, satisfactory explanations could not be given, he disallowed ₹ 28,75,927/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), which was allowed by the Ld. CIT(A) against which the revenue is before us. 5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee in this year has claimed expenditure on account of legal and professional charges to the tune of ₹ 28,75,927/- which according to the AO was double the expenditure for this purpose, when compared to that of the last assessment year which was only of ₹ 14,08,257/-. According to AO, the assessee failed to give cogent reason or explanation for incurring such a huge amount for legal and professional charges when the turnover has come down from ₹ 22 cr. to ₹ 20 cr. and on being asked, the assessee explained that due to retirement of few top management officials who were handling legal, HR, etc. of the assessee company, and in their position since the assessee company could not find any experts in this field took a decision to retain the services of retired professionals who handled the assessee s professional wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character of the activity. We agree with the Ld. CIT(A) that the professionals appointed were experts in their respective fields, and that their services were retained to groom and train the new recruits as no suitable replacement was readily available. We note that the assessee has discharged the initial onus casted upon it to claim the expenditure by submitting the name, address, PAN etc, (of the professionals) the AO could not have added the amounts back without further verification and ought not to have casted any doubt about the genuineness of the expenditure without bringing any adverse material against the assessee. And since the expenditure was for business purpose the expenditure claimed on this count needs to be allowed and it was rightly allowed by the Ld. CIT(A), which we agree and therefore, we are inclined not to interfere in the order of Ld. CIT(A) which we confirm. 7. Next ground is in respect to deletion of addition of ₹ 9,90,545/- disallowed by the AO on account of foreign tour expenses claimed by the assessee. 8. Brief facts are that the assessee claimed foreign tour expenses for which the AO asked for details. The assessee replied that foreign tour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on account of boarding and lodging. The Ld. CIT(A) taking into account the element of personal expenditure sustained 20% of the disallowance which works out to ₹ 1,26,000/- and thus assessee got a relief of ₹ 8,64,545/-. Against the action of Ld. CIT(A) only revenue is in appeal. Considering the discussion given above, in the facts and circumstances of the case, we are of the view that Mrs. Zhu Xintian the research manager having visited foreign countries wholly and exclusively for business purposes of the assessee company is entitled to claim the expenditure and we do not want to interfere in the order of the Ld. CIT(A), which is hereby upheld. This ground of revenue appeal is dismissed. 10. Ground no. 4 is against the action of Ld. CIT(A) deleting addition of ₹ 58,77,566/- added by AO disallowing claim of the assessee s expenses on account of publicity expenses. 11. Brief facts of the issue are that the assessee has claimed ₹ 58,77,566/- under the head Publicity Expenses on account of purchase of physician samples from M/s STP Pharmaceuticals Pvt. Ltd, and debited the said expense in the Profit and Loss Account to derive the net Profit from the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of accountability to effect sales and for undertaking such responsibility commission to the tune of ₹ 15,95,355/- was paid by the assessee to it. In order to boost the sales of Sorbiline , the assessee decided to give physician sample of this product. Realising that its factory did not had the capacity to produce the physician sample and for water shortage in its plant, the assessee got into an agreement with M/s. STP Pharmaceuticals on 22.02.2010 (PB page 80-88) to manufacture Sorbiline and sell the same to the assessee on Principal to Principal basis. We note from a perusal of invoice that M/s. STP suffered central sales tax (PB Page 91-106) for the product manufactured by it. The assessee took into consideration the advantage of the unit of M/s. STP which was located at Sikkim and cost of production of physician sample was comparatively very less and there was no scarcity of water. The decision to disburse physician sample was to boost the sale of Sorbiline in the market and it gave results. We note that total sales of Sorbiline comes to ₹ 13,65,19,553/- whereas the expenditure incurred on physicians samples amount to ₹ 5,81,77,566/- which represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative intent. 14. As per clause (e) of Explanation (iv) of sec. 194C of the Act, itself excludes manufacture or supply of a product according to the requirement or specification of a customer (assessee) by using material which is purchased from a person other than such customer (assessee), from the ambit of section 194C. 15. We note that clause (e) as introduced contains a positive affirmation that the expression work will cover manufacturing or supplying a product, according to the requirement or specification of a customer, by using material purchased from such a customer. Clause (e) has placed the position beyond doubt by incorporating language to the effect that the expression work shall not include manufacture or supply of a product according to the requirement or specification of a customer by using material which is purchased from a person other than such customer. Meaning thereby, when the material is purchased from the customer who orders the product it constitutes a contract of work, resultantly section 194C will be attracted, while on the other hand, where the manufacturer has sourced the material from a person other than the customer, it would not be classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such, the entire expenditure of ₹ 58,77,566/- being paid to M/s.STP Pharmaceuticals Pvt. Ltd for purchase of Sorbiline does not come under the ambit of sec. 194C, therefore, the AO erred on this issue, which has been rightly corrected by the Ld. CIT(A), which calls for no interference, so we confirm the order of Ld. CIT(A). 18. Coming to the CO of assessee. The assessee is aggrieved by the order of Ld. CIT(A) in confirming the addition of ₹ 20,97,900/- claimed by the assessee on account of promotional expenses. The assessee during the relevant financial year has debited an amount of ₹ 20,97,900/- under the head publicity expenses on account of sales promotion. According to Assessee Company the said expenditure was incurred by the assessee on account of distribution of gift articles among the dealers/distributors as part of its Sales Promotional Schemes. However, the AO disallowed the same alleging that neither the assessee could produce copy of any agreement showing the basis for such distribution nor any confirmations from the dealers/distributors were filed acknowledging such receipt. The AO further observed that since almost the entire sales was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) on the ground that the internal communication of the seller of the gift material M/s. Subhlakshmi Enterprises has never been confronted with the assessee company and they were kept in dark of the said statement which has been recorded behind the back of the assessee company and has been relied on for forming adverse conclusion which has raised suspicion in the mind of the AO/CIT(A). According to the Ld. AR, if the AO comes across any adverse material and if he decides to use it against the assessee, then first of all the copy of the adverse material should be handed over to the assessee and thereafter, the assessee should be given an opportunity to cross examine the person who has given adverse material/evidence/deposed against it. For the said proposition, the assessee has relied on the decision of Hon ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise 62 Taxman.com 3, wherein their Lordships have held that the failure to give the assessee the right to crossexamine witnesses whose statements are relied upon results in breach of Natural Justice and it is a serious flaw which renders the order a Nullity. It has also been bro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
