9911796707
TMI Blog2019 (9) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... peals against the common order of the Commissioner of Income Tax(Appeals)-8, Chennai in ITA Nos.294 & 296/16-17 dated 20.11.2018 for the assessment years 2013-14 & 2014-15 respectively, while the assessee filed cross objection against the order related to assessment year 2013-14. 2. M/s. Mainetti (India) Pvt. Ltd., the assessee, is engaged in the business of manufacturing plastic and garment hangers. While making the assessments for the assessment years 2013-14 & 2014- 15, the AO found that the assessee has claimed nomination fee of ₹ 4,07,88,503/- & ₹ 5,03,97,796/- for the assessment years 2013- 14 & 2014-15 respectively. On a query, the assessee explained the transaction as under:- "Nomination fee - business expenditure Note on our Business Model: We are into manufacture of Hangers. These hangers ore used both as a packaging/display product by the eventual buyer. We mainly service the global brands such as Old Navy, Asda George, C&A, Arcadia etc., As far as garment sourcing is concerned, the same is always sourced along with hangers. So the garment manufacturer when he exports his garment will do it with hangers. We have a variety of hangers for each applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secures business for the assessee, by way of Indian garment manufacturers procuring hangers only from the assessee upon receiving purchase orders from the non-resident retailers, which was not available prior to the agreement. Further being an accredited vendor to global brands gives us an edge in our business and also to procure fresh businesses/leads. The global competition/spurious products make the business very competitive. At this stage this nomination agreement was a new leg to the business entered into by the assessee with non-resident its retail customers, As mentioned above, by virtue of this agreement not only is business secured bill a continuous return on investment in tools made by the assessee company is ensured. In this connection, attention is drown to the decision of the Hon'ble Supreme Court in the case of SA, Builders Ltd v CIT(A) & Anr [2007] 288 ITR I (SC), wherein it has been held as follows: "once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the armchair of the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue filed these appeals with similar grounds and hence, as a model, the grounds related to assessment year 2013-14 is extracted as under:- 1. The order of the Ld. CIT(A) is contrary to law and facts of the case. 2. The Ld.CIT(A) erred in deleting the disallowance of nomination fee made by the Assessing Officer to the extent of ₹ 4,07,88,503/- for the A.Y.2013-14. 2.1 The Ld.CIT(A) erred in allowing the assessee to claim nomination fees paid as allowable business expenditure to the tune of ₹ 4,07,88,503/- for the A.Y.2013-14. 2.2 The Ld.CIT(A) erred in allowing the nomination fees paid expenses claimed by the assessee despite the fact that the assessee failed to furnish any evidence in the form of tripartite agreement before the Assessing Officer in support of the claim that they are the Sole or Preferred Vendor for the foreign retailer. 2.3 The Ld.CIT(A) had failed to observe that the Assessing Officer had rightly pointed out that the cost of tools would be accounted for at the time of fixing the sale price of the hangers and it makes no business sense for the foreign retailer to accept that there be a moratorium on the payment of Nomination fee on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutable to the business carried on by the assessee. Now the contention of the Revenue were, it was unnecessary for the assessee to have incurred expenditure towards nomination fee, the assessee was not incurring such expenditure during the past, there is no direct nexus with respect to the expenditure incurred by the assessee and the business of the assessee and the huge investment on specialized tools made by the assessee has no relevance to the business model of the assessee. These findings of the Revenue are not appreciable. The Revenue cannot sit on judgment with respect to the business policies and decisions made by the assessee during the course of the business of the assessee. Any business carried out by any entity has various dimensions and complexities which have to be prudently tackled by the entity in order to survive in that business. Further the general practice in any business is that when an entity obtains certain benefits from another entity, a portion of the benefit is passed on to that entity in some manner or the other in order to nourish healthy business environment. In the case of the assessee, the proximity of the assessee's clients and the garment supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
