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TMI Blog2020 (3) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... e chemical are as per the specification and name of the product may be similar what is being sold in the domestic market. However, the quality specification may vary according to the specifications required by the buyers. We cannot go with the name of the product rather we have to verify the name of the products with specifications which are sold in the domestic as well as international market. There may be specific requirement of particular quality for export with proper testing. From the assessment records, it is not clear whether the AO/TPO has verified in the above said specifications and we notice that AO has merely verified the name of the chemical in the documents submitted before him. Addition proposed by the TPO are negligible compared to the value of exports made by the assessee, therefore we are inclined to delete the above said addition in favour of the assessee. Accordingly, ground no. 1 is allowed. Disallowance of sales promotion expenses - HELD THAT:- It is common practice that whenever customers are entertained and they are accompanied by the executive of the company and the payment made invariably through plastic money and the payment vouchers are being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, assessment order u/s 144C(3) of the Act was passed by making addition u/s 92CA(4) of the Act. 3. Further AO observed that assessee has adopted an amount of ₹ 27,73,969/- on account of sale promotion expenses. On verification of the copy of the ledger account alongwith copy of the bills /evidences submitted by the assessee, AO observed that there were certain expenses incurred through credit card, the credit card was in the name of one of the director of the company to the extent of ₹ 1,73,901/-. According to AO, the same are in the nature of personal expenditure. Accordingly, he disallowed the above expenditure. 4. Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and filed before him a detail submission, which is reproduced below:- 4. Appellant's submissions; ADDITION OF ₹ 189,480 MADE ON ACCOUNT OF ADJUSTMENT OF ALP IN RESPECT OF DOMESTIC TRANSFER PRICING QUA TRANSACTIONS WITH AN AE 1. In the year under reference, the Appellant had transactions with M/s Anek Prayog Pvt Ltd., which is an Associated Enterprise (AE). 2. Since the value of transactions with AE exceeded ₹ 15.0 crores the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that the Appellant had transactions of over ₹ 15.0 crores with the AE and all the other transactions are found to be fair and at ALP. Thus, there was no reason or rationale for the Appellant to do a transaction worth only ₹ 1 1,53,200 (i.e less than 1.5% of the total) at a higher cost with the AE, more so, as both the companies paid tax at the same rate. the premises set out above, it is prayed that the impugned addition may kindly be deleted. 7. Appellant's submissions; II Disallowance out of sales Promotion Expenses-₹ 173,901 1. The details of expenses disallowed are at page 4 of the assessment order. 2. The learned AO disallowed the said expenses on the footing that (a) since the expenses were incurred via credit card in the name of Director, the said expenses were personal in nature (b) There was no nexus shown between the expenses incurred and the business of the Appellant. 3. It is respectfully submitted that the impugned disallowance is grossly untenable in that: a. The Appellant is engaged in the business of Pharmaceuticals were 96% of his sales are export sales. b. The expense of ₹ 109,500 was incurred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the product. This will make its selling price more. So I do not accept appellant's submission and so adjustment made by TPO is hereby confirmed. This ground of appeal is dismissed. 8. Decision for Ground No.2 3: Ground No. 2 and 3 is regarding disallowance of sales promotion expense of ₹ 173901/-. I have gone through the submission of the appellant. The Assessing Officer noticed during the course of assessment proceedings that ₹ 27,73,469/- has been debited in P/L Account on account of sales promotion expenses. While going through the submissions the Assessing Officer noticed that out of the expense incurred through the credit card both expenses were personal in nature. Sr.No Name of the bill issuer party Amount (In Rs.) i Canali India Pvt. Ltd. 1,09,500 ii Yauatcha 20,751 iii Paul Shark 35,990 iv Manharekar Wines 7,660 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the assessee. This is genuine expenditure incurred for the purpose of business only and he prayed that the disallowance made by the AO may be deleted. 9. On the other hand, Ld. DR relied upon the orders passed by the lower authorities. 10. Considering the rival submission and material placed on record, we notice from the records that assessee has purchased Nicorandil chemical from its associate enterprises @ 20,000 per Kg, whereas the same chemical are sold in the domestic market for lesser value. We observed from the submission made by Ld. AR that the assessee has purchased chemical from the associate enterprises in order to export the same and assessee has instructed the associate enterprises to supply the quality as per the specification of the buyers and accordingly associate enterprises has supplied the chemical following the above said specification. We are in agreement with the Ld. AR of the assessee that the quality of the product for export has to be as per the specification of the buyers and should go through strict quality check and the parameters of the chemical are as per the specification and name of the product may be similar what is being sold in the do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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