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TMI Blog2020 (10) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, the ground of appeal of the assessee is partly allowed. Disallowance on account of damage and wastage of goods - HELD THAT:- Assessee by claiming the bad debts is not under the obligation to prove the ir-recoverability of the amount from the parties. Assessee chooses to write off such amount as the damaged goods which is also supported by the ledger copy of the other party. Thus,in the present situation, what we try to infer is that claim of the assessee cannot be treated as bogus.Authorities below have not verified from the concern parties whether the claim made by the assessee is not tenable by issuing notice under Section 133(6)/131 of the Act. Similar claim of the assessee was admitted by the Revenue for immediate preceding assessment year as discussed above, therefore, the same claim in the year under consideration, though high in value, cannot be rejected without any cogent materials - we are not impressed with the finding of the authorities below in the manner in which they have rejected the claim of the assessee. Accordingly, we set aside the finding of CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)-XVI, Ahmedabad dated 12.11.2013, in the proceedings under Section 143(3)of the Income Tax Act, 1961 (in short the Act ). 2. The assessee has raised following ground of appeal:- 1.1 The order passed u/s 250 on 12.11.2013 by CIT(A)-XVI A bad for A.Y. 2008-09 partly confirming the additions/disallowances made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has erred in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowances. 2.1 The Ld. CIT(A) has grievously erred in law and on in confirming the following disallowances: (i) Depreciation ₹ 45,36,884 (ii) Business promotion exp (foreign) ₹ 16,72,746 (iii) Foreign traveling exp. ₹ 1,38,381 (iv) Damage wastage ₹ 25,57,779 2.2 That in the facts and circumstances of the case, the Ld. CIT(A) ought not to have upheld the above said disallowances. 2.3 The observations made and conclusion reached by CIT(A) to upheld the impugned disallowances are not admitted by the appellant to the extent the same are contrary to the evidence on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate gross profit from the manufacturing activity and similarly the assessee has not furnished any separate trading account with respect to its trading activities. vi. There was no detail mentioned in the tax audit report bearing column No. 28(b) about the turnover, purchases and stock viz a viz quantitative information with respect to the items in which the assessee is dealing. vii. There was no power connection for the factory building, though the assessee claimed that the manufacturing process was done by using DG set but failed to submit any bills and supporting document of fuel charges. In view of the above the AO concluded that the manufacturing activities of the assessee has not commenced in the year under consideration and therefore the depreciation of ₹ 51,31,747/- is not eligible for deduction under Section 32 of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee. 6. Aggrieved by the order of AO, the assessee preferred an appeal before the Ld. CIT (A). 7. The assessee before the Learned CIT (A) submitted that the AO has disallowed depreciation for ₹ 51,31,747/- which is the accumulated depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be permanently run on D G sets. The A O has in the assessment order as well as in the remand report, brought out glaring inconsistencies and contradictions in the evidences produced by the appellant to show that the hypothesis of having undertaken any manufacturing activity clearly appears to be an attempt made with a sole purpose of claiming depreciation so as to reduce the incidence of taxation. Non production of separate trading account and manufacturing account in respect of manufacturing also alludes that no manufacturing activity was actually taken. Incidentally, it is pertinent to point out that vide note sheet entry dt 14-10-2013, the A R of the appellant was requested to file Trading P L A/c. Of Uttarakhand Unit which is not complied with. Consequently, in view of the available evidences, it is held that the action of the A O in disallowing the claim of depreciation on the premise that no manufacturing activity was undertaken between the impugned period is a correct and is based upon adequate appreciation and understanding of the available evidences. To the extent, the disallowance made by the A O in principle is confirmed. The argument of the appellant however appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to use or ready to use. It is also pertinent to note that the assessee has furnished the series of documents before the Learned CIT (A) as reproduced above which appears important and reasonable but the same cannot be used as conclusive evidence that the factory premises and plant and machineries were either put to use or ready to use. 16. Similarly, we also find that there are other informations emanating from the audited financial statements that the assessee has shown stores consumption, power and fuel expenses, salary and wages, laboratory materials and miscellaneous factory expenses, placed on pages 110 and 111 of the Paper Book in the year under consideration whereas it was shown NIL in the immediate preceding year ending as on 31-03-2007. But such information cannot be relied upon to decide the issue in hand in the absence of primary documents as highlighted by the authorities below. 17. Likewise, the assessee failed to file any documentary evidence reflecting the sales made by it through the Manufacturing activity viz a viz the trading activity separately which was essential to establish the fact that assessee has carried out the manufacturing activity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of expired medicine from parties has been accepted by it. Further the assessee contended that there was not any column in VAT audit report which required information regarding the damaged goods return to it. 23. The Learned CIT(A) after considering the assessee s submission, rejoinder and remand report from AO confirmed the addition made by the AO by observing as under:- 5.3 I have carefully considered the submissions made by the appellant and the argument taken by the assessing officer in the light of material available on records. The A O has clearly brought out in the assessment order as well as the remand report that the appellant failed to provide list of expired goods and their reasons for non inclusion in VAT audit report. Even during the appellate proceedings, the appellant has failed to address to these queries of the A O. It is pertinent to point out at this stage that in the activity concerning business of pharmaceutical products maintenance of records and registers for damaged and expired goods is a necessary pre-requisite as the same comes under the supervision of Drug Control Authority. The appellant therefore cannot take the argument that the expired good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the surmise and conjecture which is not desirable under the provisions of law. As such there was no rational for the basis adopted by the authorities below for rejecting the claim of the assessee in part. 28. Besides the above, we also note that the facts of supplying the goods to the parties as discussed above, has not been disputed/doubted by the authorities below. Thus in such a situation if the assessee would have opted to claim the bad debts against the supply of goods instead of writing off as the damaged goods, the claim of the assessee would have been accepted under the provisions of law as provided under Section 36(1)(viii) read with Section 36(2) of the Act. It is because, the assessee by claiming the bad debts is not under the obligation to prove the ir-recoverability of the amount from the parties. However, the assessee chooses to write off such amount as the damaged goods which is also supported by the ledger copy of the other party placed on pages 38 to 46 of the Paper Book. Thus,in the present situation, what we try to infer is that claim of the assessee cannot be treated as bogus. 29. It is also pertinent to note that the authorities below have also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted fact of the case that the expenses were incurred for sponsoring visits of doctors so as to get business. The admission of the appellant squarely points out towards an unethical and illegal practice which is not permissible in law. Ay expenditure incurred towards any infraction of law cannot be allowed as a deduction. Incidentally, it is pertinent to note that the medical counsel of India which governs medical profession in the country strictly prohibits doctors to take any such benefits from companies whose products they prescribe to their patients. Consequently the addition made by the ld A O of ₹ 16,72,746/- is confirmed and the ground of ground of appeal No. 4 is dismissed. 36. Aggrieved by the order of the Learned CIT(A) the assessee is in appeal before us. 37. The Learned AR before us contended that the expenses were incurred for the purpose of the business and therefore the same cannot be disallowed. 38. On the other hand the Learned DR vehemently supported the order of the authorities. 39. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee incurred certain ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the marketing directors of the assessee company attended the exhibition but the element of personal expenditure of the director cannot be ignored. Therefore the Learned CIT(A) restricted the claim of expenses up-to 90% and disallowed 10%. Accordingly, the Ld. CIT-A confirmed the addition of ₹ 1,38,381/- only. 45. Being aggrieved by the order of the Learned CIT(A) the assessee is in appeal before us. 46. The Learned AR before us submitted that the Learned CIT(A) has accepted the claim of the assessee to the tune of 90% but directed inadvertently to restrict the disallowance of ₹ 1,38,381/- instead of ₹ 15,376/- only. 47. The Learned AR further submitted that the assessee being a body corporate cannot incur any expenditure which are personal in nature. Accordingly, the ld. AR prayed to allow the claim of the assessee. 48. On the other hand, the Learned DR vehemently supported the order of the authorities below. 49. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion we note that, the claim of the assessee was accepted by the Learned CIT(A) to the tune of 90% of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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