9911796707
TMI Blog2021 (3) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... erference. We, accordingly, declined to interfere with the same and dismiss grounds 1 to 3 Revenue's appeal. Disallowance of business promotion expenses - HELD THAT:- There is no dispute that the assessee produced the details and documents like sample invoices, copy of Ledger, summary mentioning the category of gifts and the list of people to whom gifts were given etc were furnished before the authorities and no discrepancies are specifically pointed out with any of these documents. AO himself admitted that it is customary under Indian tradition to offer gifts on the festive occasions like Diwali Festival. Ld. CIT(A) held that maintenance of cordial relations with customers are required for obtaining the market information which is for the furtherance of the assessee's business. By no stretch of imagination could be said that offering of gifts by a businessman to is customers is barred by any law for the time being in force. Now coming to the quantum of disallowance learned AO made it at 60% whereas the Ld. CIT(A) restricted the same to 20%. As observed by is about, no discrepancies found with the books of accounts of the assessee as to the incurring of these expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order deleted the addition of ₹ 3,05,73,000/- by accepting the contention of the assessee that the Revenue has been book or to the extent of services rendered by the assessee to its AE during the relevant financier, which is also as per the agreement between the assessee and its parent company and the same is higher than the Mark up percentage of the expenditure, which was not adversely commented by the Ld. TPO. Ld. CIT(A) however, gave relief to the assessee in respect of the business promotion expenses to the extent of ₹ 33,50,785/- by restricting the disallowance to 20% as against 60% disallowed by the learned Assessing Officer, but sustained the addition to the tune of ₹ 16,75,392/-. Challenging the deletion of the addition made on account of the advance amount paid and the granting relief to the assessee by restricting the disallowance of the business promotion expenses to 20% only, Revenue is in this appeal; whereas the assessee preferred the cross appeal in respect of the addition on account of business promotion expenses to the extent they are sustained by the Ld. CIT(A). 4. Coming to the grounds No. 1 to 3 of Revenue's appeal relating to the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the remuneration received by the assessee and on consideration of all these facts the Ld. CIT(A) granted relief to the assessee. He therefore, submitted that there are no merits in the argument of the Ld. DR and prayed to dismiss the appeal of the Revenue. 6. We have gone through the record in the light of the submissions made on either side. As could be seen from the agreement entered into with its parent entity, the assessee is receiving service income from its AE pursuant to the terms of consulting and service agreement dated 24/3/2011. According to the terms of agreement, for the period between 1/4/2011 and 30/9/2011 a fee of USD 600,000/- per month will be invoice and paid on quarterly basis to the assessee by the AE, for the period between 1/10/2011 and 31/3/2012 fees will be determined and agreed to between the assessee and the AE in the 1st week of October, 2011 and shall be invoice and paid on quarterly basis, and a final adjustment based upon the actual cost for the period between 1/4/2011 and 31/3/2012 for the services rendered by the assessee company will be invoice and paid in the 2nd quarter of 2012. 7. Is not in dispute that the opening balance mentioned as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that all the amounts that were received during the financial year 2011-12, irrespective of the fact that corresponding services were rendered during that year are not, should be brought to tax in the assessment year 2012-13 itself. 10. In the light of our discussion in the foregoing paragraphs, we hold that the reasoning adopted by the Ld. CIT(A) and the conclusions reached by him in deleting this amount of ₹ 3.05 crores which is in fact the advance amount but retreated by the learned Assessing Officer as income for the assessment year 2012-13, are perfectly legal and not warrant any interference. We, accordingly, declined to interfere with the same and dismiss grounds 1 to 3 Revenue's appeal. 11. Now coming to the 2nd addition on account of the disallowance of business promotion expenses, learned Assessing Officer observed that the assessee could not provide any proper justification and the need for business promotion expenses especially when the assessee company is not required to attract any customers through business promotion and its only client is its hundred percent holding company to which it provides market information; and also that the assessee fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the list of people to whom the gifts were given etc were furnished and without bringing on record any objective material to show that there are any defects in the details furnished by the assessee, any disallowance at whatsoever percentage is unsustainable. He further submitted that offering gift is not banned by law. 15. He further submitted that during this assessment year the assessee derived a markup of cost plus 22.81% from its AE, even business promotion expenses of ₹ 83,76,961/-, assessee was compensated by its AE with a markup of 22.81% and, therefore, the entire expense has been incurred for the purpose of business carried on by the assessee. 16. At this stage there is no dispute that the assessee produced the details and documents like sample invoices, copy of Ledger, summary mentioning the category of gifts and the list of people to whom gifts were given etc were furnished before the authorities and no discrepancies are specifically pointed out with any of these documents. Further AO himself admitted that it is customary under Indian tradition to offer gifts on the festive occasions like Diwali Festival. Ld. CIT(A) held that maintenance of cordial relation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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