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TMI Blog2025 (1) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenses were disallowed in A.Ys 2021-22 and 2022- 23, the Assessing Officer proposed to reopen the assessments for A.Ys 2019- 20 and 2020-21 to disallow the market development expenses, being payment made to NHPL. This is evident from the orders passed u/s. 148A(d) of the Act on 28.03.2023. After considering the objections and submissions of the assessee, the Assessing Officer himself was convinced and passed assessment orders u/s. 147 of the Act on 26.03.2024 for A.Ys 2019-20 and 2020-21, accepting assessee s claim of market development expenses. Therefore, principle of consistency would have been maintained by following the position taken in the reassessment proceedings for A.Ys 2019-20 and 2020-21 rather than following the non-existent orders of the First Appellate Authority in A.Ys 2017-18 and 2018-19. Thus, market development expenses incurred by the assessee on account of payment made to NHPL, being in the nature of revenue expenses, are allowable. Accordingly, we direct the AO to delete the disallowances. Decided in favour of assessee. - Shri Saktijit Dey, V.P. And Smt Renu Jauhri, A.M. For the Assessee : Shri Dharmesh Shah And Shri Mitali Parekh For the Revenue : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct. Accordingly, he issued a show cause notice to the assessee proposing to disallow the expenses claimed, as according to the Assessing Officer they are of capital nature. 5. In response to the show cause notice, the assessee furnished a detailed reply justifying its claim and objecting to the proposed disallowance. However, rejecting the submissions of the assessee, the Assessing Officer went by the work profile of NHPL as mentioned in the web page and concluded that the market development expenses are not related to sale of product. Further, he observed that while considering allowability of identical expenses in A.Ys 2017-18 and 2018-19, the First Appellate Authority has upheld the disallowance of such expenses as they are in the nature of capital expenses. Thus, observing that principle of consistency has to be maintained, the AO proceeded to disallow the market development expenses claimed by the assessee. Though, the assessee contested the aforesaid disallowance before learned First Appellate Authority, however, relying upon the decision taken by him on identical issue in assessee s own case in A.Ys. 2017-18 and 2018-19, learned First Appellate Authority upheld the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Authority. 8. We have considered rival submissions and perused materials on record. A reading of the impugned assessment order clearly reveals that the Assessing Officer has disallowed the market development expenses paid to NHPL, basically for two reasons. Firstly, as per the work profile of NHPL mentioned in the Webpage of the company, it is not involved in sale of product. Secondly, with regard to allowability of identical expenses in A.Ys 2017-18 and 2018-19, assessee s claim has been rejected both by the Assessing Officer and thereafter by the First Appellate Authority. 9. On appreciation of facts and material on record, we are of the view, both the aforesaid reasoning of the Assessing Officer are unsustainable. It is evident, in A.Ys 2017-18 and 2018-19, referring to the work profile of NHPL in its webpage, the Assessing Officer had made identical disallowances and learned First Appellate Authority had sustained them. However, while deciding assessee s appeals for A.Ys 2017-18 and 2018-19 the Tribunal vide order dated 20.06.2023 in ITA No. 382/Mum/2023 restored the issue to the Assessing Officer with a following observations: 9. Heard the parties and perused the material av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involves in selling of the products but still on the basis of profiles images captured from internet site, it cannot be construed, without any substantive material that the works carried out by the assessee by M/s Nijji were outside of its scope. 9.3 No doubt the onus is upon the assessee as per the Evidence Act, as observed by the Ld. Commissioner in the impugned order, to establish its case. However, as per Article-265 of the Constitution of India, it is the mandate of the law that no tax shall be levied or collected except by the authorities of law. The Hon ble Allahabad High Court in the case of P.T. Sheonath Prasad Sharma Vs. CIT 66 ITR page 647 (Alld.) also reminded that Income Tax Officer is empowered to assess the income of the Assessee and determine the tax payable therein in accordance with law but not otherwise. Therefore in our considered view, the AO by exercising its powers under the Act, would have summoned M/s Nijji to ascertain the real picture and to determine real status of expenditures in particular facts and circumstances. 9.4 Hence, for the just decision of case and for the ends of justice, we deem it appropriate to remand the instant issue to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s market presence. In fact, the Assessing Officer has acknowledged furnishing of confirmation of NHPL. Therefore, we find substantial merit in the submission of learned counsel for the assessee that the reason for which the issue was restored back to the Assessing Officer in AYs 2017-18 and 2018-19 does not exist in the impugned assessment years. Hence, the issue can be decided on merits. 12. On perusal of the confirmation of NHPL and other corroborative evidences, it is evident that the expenses incurred primarily involve expenditure related to sale of products, such as, staff recruitment charges, salary and expenses of territory sales executives, salary and expenses of sales personnel manager, salary and expenses of sales manager, salary of MIS executives, salary and expenses of project Director and fix management service payments. It is an undisputed fact on record that the personnel engaged in sale of products of the assessee belong to NHPL. Therefore, it cannot be denied that market development expenses are towards sale of product, hence, are of revenue nature. 13. It would be relevant to observe, based on the reasoning, on which, market development expenses were disallowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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