TMI Blog2015 (6) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish the report of the accountant before the AO in the set aside proceedings and there after the AO shall proceed to examine this matter in accordance with the law. Disallowance of advertisement and public relation expenses - AO disallowed the claim of the assessee, apparently by invoking the Explanation given u/s 37(1) - HELD THAT:- We notice that the tax authorities have taken a generalized view that the advertisements have been banned by Government regulations and hence these expenses are not allowable. In fact, the tax authorities seem to have not examined the break-up details of the advertisement expenses. It is the submission of the assessee that these expenses were not incurred on public advertisements. The assessee has furnished relevant regulations - A perusal of the same would show that the restriction is placed on the News papers and Cable TV operators in carrying advertisement of liquors. It is not the case of the department that the assessee has carried out advertisement in news papers and cable TV channels, which is in fact prohibited. It is also submitted that the advertisement expenses incurred by the assessee was allowed in the earlier years. Under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld CIT(A) that the purchase value of Beer and Wine has been approved by customs authorities. The assessing officer, however, submitted in the remand report that the price accepted by the Customs Authorities has got no relevance in the Income tax proceedings. Accordingly, he stood by the addition of 10% of the purchase value made by him. The Ld CIT(A) deleted this addition by holding that the AO cannot make adhoc disallowance without bringing comparable cases, particularly when the Custom authorities have accepted the purchase value. The revenue is contesting this decision of Ld CIT(A). 4. Before us, Ld. AR vehemently argued that no adjustment to purchase value is required, since the customs authorities have approved the imported value. He further submitted that the Arms Length price should be determined under any of the methods prescribed under the Act. In this regard, he placed reliance on the decision rendered by the Mumbai bench of Tribunal in the case of CA Computer Associates (P) Ltd reported in (2010) (37 SOT 306). 5. On the contrary, the Ld. DR submitted that the purchase value approved by the Customs authorities has got no relevance under income tax proceedings and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y CIT(A). Thus this issue is common in the appeals filed by both the parties. 7. We have heard the parties on this issue. The facts relating to the same are that the assessee incurred a sum of Rs.30.60 lakhs as product launch expenses. The assessing officer took the view that the benefit of the said expenses would be available to the assessee in the succeeding years also. Accordingly, the AO restricted the addition to 20% and disallowed remaining 80% of the expenses. In the appellate proceedings, the Ld. CIT(A) allowed 1/3rd of the expenditure and accordingly sustained addition to the extent of 2/3rd of the expenditure. 8. The Ld. AR submitted that the concept of treating expenditure as Deferred revenue expenditure is not available under the Income tax Act. On merits, the Ld A.R submitted that there is no guaranty that the benefit of product launch expenses would extend for more than a year. The Ld. AR, accordingly, submitted that the product launch expenses incurred by the assessee should be allowed in full during the year under consideration itself. In this regard the Ld. AR placed reliance on the decision of Coordinate Bench referred in the case of ACIT vs. Kopran Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the law and hence the alternative contention put forth by the assessee before Ld CIT(A), in our view, would not be binding it, since the said contention is against the principles of the taxation provisions discussed above. Accordingly, we set aside the order Ld. CIT(A) on this issue and direct the assessing officer to allow the product launch expenses in full in the year under consideration. 10. The next issue contested by the assessee relates to the disallowance of advertisement and public relation expenses. Since the assessee was dealing in Beers and Wines and since the advertisement of alcoholic products are banned by Government of India, the AO disallowed the claim of the assessee, apparently by invoking the Explanation given u/s 37(1) of the Act. The Ld CIT(A) also confirmed the same. 11. We have heard the parties on this issue. We notice that the Ld CIT(A) has taken the view that the advertisement expenses are hit by the Explanation given u/s 37(1) of the Act. The said explanation reads as under:- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to M/s Wine Enterprises in the subsequent year, meaning thereby the above said expenses were incurred by M/s Wine enterprises on behalf of the assessee. However, the AO took the view that the assessee should have paid these expenses on its own. Further the AO has also observed that the assessee has not shown that the above said expenses were not claimed by M/s Wine Enterprises. Accordingly, he disallowed the amounts cited above, which were paid by M/s Wine Enterprises. The Ld CIT(A) also confirmed the same. 14. We heard the parties on this issue. According to the assessee, the above said payments have been made by M/s Wine Enterprises on behalf of the assessee and hence it has accounted for the same and reimbursed the amounts in the subsequent year. However, this claim of the assessee has not been examined by the tax authorities. At the same time, we notice that the assessee has also failed to substantiate its claim by furnishing the relevant documents and it has also failed to show that M/s Wine Enterprises has not claimed the impugned payments as its expenditure. Hence, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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