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2015 (9) TMI 900 - AT - Income TaxReopening of assessment - payment made to M/s Mahindra & Mahindra for the purpose of obtaining exclusive vendor status - Held that:- From the explanation furnished during the course of original assessments, it is clear that the assessee company was harping on that it is nothing but volume discount by the appellant to the M/s Mahindra and Mahindra. There is no evidence on record to indicate that the agreement entered into by the assessee company with M/s Mahindra & Mahindra, dated 11th January, 1998 was filed before the Assessing Officer. Therefore, the Assessing Officer had no opportunity to peruse and draw any kind of inference about the nature of agreement or the right acquired pursuant to that agreement. Hence, it cannot be said that the Assessing Officer at the time of framing the original assessment formed any opinion on this issue. Therefore, the contentions raised by the appellant that the reassessment proceedings were initiated based on the mere change of opinion, is devoid of merit. The case-laws relied upon by the appellant do not come to the rescue of the appellant as the ratio laid down on those cases are that the reassessment proceedings are invalid in law, when prompted by a change of opinion. Accordingly, we hold that the reassessment proceedings initiated by the Assessing Officer are valid in law. - Decided against assessee. Disallowance on the ground that the expenditure incurred to obtain exclusive vendor status was in the nature of capital expenditure - Held that:- In this case also the assessee company acquired a right to carry on its business unfettered by any competition from outsiders within India. It was a protection acquired by the company for its business as a whole. As a result of this, the capital value of the business goes to appreciate and make it more profit yielding. Therefore, the expenditure incurred in acquiring this right is nothing but a capital expenditure which cannot be allowed as a deduction under Section 37(1) of the Act. The fact that the appellant company paid consideration by way of reduction from the invoice value does not make any difference because what has to be looked to is the character of the payment. A capital expenditure may as well be spread over for a number of years and had retained his character as a capital expenditure. We place reliance on the decision of CIT Vs. Piggot Champman & Co., (1949 (2) TMI 8 - CALCUTTA HIGH COURT) and further the fact that in the books of account this item was treated as a volume trade discount cannot determine the true nature of the transaction. Nomenclature of a transaction is immaterial while deciding the true nature of the transaction. Thus no hesitation to hold that the expenditure incurred by the assessee company in acquiring exclusive vendor status in terms of the agreement entered into by it is nothing but capital expenditure and hence this ground of appeal is also dismissed.- Decided against assessee. Disallowance without appreciating the fact that during the year the total expenditure incurred and claimed on account of trade/volume discount was only ₹ 9,23,23,607/- - Held that:- As held that the entire expenditure is capital in nature and mere fact that the capital expenditure is spread over period of time, does not make any difference. Therefore, the argument that the expenditure incurred during the year under consideration was only ₹ 9,23,23,607/-, does not hold any water.- Decided against assessee.
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