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2014 (8) TMI 1207 - AT - Income TaxDisallowance of advance write off and deposit write off - HELD THAT:- The claim of assessee is that it represented additional custom duty deposited by M/s IBM Ind. Pvt. Ltd., which was found to be not recoverable subsequent to acquisition of business from M/s IBM Ind. Pvt. Ltd., However, nothing has been brought on record by the assessee to show that the additional customs duty deposited by M/s IBM Ind. Pvt.Ltd., was not on capital account, but on trading account only. Assessee also did not furnish the agreement relating to global transfer of business between M/.s IBM and M/s Lenovo. There was no evidence as to which products were imported by M/s IBM Ind.,Pvt Ltd., on which the additional customs duty was deposited by it. Assessee had simply effected a write off and failed to support its claim for allowance under the IT Act. CIT(A) has specifically mentioned in its order that even before him the assessee could not file any record proving the character of the write off. In such circumstances, we are of the opinion, that disallowance was rightly sustained by the CIT(A). Write off of service tax - What we find is that the list of invoices placed at page no.109 to110 does not show the nature of the purchases made by the assessee from M/s IBM Ind.Pvt.Ltd., Assessee could have very well bifurcated the nature of in-put at the stage of purchase itself, viz, what would be the items that would go to manufacturing section and what would be the items that would go to trading segment. Once such a bifurcation is made it will not be necessary to divide the service tax paid on purchase from M/s IBM based on total turnover. Nevertheless, there is substance in the argument of the assessee that it could never claim any service tax credit against service tax paid on items which were intended for trading. Additional evidence filed by the assessee in the nature of service tax return can, in our opinion, be taken up for consideration, since it is a statutory record. Nevertheless, in order to ascertain the amount that the assessee can legitimately claim a write off from the total service tax paid, a thorough verification by the AO is required. We therefore, set aside the issue regarding the claim of write off of service tax back to the file of the AO for consideration afresh in accordance with law. Disallowance of marketing support and transition fee - Disallowance by the AO for the reason that the expenditure was incurred by the assessee for retaining the customer/dealer base of M/s IBM Ind.Pvt.Ltd., which resulted in acquiring an enduring benefit - HELD THAT:- Co-ordinate Bench of the Tribunal has allowed the claim of the assessee for assessment year 2006-07 services rendered by IBM are for smooth and efficient carrying on the business of the assessee for a period of 5 years. This might give an enduring benefit to the assessee but every activity which given enduring benefit to the assessee would not get the character of capital nature. It has been held by the various high courts in a catena of decisions that the enduring benefit is not the only criteria to decide the nature and character of expenditure. The necessary test is whether it is for acquisition of any capital asset or for the purpose of carrying on the business, deriving revenue from it. The marketing support services cannot however be considered as acquisition of a capital asst. The support services are for the purpose of sale of the products manufactured by the assessee and, therefore, it is clearly established that it is for efficient running of the business and deriving revenues therefrom. In such circumstances, we are inclined to hold that the fees paid by the assessee for marketing support services rendered by IBM is clearly revenue in nature and is allowable as deduction u/s 37. - Decided against revenue.
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