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2019 (4) TMI 1659 - AT - Income TaxTP Adjustment - Advertisement & Sales Promotion (AMP) expenses - whether advertisement and sales promotion expenses incurred by the assessee being an importer and distributor of wine and spirits in India in the forms of gifts, display at retail outlets, discount schemes, custom duty charged on POSM, etc. are revenue in nature as contended by the assessee? - HELD THAT:- When we examine the facts and circumstances of the case in the light of the ratio of Monto Motors Ltd. [2011 (12) TMI 50 - DELHI HIGH COURT] it is proved on record that the assessee has incurred periodical expenses on account of advertisement and sales promotion which is to increase the sales of products in order to remind the customer from time to time so that they do not forget the products and its qualities. Hon’ble High Court has held that when the advertisement expenses are incurred to increase the sale of the products, the same are treated as revenue expenditure because the memory of purchasers or customers is short-lived. So, in the instant case, the Revenue has not brought on record any material to prove that advertisement and sales promotion expenses have created long lasting benefits to the assessee, because advertisement and sales promotion are generally made in order to increase the sales and their impact is limited and felt for a short duration by the customers. Also see EMPIRE JUTE COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1980 (5) TMI 1 - SUPREME COURT] So, in this case, assessee has undisputedly incurred advertisement and sales promotion expenses periodically, and not at once just to refresh the product and quality to be sold in the memory of its customers. So, it cannot be held to be in the nature of enduring benefit for a trader - advertisement and sales promotion expenses have been incurred by the assessee just to enhance its sales and profit and cannot be treated as capital in nature. - Decided in favour of assessee. Addition u/s 40A (ia) - scope of Notification No.56/2012 dated 31.12.2012 issued by the CBDT - disallowance of an amount debited by the assessee in P&L account on account of bank guarantee commission - assessee has made certain payments to scheduled banks qua bank guarantee provided by the banks on which TDS was not deducted - AO as well as CIT (A) have accepted the proposition put forth by the assessee that bank guarantee commission does not cover under the definition of “interest”, hence section 194A is not applicable to such payment - HELD THAT:- It is settled principle of law that in case of bank guarantee commission, section 194H of the Act, where principal agent relationship are not there, is also not applicable. Reliance in this regard is placed on the decision rendered by the coordinate Bench of the Tribunal in Kotak Securities Ltd. vs. DCIT – [2012 (2) TMI 77 - ITAT MUMBAI] Bare perusal of the Notification in the instant case goes to prove that this Notification is clarificatory in nature. Applicability of the aforesaid Notification to a period prior to the period of its issue has been examined by Hon’ble Delhi High Court in case of Pr.CIT vs. Make My Trip India Pvt. Ltd. [2019 (3) TMI 1359 - DELHI HIGH COURT]. Furthermore, as per Second Proviso to section 40A (ia) of the Act, disallowance cannot be made because bank guarantee commission paid by the assessee to scheduled banks has been duly included in the total income of the banks as they are tax resident of India and they have duly paid the tax on such guarantee commission. So, under Second Proviso to section 40A (ia), no disallowance can be made. So, disallowance of ₹ 9,81,336/- made by the AO and restricted by the ld. CIT (A) to ₹ 7,92,680/- is not sustainable in the eyes of law, hence ordered to be deleted. - Decided in favour of the assessee.
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