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2019 (12) TMI 210 - AT - Income TaxDisallowance of subvention expenditure - claim of the assessee that subvention expenses represent amounts given to customers by way of discount etc. as per the instruction of the suppliers - HELD THAT:- Ledger folio of the subvention expenses is enclosed in the paper book filed by the assessee from pages 8 to 19. The total expenses incurred is ₹ 11,63,682. The total turnover for the year is ₹ 24.86 crore and the turnover increased for the year by ₹ 1,67,37,327. We are of the view that if the assessee can prove by producing the sale invoices that these subvention expenses are discount given to the customers, necessarily, the disallowance is uncalled for. For examination of the said issue, the matter is restored to the Assessing Officer for fresh consideration. The assessee shall produce sample sales invoices for the above said period to prove that the discounts are given to the customers. Disallowance of expenditure incurred for setting up of Ape Four Wheeler Unit - HELD THAT:- The assessee had claimed as revenue expenditure a sum of ₹ 10,16,666. These are expenses incurred for setting up a dealership unit at Kannur. We have perused the details of the expenses, which are placed in the paper book filed by the assessee. Expenditure claimed are bank charges, bonus, commission paid, salary and wages, staff welfare expenses, etc. These expenses are clearly incurred for setting up a new unit and cannot be stated that it is an expenditure incurred for extension of existing unit. The new premises were taken on lease and new agreements were signed. The expenditure incurred is for setting up of a new business, cannot be allowed as a revenue expenditure. Interest attributed to the funds diverted to sister-concern - HELD THAT:- It is clear that no funds were diverted to sister concern during the relevant assessment year. No addition / disallowance was made on this account in the earlier assessment years or in the subsequent assessment years. Moreover, we find that M/s.Pothen & Pothen Automobiles Private Limited (sister concern) is an authorized distributor for three wheeler spare parts from Trichur to Kasargode. Since the assessee is dealing in Ape three wheelers, it receives spare parts required from M/s.Pothen & Pothen Automobiles Private Limited and procuring the spare parts, advances were given by the assessee-company. So there is element of commercial expediency of such advances to the sister concern. Since no fresh advances were given during the relevant assessment year to the sister concern and when no addition on this account was made in the earlier assessment years or in the subsequent assessment years, according to us, no addition can be made on a notional basis to the interest income under the head `income from other sources’.
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