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2021 (9) TMI 914 - AT - Income TaxAddition u/s 28(iv) or 43(1) - Receipt of Special Redistributors' Incentive - Addition u/s 28(iv) being the amount of cost of demo van disbursed by M/s. Usha International Ltd. - As per assessee case of the assessee is covered by Explanation 10 to Section 43(1) - failure of the assessee to submit any proof regarding the utilisation of the incentive amount in question for purchase of van, the AO treated the incentive amount as the business income of the assessee as per Section 28(iv) - assessee in the present case is a partnership firm which is engaged in the business of distribution of agro machineries i.e. pumping set, generator set, agricultural engines, power tiller, lubricants, spare parts etc and works as dealer/redistributor of other companies - HELD THAT:- The amount of incentive in question thus was received from M/s. Usha International Ltd. for the specific purpose of purchase of van which was to be utilised for the display and demonstration of the logo of M/s. Usha International Ltd. and since the said amount was actually utilised for purchase of van in the immediately succeeding year, find merit in the contention of the assessee that it was a case where a portion of cost of asset claimed by the assessee had been met directly by M/s. Usha International Ltd. in the form of subsidy or grant and it was rightly excluded by the assessee from the actual cost of the asset in order to determine the cost of acquisition for the purpose of Section 43(1) of the Act as specifically provided in Explanation 10 thereto. The amount of incentive received by the assessee from M/s. Usha International Ltd. specifically for the purchase of van was not in the nature of any benefit or perquisite which had arisen from business so as to treat the value of the same as business income of the assessee in terms of Section 28(iv) - assessee that the case of the assessee is covered by Explanation 10 to Section 43(1) of the Act and not by Section 28(iv) of the Act. Therefore, delete the addition made by the AO u/s. 28(iv) . Addition of freight inward expenses - HELD THAT:- As freight inward expenses claimed by the assessee were incurred in cash and the same were supported by only self-made vouchers - The claim of the assessee for the freight inward expenses to that extent, in my opinion, therefore was not fully verifiable as rightly held by the authorities. However, find some merit in the alternative contention raised by the ld. Counsel for the assessee that the disallowance of 15% made by the AO and confirmed by the ld. CIT(A) is excessive and unreasonable keeping in view the nature of the business of the assessee and it would be fair and reasonable to restrict the same to 7.5%. Accordingly modify the order of the ld. CIT(A) on this issue and direct the AO to restrict the disallowance of 15% to 7.5%. Ground No. 2 of the assessee's appeal is treated as partly allowed.
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