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2022 (9) TMI 760 - AT - Income TaxDisallowance of sales promotion expenses - Cash expenditure - Applicability of section 40A(3) - Addition made as assessee is selling the liquor products to Tamilnadu State Marketing Corporation (TASMAC) a public sector undertaking of the Government of Tamil Nadu and the products are delivered at the Depots of TASMAC and employees of TASMAC are employees of the Government thus there is no question of incurring any such expenses for promotion of the sale - HELD THAT:- CIT(A) has observed that the payments made to the contract employees of retail/distributing arm of State Government i.e. TASMAC or Kerala State Beverages Corporation (KSBC) fall under explanation to section 37(1) of the Act for the reason that the employees of TASMAC or KSBC are indirectly employees of the Government as TASMAC and KSBC are Government undertakings and any payment made to these person otherwise than a legal remuneration is an offense under the Prevention of Corruption Act. Further, it was observed that most of the expenses are incurred by cash and the provisions of section 40A(3) of the Act are attracted and moreover, the assessee has also not made out his case to show that it falls under Rule 6DD of Income Tax Rules, 1962. Under the above facts and circumstances and since the assessee has not been able to substantiate with any form of evidence towards sales promotion expenses, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed for the assessment years under consideration. Disallowance u/s 14A of the Act r.w. Rule 8D - necessity of recording satisfaction - HELD THAT:- AO was fully satisfied that the provisions of Rule 8D has to be invoked based on the materials available on record. Therefore, it cannot be said that the Assessing Officer has not recorded satisfaction. Under the above facts and circumstances, the ground raised by the assessee is dismissed. Disallowance u/s 14A vis-àvis computation of book profits u/s 115JB - Since, the issue is covered by case of ACIT Vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and by the decision of Sobha Developers Ltd. [2021 (1) TMI 378 - KARNATAKA HIGH COURT]. We set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to delete the addition.
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