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2020 (3) TMI 674 - AT - Income TaxTP Adjustment - transactions for purchase of one product, viz. Nicorandil, with the said AE - Appellant had purchased the said Product from the AE @ ₹ 20,000 per unit, while the AE sold same product to third party @ Rd. 17,000 per unit - difference in the quality of Product sold by the AE to the Appellant and the Third Party - HELD THAT:- Assessee has purchased Nicorandil chemical from its associate enterprises @ 20,000 per Kg, whereas the same chemical are sold in the domestic market for lesser value. We observed from the submission made by Ld. AR that the assessee has purchased chemical from the associate enterprises in order to export the same and assessee has instructed the associate enterprises to supply the quality as per the specification of the buyers and accordingly associate enterprises has supplied the chemical following the above said specification. We are in agreement with the Ld. AR of the assessee that the quality of the product for export has to be as per the specification of the buyers and should go through strict quality check and the parameters of the chemical are as per the specification and name of the product may be similar what is being sold in the domestic market. However, the quality specification may vary according to the specifications required by the buyers. We cannot go with the name of the product rather we have to verify the name of the products with specifications which are sold in the domestic as well as international market. There may be specific requirement of particular quality for export with proper testing. From the assessment records, it is not clear whether the AO/TPO has verified in the above said specifications and we notice that AO has merely verified the name of the chemical in the documents submitted before him. Addition proposed by the TPO are negligible compared to the value of exports made by the assessee, therefore we are inclined to delete the above said addition in favour of the assessee. Accordingly, ground no. 1 is allowed. Disallowance of sales promotion expenses - HELD THAT:- It is common practice that whenever customers are entertained and they are accompanied by the executive of the company and the payment made invariably through plastic money and the payment vouchers are being reimbursed by the company, therefore in this case also, directors of the company has incurred this expenditure and we may have to accept the general practice of the industry. Therefore, considering the fact that assessee is in export business and it has to entertain the visitors. We can consider this expenditure incurred only for the purpose of business. Therefore, this expenditure is allowed as business expenditure. We do not agree with the AO that the payment made through credit card owned by the director are only for personal expenditure. Accordingly, ground no. 2 is allowed.
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