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2023 (9) TMI 1035 - ITAT MUMBAIAddition u/s 68 - genuineness & creditworthiness of foreign entities/ ultimate investors were not properly established by the assessee - assessee failed to discharge its onus to prove the genuineness of these transactions as the Cleartrip Inc. (Mauritius) did not have its own fund to invest and money trial revealed that main source of these funds were routed through various accounts - HELD THAT:- To show the creditworthiness of the private equity investors in Cleartrip incorporation Cayman Island assessee submitted their profile and the annual financial statements of Cleartrip incorporation Mauritius. The learned assessing officer did not have any material, which controverts above submission and information. There is information about FT7TR reference made by LD AO. For this assessment year assessee has proved identity and creditworthiness of investor as well as the genuineness of the transaction of investment in equity shares of the company. Apparently, assessee has discharged its initial onus cast upon the assessee under the provisions of section 68 of the income tax act. Therefore, we find that the assessee has fairly demonstrated the identity, creditworthiness and the genuineness of the transition by producing extensive material independently for this year also. Proviso to section 68 does not apply to a non-resident investor. Even otherwise assessee has shown nature and source of funds in the hands of Nonresident 100% holding company investor also independently. Hence, we confirm the order of the learned CIT (A) deleting the above addition. No merit in the appeal of the learned Assessing Officer. Hence, the solitary ground of appeal against the deletion of addition is dismissed. Disallowance of advertisement and sales promotion expenses - As stated that the even if there is an incidental indirect third-party benefit, it would not result into characterization of expenditure as not incurred wholly and exclusively for the business of the assessee, no disallowance in the hands of the assessee can be made - HELD THAT:- AO despite having the complete detail of such expenditure could not give any independent finding on examination of such detail that the expenditure incurred by the assessee is not wholly and exclusively incurred for the purpose of the business of the assessee. Though assessee denied that there is any benefit to the third parties, however, even if there is an incidental indirect benefit to the some other parties, that would not entitled to revenue to disallow the expenses incurred by the assessee for its own business purposes. We find that if the expenditure is incurred by the assessee for the purposes of the benefit of the third party or its overseas sister concern, it becomes an international transaction which could not have been resulted into disallowance u/s 37 (1) but determination of Arm/s length price of such transaction under Chapter X of The Act. In absence of any evidence placed by the learned assessing officer that these expenditure has resulted into benefit to the third-party and these are not incurred wholly and exclusively for the purposes of the business of the assessee, we do not find any reason to sustain the disallowance. Disallowance of expenditure of advertisement and sales promotion expenditure being 20% of the total expenditure of advertisement and sales promotion expenses incurred by the assessee is allowed.
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