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TMI Blog2012 (10) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) has erred in deleting disallowance of Rs.1,23,654/- made u/s 40A(9) by the Assessing Officer by wrongly holding that the payment was an allowable statutory liability of the assessee. (iv) On the facts and in the circumstances of the case and contrary to the provisions of law, the ld. Commissioner of Income Tax(A) has erred in deleting the disallowance of Rs.9,82,037/- made by the Assessing Officer out of claims of advertisement and services promotion expenses by invoking the provisions of section 40(a)(ia) of the I.T. Act." 3. Brief facts giving rise to this appeal are that the Assessing Officer picked up the case of the assessee for scrutiny by notice u/s 143(2) and 142(1) of the Income Tax Act, 1961 (for brief the Act). After providing due opportunity of hearing, the Assessing Officer made additions for payment of interest on loan liability, on reduction of claim, depreciation, on account of pension fund, on account of HHM Scheme payment and on account of dividend tax and the Assessing Officer also disallowed the payment of service tax contribution and finalized assessment at total taxable income of Rs.30,87,082/-. 4. Aggrieved, the assessee filed an appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted at source. It is these amounts received by the assessee that the excise department raised demand on the assessee for the year 2004-05 & 2005-06 as a result of which the payment was made. The demand was raised by the Commissioner of Central Excise who jssued summons to the assessee on 26.5.2006 of RS.1, 75,064/- and Rs.61,483/- which was duly paid vide photocopies of challans. The demand made on the assessee and the payment in respect thereof both fall in the accounting period to question and therefore, the deduction was claimed during the accounting period. The payment is allowable under section 43B of the Income tax Act. The ld. AO while she made the disallowance by observing that the effect of payment is revenue neutral acted on misconception of facts which are not even clear to her and the disallowance was made on wrong appreciation of the factual position. The perusal of the documents accompanying this note make the position clear as to the liability of service tax incurred by the assessee on the payments received by it from the banks and finance companies to whom the services are stated to be rendered by the assessee for which it received the payment after the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above submissions, the assessee's representative submitted that as per Schedule A of fixed assets that the assessee claimed depreciation @60% on computer and computer printer. He also submitted that the Assessing Officer did not object other two items except computer UPS on which the Assessing Officer allowed depreciation @15%. 10. After careful consideration of submissions of both the parties and perusal of the record before us, we are of the view that the Assessing Officer has no reason to take a different stand for granting depreciation on computer UPS because the computer UPS is also an inseparable peripheral to the computer which is eligible for 60% deprecation. Therefore, we hold that the ld. Commissioner of Income Tax(A) rightly allowed depreciation @60% and we have no reason to interfere with these findings of Commissioner of Income Tax(A). Hence, ground no.2 is also dismissed. Ground No. 3 11. Apropos ground no.3, ld. DR submitted that the Assessing Officer has disallowed the claim of Rs.1,23,654 by invoking the provisions of section 40A(9) of the Act. The assessee's representative before us submitted that the payment was made by the assessee on account of statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuously depositing employees' share to Provident Fund (Account 10, Pension) from financial year 2004-05, 2005-06, 2006-07 and 2007-08 (page 32 of Paper Book). The DR did not dispute the fact that this payment has been complying the statutory requirements of the assessee and this kind of payment has not been disputed in the earlier years by the authorities below. Therefore, the findings of the Assessing Officer cannot be sustained. On the other hand, ld. Commissioner of Income Tax(A) rightly held that the demand was made on account of statutory liability of the assessee, therefore, the action of the Assessing Officer was misconceived. In view of above, ground no. 3 is also dismissed. Ground no. 4 15. Apropos ground no.4, the DR submitted that the Assessing Officer rightly held that the assessee made payment of advertisement and business promotion expenses on various schemes initiated by the manufacturer. He further submitted that the Assessing Officer rightly noted that the expenses were incurred by principal manufacturer and subsequently charged from the assessee dealer by way of debit notes. The DR finally submitted that the expenses were neither incurred by the assessee dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs.9,82,037/-. In this regard AO has discussed the issue in the body of assessment order as under:- "The company has claimed expenditure of RS.9,82,037/- on account of HHM scheme. As per the explanation given by the assessee the expense represents the payment of advertisement and Business Promotion on various schemes initiated by the manufacturer (Principal). The expense is incurred by the Principal and subsequently charged from the dealer by way of a debit note. The expense is neither incurred by the dealer nor is the bill in the name of the dealer. As such the expenditure represents the services rendered by the principals. Since the assessee company has not deducted tax at source on HHM payment the expense stands disallowed under the provisions of Sec. 40(a) (ia) of the Income Tax Act. " 8.1 During the course of appellate proceedings Id. AR of the assessee has submitted as under:- "It is common ground that the appellant is an authorized dealer of Hero Honda and its accessories and also runs service stations. There is cut throat competition in the business in which the appellant has engaged itself. The Principal, Hero Honda of which the appellant is the (authorized dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the findings of the AO and submission of the Id. AR and further details [chart available at page NO.64 and Page NO.65 to 67 of the Paper Book], wherein, it has been found that these are the discounts against the various promotional schemes. On page NO.68 there is full break up of the amount of Rs.9,82,0371-. So, there is no rational in invoking the provisions of Section 40(a)(ia) of the IT Act. In my considered opinion assessee deserves relief on this account. This ground is allowed in favour of the assessee." 19. At the outset, we observe that the DR did not dispute the fact that the assessee company had given discount of Rs.10,18,585.25 by its principal manufacturer during the financial year under consideration against the various promotional schemes and as per trading account submitted by the assessee before the authorities below which is available from page no. 46 to 50 and 68, it is apparent that the assessee has shown purchases of vehicles amounting to Rs.14,52,63,900.69 after deducting the discount from the billing amount. But we observe that the ld. Commissioner of Income Tax(A) has not discussed and given a finding in this regard that how the discount given by the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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