TMI Blog2014 (7) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... es u/s 40A(2)(b) of the Act – Held that:- CIT(A) noted that the similar expenditure paid for advertisement to Arts India has been allowed in the preceding years in scrutiny assessment except in A.Y. 90-91 where disallowance of 25% was made by AO but the same was deleted by CIT(A) - nothing has been brought on record to demonstrate that against the order of CIT(A) for A.Y. 90-91- no material has been brought to demonstrate as to how the payment made by Assessee to Arts India was excessive – revenue has not brought any material on record to controvert the findings of CIT(A) – there was no reason to interfere with the order of CIT(A) – Decided against Revenue. Unexplained expenditure on advertisement u/s 69C of the Act – Held that:- CIT(A) while deleting the addition has noted that the information gathered by the AO u/s. 133(6) from various newspapers was not made available to the Assessee nor any explanation was sought from Assessee and therefore the question of giving any justification by the Assessee does not arise - on perusing the account of Arts India that the payments received by Arts India could have been for the year under consideration as well as old outstanding dues sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of disallowance relating to show room renovation/repair expenses. 4. During the course of assessment proceedings, A.O noticed that Assessee had debited ₹ 23,09,855/- as expenses for renovation of show room. The submission of the Assessee that the expenditure was made for different rented show rooms of the company and the renovation was made due to spoiled furniture on account of humidity and termite was not found acceptable to the A.O. On perusing the copy of the ledger, A.O was of the view that the expenditure incurred under the head renovation was capital in nature. A.O also noticed that no repairs and renovation expenses was incurred by the Assessee in earlier years. He accordingly disallowed the claim of the Assessee. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee decided the issue in favour of Assessee by holding as under:- Decision : I have gone through assessment order and the submissions of the assessee and it is seen that the Assessing Officer has treated it as capital expenditure by observing that the showroom renovation pertains to Ashram road only and according to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the submissions of the Assessee and on perusing the copies of the bills has given a finding that the expenditure incurred by the Assessee was by way of replacement/repairing of old existing furniture and fixtures and modification made to facilitate the display of changed models of products of companies which are sold by Assessee. CIT(A) after relying on the decision of the Ahmedabad Tribunal in the case of Wellknown Organizers Ltd. and the decision of Hon ble Gujarat High Court granted relief to the Assessee. Before us ld. D.R. could not controvert the findings of CIT(A) and thus we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 2nd ground is with respect to deleting the disallowance of interest of ₹ 3,96,000/-. 8. During the course of assessment proceedings, A.O noticed that Assessee has given ₹ 33 lacs as furniture security deposits to the proprietory concern of one of the partners and also to the partners of the firm. He also noticed that no interest was charged on the furniture deposit. A.O was of the view that on one hand Assessee had taken secured loan on which interest was paid by the Assessee and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is dismissed. Ground no. 3 is with respect to deleting the addition of ₹ 18,50,275/- under section 40A(2)(b) of the Act. 12. During the course of assessment proceedings, A.O noticed that Assessee had paid ₹ 1,23,35,170/- to Arts India, which is a related party covered under section 40A(2)(b) of the Act for advertisement. A.O also noted that substantial advertisement expenses was paid to Arts India. The amount paid to Arts India was considered unreasonable and excessive by the A.O. He accordingly disallowed 15% of the advertisement expenses. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee deleted the addition made by the A.O by holding as under:- Decision : The submission of assessee is considered and from perusal of assessment order it is seen that the assessing officer has disallowed 15 % of advertisement expenditure of ₹ 1,23,35,170 incurred through M/S Arts India. It also seen that this expenditure has been allowed in the preceding years for which assessment was also framed after scrutiny. From the order of the C.I.T (Appeals) for A.Y. 1990-01 placed at paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a related party of the Assessee. To verify the reasonableness of expenditure paid by Assessee to Arts India and to verify the actual amount paid by Arts India to different advertising agencies letter under section 133(6) were issued to some newspapers/advertising agencies which are listed on page 7 of the order. On perusal of statements given by different advertisement agency, A.O noticed that Arts India actually paid a sum of ₹ 1,58,96,525/- for advertisement of the Assessee whereas as per the books of accounts, Assessee had paid a sum of ₹ 1,23,35,170/-. A.O was therefore of the view that since the Assessee has not given any justification for incurring more expenditure on advertisement and in the absence of any justification by the Assessee as to why related party would incur more expenditure on advertisement than that of the expenditure received by it as per the books, he concluded that the Assessee had given excess payment of advertisement amounting to ₹ 35,61,355/- out of the books which attract provisions of Section 69C of the Act. He therefore considered the aforesaid excess amount as unexplained expenditure and added to the income. Aggrieved by the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the addition of ₹ 35,61,355 u/s 69C is hereby directed to be deleted and the ground of the assessee is accordingly allowed. 17. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 18. Before us, ld. D.R. relied on the order of A.O on the other hand ld. A.R. supported the order of CIT(A). 19. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that the information gathered by the A.O u/s. 133(6) from various newspapers was not made available to the Assessee nor any explanation was sought from Assessee and therefore the question of giving any justification by the Assessee does not arise. He has further noted on perusing the account of Arts India that the payments received by Arts India could have been for the year under consideration as well as old outstanding dues since there was opening credit balance shown as payable by the Assessee and there was balance outstanding at the close of the year. He has further noted that in the absence of proof of incurring expenditure out of the books by the Assessee, no case of addition u/s. 69C has been made by the A.O. Before us, Revenue has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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