TMI Blog2015 (4) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Disallowance of technical advisory fees - Held that:- IT(A) has rightly observed that the onus is on the assessee to substantiate on the basis of evidences regarding business expenditure which has been claimed u/s 37(1). This onus has not been discharged by the assessee. We note that ld CIT(A) has rightly held that in the absence of any evidences on record regarding the nature of services provided for which the above expenditure has been incurred, the disallowance made by the AO is as per law, hence, the ld CIT(A) has rightly dismissed this ground of appeal. In view of the above we are of the view that no interference is called for in the impugned order passed by the ld CIT(A), hence we uphold the same by rejecting this ground of appeal as raised by the assessee in respect of “Technical Advisory Fees” which amounts to ₹ 7 crores and we confirm disallowance of ₹ 7 crores because assessee failed to substantiate its claim. Depreciation - Whether CIT(A) has failed to allow depreciation thereon being expenditure [technical advisory fees] of capital nature eligible for depreciation u/s. 32(1) ? - Held that:- The assessee vide the agreement dated 15.02.2001 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Ld. CIT(A)-XII, New Delhi on the identical and similar issue involved in A. Y 2004-05. Hence, following the earlier precedent, the Ld. CIT(A)-XV, New Delhi has rightly deleted the addition of 2,07,89,275/- and decided the issue in favour of the assessee. - ITA No. 2262/Del/2011, ITA No. 2263/Del/2011, ITA No. 1475/Del/2011 - - - Dated:- 26-3-2015 - Shri J.S.Reddy And shri A. T. Varkey JJ. For the Appellant : Shri R. S. Gill, CIT DR For the Respondent : Sh. Pradeep Dinodia, CA ORDER Per A. T. Varkey, JUDICIAL MEMBER The revenue and the assessee is in cross-appeals against the order of the ld CIT(A), XV, New Delhi dated 21.12.2011 for Assessment Year 2001-02. The revenue is also in appeal against the order for Assessment Year 2003-04. First of all we take up the revenue s appeal for Assessment Year 2001-02. 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of interest expenditure of ₹ 43,87,500/- on account of notional interest cost made by the AO. 2. The facts in brief are that the assessee company is engaged in the manufacture and sale of tooth brushes, dealing in Small El ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the Assessee it is not for the AO to decide as to how the assessee should run its business; and how much credit facility should be granted in respect of sales made to the distributors in the ordinary course of business which is in the exclusive domain of the assessee and the AO erred on this account. The ld DR could not dispute before us that the credit facility extended by the assessee is only in respect of sales made to the distributor in the ordinary course of business. In the assessment order AO could not rebut this claim of the assessee. The ld CIT(A) has rightly relied on the decision of the Hon ble Apex Court decision in the case of the SA Builders ltd. Vs. CIT (2007) 288 ITR 1 (SC), wherein it has held that once it is established that there was nexus between the expenditure and purpose of the business (which need not necessarily be the business of the assessee itself) the revenue cannot justifiably claim to put itself in the arm chair of the businessman or in the position of board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No business can be compelled to maximize his profits. We con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax (Appeals)-XV, New Delhi on the following grounds:- 1.0 On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in sustaining the disallowance of ₹ 13,57,45,000/- on account of technical advisory fees, on wholly erroneous, illegal and untenable grounds. 1.1. In the alternative and without prejudice to the above, the Ld. CIT(A) has failed to allow depreciation thereon being expenditure of capital nature eligible for depreciation u/s. 32(1) of the I.T. Act, 1961. 2.0 That the Ld. CIT(A) has erred in law and on facts in sustaining the disallowance of ₹ 70,00,000/- on account of excise duty payment deductible u/s 43B of the I.T. Act, on wholly erroneous, illegal and untenable grounds. 3.0 That each ground is independent of and without prejudice to the other grounds raised herein. 11. The first grounds and 1.1 of appeal is regarding the contention of the appellant that the ld CIT(A) had erred in disallowing an amount of ₹ 13,57,45,000/- which was claimed on account of payment of technical advisory fees or in the alternative grant depreciation u/s 32(1) of the Act. 12. The facts in brief are that the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing GEEP Brand products Zinc (Batteries) Wilkinson Sword from the said unit acquired (M/s. SSIL) and since the assessee does not have the expertise to manufacture Zinc Batteries it has sourced the same from M/s. SSIL for which the assessee has agreed and have claimed to have made the payment for which it claimed expenditure. 20. We find that the assessee claimed an expenditure of ₹ 13,57,45,000/- under the Head Technical and Advisory Fees . This Technical and Advisory Fees has been claimed to be paid to M/S SISL under three agreements. In the first agreement dated 13th April 2000, and is for the period 1st January 2000 to 31st December 2000 and total consideration is ₹ 7 crores. The other two agreements are dated 4th January 2001 and 15th February 2001 and are for the period 1st January 2001 up to 31st December 2001 and the total consideration under the two agreement is ₹ 8.77 crores. Thus apparently assessee could have claimed an expenditure of ₹ 7 crores + ( of ₹ 8.77 crores) i.e. ₹ 2.19 crores and as such the claim at best can be considered of ₹ 9.19 crores and the remaining is per-se not maintainable. Even with respect to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s manufacturing facilities in relation to the manufacture of the Products. 2.4 The Parties will jointly use their best efforts to ensure that GDOL absorbs the Technical Advisory Services fully and speedily and that the Products manufactured by GDOL properly utilize the advice disclosed and imparted by SISL pursuant to this Agreement. 2.5 SISL shall furthermore provide to GDOL the ongoing Technical Advisory services set out in the Schedule hereto and shall advise assist GDOL in the correct interpretation of the Technical Advisory Services Documentation, if any. 23. Further agreement dated 04th January 2001 is akin to the agreement dated 10th April 2000 but for the later period. However clause 2 of supplement agreement dated 15th February 2001 provides as under:- C. By a Technical Advisory Services Agreement dated January 4th 2001 (hereinafter the Agreement ) entered between the parties hereto, the parties have agreed to certain terms and conditions as set out therein; and D. The parties, being desirous of introducing a new technology to produce No Mercury Added product, have reached certain agreements supplemental to the Agreement dated January 4th 2001 as set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intangible asset qualifying for depreciation u/s 32(1)(ii) of the Act. As we had noted before the consideration for M/s SISL as per the agreement dated 04.01.2001, is in force from 01.01.2001 up to 31.12.2001, which need to be read in conjunction with agreement dated 15.12.2001, so the agreement is in force from 01.01.2001 to 31.12.2001. And the total consideration for the year is ₹ 8.77 crores. So we can allow one-fourth (1/4th) of the said consideration as capital expenditure for which depreciation can be allowed. It amount to ₹ 2.19 crores for which the AO is directed to allow depreciation in accordance to law for the relevant assessment year, which needless to say the rest of the amount i.e. ₹ 6.58 crores will become the W.D.V for the subsequent Assessment Year 25. With regard to ground no. 2.0 concerned which relates to disallowing of an amount of ₹ 70 lacs on account of excise duty payment which was deductible u/s. 43B of the Act. We find that Ld. CIT(A) has observed that the AO during the assessment proceedings has held that the payment of ₹ 70 lacs of excise duty was not in respect of the liability of the assessee and since it was the liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(1) on 23.3.2004. The case of the assessee was selected for scrutiny and notice under section 143(2) was sent on 29.11.2004. Again notice under section 143(2) along with questionnaire under section 142(1) was sent on 28.7.2005. The assessee company is engaged in the manufacture and sale of kitchen appliances, hand blenders, epilators, tooth brushes, toothpastes and manufacturing and trading in grooming products and cell batteries. During the assessment proceedings ld. Counsel of the assessee has produced computerized ledgers extracts which have been test checked by the AO. During the year the assessee has sold all assets of GEEP manufacturing business. Assessee company also discontinued its braun domestic business activities but continued its braun export business. After considering the submissions by the Ld. Counsel of the assessee, ld. AO completed the assessment u/s. 143(3) of the Act vide his order dated 13.3.2006 and made addition of ₹ 2,07,89,275/- on account of inventory written off. 28. Being aggrieved with the assessment order dated 13.3.2006, assessee appealed before the Ld. CIT(A), who vide impugned order dated 21.2.2011 has deleted the addition by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi that keeping in view of the aforesaid precedent the disallowance made by the AO may be deleted. We find that the Ld. CIT(A) has considered the submission and the findings of the AO and the facts on record. We find that the Ld. CIT(A)-XV, New Delhi observed that the another i.e. Ld. CIT(A)-XII, New Delhi in assessee s own case for the asstt. Year 2004-05 has decided the similar issue in assessee s favor by observing as under:- I have gone through the submissions filed by the appellant and it is observed that the appellant has given complete details of inventory which have been written off as well as evidences in the form of person before whom the said item were disposed off. The appellant has pointed out that it being a Multi National Company the company has to be maintained higher standard of quality and these items are not sold in the second sale as done by the many other firms. As the appellant has furnished the complete details therefore, disallowance of ₹ 11643211/- is hereby deleted and this issue is decided in favor of the appellant. 34. We find that the Ld. CIT(A) in the instant case also found that the assessee had filed the complete details of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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