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2015 (7) TMI 87 - IITAT JAIPUR

2015 (7) TMI 87 - IITAT JAIPUR - TMI - Disallowance of Sales promotion and publicity expenses - Held that:- Facts about assessee’s regular maintenance of accounts, their non-rejection, diverse business activities, contentions, applicable case laws and past litigation history is narrated in details above and needs no repetition. We are inclined to allow grounds raised by assessee relating to retention of disallowances by ld. CIT(A) in all these years on following considerations.

i. All .....

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IT(A) in 2nd round of proceedings allowed these expenses by latest order Dtd 29-1-14 in fresh proceedings. Revenue has accepted this order and has become final.

iii. Assessee’s books of accounts are maintained regularly on day to day basis and are duly audited; there is no qualification or any material adverse remark by the chartered accounts.

iv. Assessee’s books of accounts have not been rejected much less even doubted.

v. In view of a series of favorable order .....

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GUJARAT High Court ) is applicable to disallowance retained alleging personal user by the company. Respectfully following it we hold that in the case of assesse being a limited company which is an inanimate person, there can be no personal expenditure. Consequently the disallowances attributed to be personal user cannot be justified and are deleted.

viii. For AY 2006-07 qua the same disallowances assesse has paid more Fringe Benefit Tax (FBT). As over FBT and IT provisions if any exp .....

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d the income tax record of the survey agencies which in support of its version; there exist no reasoning as to why they are being ignored by ld. AO & CIT(A). There exist conflicting claims about the existence of such survey agencies coupled with non supply of Inspectors report and non-allowing the customary right of cross examining the denying witnesses. Thus assessee has made out a case for violation of principles of natural justice. In the entirety of facts and circumstances we are inclined to .....

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d periodicals are distinct commodity than the paper, printing ink and other ingredients used therein. Since a new commercial product comes into existence, the process involved for such transformation amounts to production and manufacture. Our view is fortified by Hon’ble Delhi High Court and ITAT benches of Cochin and Ahmedabad. Respectfully following them we uphold the orders of ld. CIT(A) on this issue of additional depreciation. Apropos AY 2006-07, since relying on Sayaji Iron and Engg. Case .....

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: Smt. Neena Jeph, Sr. DR ORDER PER R.P. TOLANI, JM:- This is a set of 3 appeals by the assessee for AYs 2005-06, 2006-07 & 2008- 09 and 2 appeals by the revenue for AYs 2006-07 & 2008-09 against the respective orders of the ld. CIT(A). Grounds raised in respective appeals are summed up as under:- ASSESSEE S APPEALS: AY 2005-06 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the disallowances made out of following expenses arbitrarily .....

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agement Exp. 1,09,41,330 5,00,000 ix) Management / Staff Training Exp. 7,03,176 3,51,588 x) Foundation Day Expenses 40,54,240 2,02,712 2. On the facts and circumstances of the case the Ld. CIT(A) has grossly erred in partly confirming the disallowance of Marketing and Survey Expenses uphold the disallowance @ 20% as against 5% by Ld. AO) on the remaining expenses of ₹ 69,50,238/- resulting into confirm action of disallowance of ₹ 13,90,047/-. 3. On the facts and in the circumstances .....

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out appreciating the nature of expenses incurred vis-à-vis expediency, thus the disallowances so confirmed deserves to be deleted. S. No. Nature of Expenses Amount claimed Amount disallowed I Sales Promotion Exp. 6,10,01,834.00 8,74,863.00 ii Telephone Exp. 1,53,68,283.00 5,00,000.00 iii Deepawali Exp. 17,27,146.00 3,45,429.00 iv Travelling Exp. 80,25,173.00 8,02,517.00 v Business Exp. 3,22,370.00 67,474.00 vi Other Expenses 1,95,28,932.00 5,00,000.00 vii Vehicle Running Exp. 23,02,020.00 .....

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#8377; 64,88,084/- out of Marketing and Survey Expenses legitimately incurred by the assesse wholly and exclusively for the purposes of its business. AY 2008-09: 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the ad hoc disallowances of ₹ 5,00,000/- out of general / other expenses incurred by the assessee wholly and exclusively for its business. 2. Ld. CIT(A) erred in sustaining disallowance of ₹ 43,36,835/- out of Marketing and Su .....

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preciation of ₹ 26,70,913/- without appreciating the fact that printing of paper cannot be considered as producing a new article or thing. ITA No. 574/JP/2012 for A Y 2008-09:- On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in:- (i) allowing additional depreciation of ₹ 35,31,480/- without appreciating the fact that printing of paper cannot be considered as producing a new article or thing. 2.1 Brief facts are-Assessee is a private limited compa .....

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enses incurred, assesse claims to have filed all the relevant details and explanation in this behalf. Nature, genuineness, business expediency, and regular incurrence of these expenses is claimed to be demonstrated by the assesse. Ld. AO however did not agree with the submissions made huge disallowances out of various heads of expenditure in all these years. Aggrieved assessee preferred first appeals contending that multiple disallowances were made by AO purely on the basis of adhocism, suspicio .....

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1 2. Telephone Exp. 1,27,11,214 5,00,000 5,00,000 NIL 3. Deepawali Exp. 20,65,215 4,13,043 4,13,043 NIL 4. Travelling Exp. 96,58,750 9,65,875 9,65,875 NIL 5. Business Exp. 11,23,657 2,24,731 2,24,731 NIL 6. Other Exp. 2,49,05,438 5,00,000 5,00,000 NIL 7. Rates & Taxes 2,87,205 2,87,205 NIL 2,87,205 8. Vehicle running exp. 21,15,770 2,11,577 2,11,577 NIL Depreciation on Cars 28,89,739 2,88,974 NIL 2,88,974 9. Event Management Expenses 1,09,41,330 5,00,000 5,00,000 NIL 10. Patrika Junction Exp .....

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6,10,01,834 5% 30,50,092 21,75,229 8,74,863 2. Telephone Exp. 1,53,68,283 Lump sum 5,00,000 - 5,00,000 3. Deepawali Exp. 17,27,146 20% 3,45,429 - 3,45,429 4. Travelling Exp. 80,25,173 10% 8,02,517 - 8,02,517 5. Business Exp. 3,22,370 20% 64,474 - 64,474 6. Other Exp. 1,95,28,932 Lump sum 5,00,000 - 5,00,000 7. Vehicle running exp. 23,02,020 10% 2,30,202 - 2,30,202 Depreciation on Cars 24,24,544 10% 2,42,454 2,42,454 NIL 8. Event Management Expenses 3,26,77,152 Lump Sum 5,00,000 - 5,00,000 9. Ma .....

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tival celebration Exp. 22,46,220 20% 4,49,244 NIL 4. Travelling Exp. 1,89,30,07 4 10% 18,93,007 NIL 5. Hospitality/Business Exp. 19,94,915 20% 3,98,983 NIL 6. General/Other Exp. 3,82,68,78 4 Lump sum 5,00,000 NIL 7. Vehicle running exp. 26,04,198 10% 1,30,210 NIL 8. Marketing & Survey Exp. 4,83,31,69 3 10% 43,36,835 NIL 9. Foundation day ceremony Exp. 17,88,930 Lump Sum 1,78,893 NIL 10. Additional Depreciation Exp. 35,31,480 - 35,31,480 NIL 2.4 Apropos Sale promotion and Publicity expenses l .....

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in these appeals have been allowed in all the years till 2004-05. Assessee duly complied with. All the quarries raised by ld. AO, there is no allegation of any noncooperation. Without finding any specific defect in the compliance or books of accounts, ld. AO merely on suspicions and by summary observations disallowed 5% of entire expenditure amounting to ₹ 38,37,508/-, which is purely based on sweeping and vague observations which are common for all AYs and are reproduced below: A.Y. 2005- .....

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ike food and refreshments, traveling and conveyance, hotel booking. Event & fair and others etc. Even the evidences for distributing the gifts also remains unverified. Therefore, for want of verification and element of non-business use involved in them 5% of these expenses are disallowed and added back to the total income of the assessee. Therefore, disallowance @ 5% i.e. ₹ 38,37,508 is made and same is added back to the total income of the assessee . AO Page 5 - A.Y. 2006-07 The asses .....

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s, traveling and conveyance, hotel booking. Event & fair and others etc. Even the assessee has not submitted any evidences in support of its contention that the gifts were given to various customers under the schemes to Hawkers, selling agents etc. So the same also remains unverified. Therefore, for want of verification and element of non-business use involved in them 5% of these expenses are disallowed and added back to the total income of the assessee. Therefore, disallowance @ 5% i.e.  .....

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d wholly and exclusively for business purpose. Further the expenditure incurred for nonbusiness can neither be denied nor ruled out as evident from the nature of expenses noted in the submission above like food and refreshments, traveling and conveyance, hotel booking, event & fair and others etc. Even the assessee has not submitted any evidences in support of its contention that the gifts were given to various customers under the schemes to Hawkers, selling agents etc. So the same also rema .....

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e assessee. Reliance is placed on the following judgement. Meaning of wholly and exclusively - The adverb Wholly in the phrase laid out or expended for business refers to the quantum of expenditure. The adverb exclusively has reference to the object or motive of the Act behind guest house expenses expenditure. Unless such motive is solely for promoting the business, the expenditure will not qualify for deduction. C.J. Patel & Co. vs. CIT 158 ITR 486 (Hon'ble Gujarat High Court in the cas .....

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. 2.6 Aggrieved assessee preferred 1st appeals contending that detailed submissions and evidence was filed before ld. AO, nature of business operations had widened and turnover had increased. Adhoc disallowance of 5% out of sales promotion and publicity expenses made by AO was based purely on suspicions and summary assumptions, it should be deleted. Ld. CIT(A) though found merit in assessee s contentions, instead of deleting the entire additions reduced it to ₹ 13,90,047/- by following obs .....

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t notice or providing a hearing hearing enhanced the 5% disallowance made by AO to 20% amounting to ₹ 13,90,047/-. The impugned enhancement was carried out by ld. CIT(A) on mere vague and sweeping observations that - the assessee failed to prove that amount was wholly and exclusively incurred for business purposes; it was not subject to verification; personal element may be involved and to plug any possible leakage of revenue. Ld. AO verified and held 5% as adhoc disallowable, most of whic .....

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.2007&14.03.11, reproduced at page 2 to 3 of the assessment order. A perusal thereof clearly spells out that assesse reasonably discharged its onus in demonstrating that same was incurred wholly and exclusively for the business of the assessee. 2.8. These disallowances have a history as all of them have been allowed in favor of the assessee in A.Ys. 1992-93 to 1997-98, 2000-01 and 2001-02 by the ITAT, a compilation of the orders of the ITAT in this behalf along with chart of the yearwise add .....

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14 deleted these disallowance which has become final as it is not challenged by the department. It is vehemently contended that no defects in books of accounts are alleged in these years and in view of this demonstrative history the issues about these expenses being wholly and exclusively incurred for business are consistentently allowed.It is travesty of justice and inconsistency on the part of department to adopt a flip flop attitude and go on indiscriminately making disallowances every year b .....

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red expenditure on scheme gifts, freight and cartage, travelling, publicity expenses, event and fair expenses etc. Out of the total expenses of ₹ 7,67,50,153/- only a sum of ₹ 9,95,438/- was incurred towards - Food & refreshment ₹ 924928/- + Hotel Booking ₹ 70,510/-. This also was incurred on the meetings of the advertisement and selling agents by the assesse organized for business consideration to get proper field feedback and apprise them of periodical commercial ta .....

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.71 crores as tabulated at PB 213. Without any justifiable reason and merely on suspicions unjustified disallowances of ₹ 13,90,047/- is sustained by ld. CIT(A). 2.11. Lower authorities have failed to appreciate these crucial aspects that advertisement receipts are the backbone of media business could not be achieved without the participation of advertisement agencies. The advertisement receipts increased to ₹ 84.71 crores from ₹ 73.72 crores in AY 2005-06 and increase is there .....

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ses on account of lunch and dinners served to the guests from various branches which stood disallowed. In appeal, Hon ble Delhi High Court, observed that the expenditure incurred for extending customary courtesy to persons connected with the assessee s business is in fact incurred for the purpose of its business, they are not cover under the word entertainment and therefore, the same is an allowable expenditure because it was necessary for its efficient conduct of business. 2.13 Since the facts .....

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2.7% of the total expenditure. Considering the imperative fact that lot of services and material is to be procured from unorganized sector which insist for cash payments, this negligible amount supported by self-made vouchers constitute admissible evidence. Books of accounts have not been rejected or questioned; the expenditure is debited in books on day to basis in regular course of accounting. Thus looking at the volume of business activities, necessities of petty expenditure the negligible 2 .....

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(P&H) Empire Jute Co. Ltd. Vs. CIT 124 ITR 1(SC) at is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency. S.A. Builders Vs. CIT 158 Taxman 74 (SC) Section 37(1) of the I .....

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le specific example being for non business purpose.Besidesit is trite law that the Ld. AO could step into the shoes of a businessman to decide how & why a particular expense should be incurred. 2.16 Adverting to other partially sustained expenses following contentions are raised by the assesse. Telephone Expenses: 2.17 It is submitted that the assessee s business of mass media including publication of newspapers add event management requires extensive use of telephones and communication devi .....

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necessary for the advancement of the business objectives of the assessee company. In this regard reliance is place on Revenues own instructions issued by CBDT [13/A/20/68 dated 03.10.1968] emphasizing that the Diwali and Muhurat expenses could not be held as disallowable while examining the genuineness of the expenses claimed by the assessee. There is no finding by lower authorities that these expenses were not genuine Travelling Expenses: 2.19 A sum of ₹ 9,65,875/- being 10% was disallowe .....

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bservations. While making these additions the Ld. AO completely lost sight of the nature of business in which assessee company is engaged, wherein, travelling by staff persons as well as executives of the company is a necessary factor for the purpose of collecting information / news items / interviews etc. and other purposes. Further the travelling undertaken by directors outside India in relation to the procurement of machines was duly capitalized details of which were also submitted thus the r .....

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o be deleted. Business Expenses: 2.20 A sum of ₹ 2,24,731/- being 20% of total expenses claimed under this head was disallowed which includes the expenses incurred on the visits of representatives, suppliers and news line dignitaries who visited the office of the assessee company and its branches resulting into publicity and media coverage both print as well as electronic media. Ld. AO completely ignored the assessee s explanation dated 27.12.2007. Other Expenses 2.21 A sum of ₹ 5,00 .....

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es incurred. Further the branch-wise details of the expenses incurred along with the copies of the respective accounts were submitted before the AO who failed to point out a single expense incurred for non business purpose and has made the lump sum disallowance out of the same. Vehicle Running Expenses: 2.22 A sum of ₹ 2,11,577/- was disallowed out of total expenses claimed at ₹ 21,15,770/-; assessee company is managed by the independent professionals and directors. The assessee is a .....

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med at ₹ 1,09,41,337/-. In this regard, it is submitted that out of the total receipt from event management activity at ₹ 2,28,16,642/- (PB 213) a sum of ₹ 1,09,41,337/- was claimed under various heads and a net surplus of ₹ 1,18,75,305/- was declared as income from organizing various fates and events at various places which amount other benefits help improve the advertisement and publicity. These expenses are duly supported by necessary bills and vouchers and in case of .....

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uent assessment year. In this regard, it was the fee paid by the assessee company on the courses undertaken and completed by Shri Nihar Kothari, Managing Director of the assessee company. Though a part of the course pertained to the succeeding assessment year however, since the fee was paid in the year under consideration and was non-refundable, therefore the same was claimed for the year under appeal. Ld. AO as well as Ld. CIT(A) did not doubt the claim but unjustifiably assumed that the course .....

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5% by Ld. CIT(A). In this regard, it is submitted that the ceremony was solemnized with the object of achieving development in personal and direct interaction between the selling and advertising agencies and the employees of the assessee company. Another key purpose of this ceremony was to honor and appreciate the services of advertising agents who are the backbone of the assessee company. The ceremony is organized every year since the inception of company and these expenses were never disallow .....

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.2 It is also submitted that the impugned disallowances have been made only on the basis of some vague and general observations without in any manner specifically pointing out as to why the expenses as claimed by assessee are not being allowed. The books of accounts of assessee company are duly audited as per the provisions of section 44AB were nowhere doubted by the Ld. AO and the trading results as declared by assessee has been accepted by him, therefore, no disallowance of expenses could have .....

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being an inanimate entity there cannot be anything personal about it and expenses cannot be disallowed as personal expenses. Hon ble Gujrat High Court observed as under in this behalf: 9.1. There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company is a distinct assessable entity as per definition of "person" under s. 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, "eve .....

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laced at PB 47-50 keeping the settled law about the principle of consistency, all these disallowances in the assessment years 2005- 06, 06-07 and 08-09 under appeals, deserve to be deleted. 3.4 Ld. DR. relied on the orders of ld. CIT(A) on these issues. 3.5 We have heard the rival contentions and perused the material available on record. Facts about assessee s regular maintenance of accounts, their non-rejection, diverse business activities, contentions, applicable case laws and past litigation .....

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ii. In addition to above, for AY 2004-05 also the other additions/disallowances stood allowed to assesse and issue of 5% disallowance out of sales promotion was set aside by ITAT for fresh consideration. Ld. CIT(A) in 2nd round of proceedings allowed these expenses by latest order Dtd 29-1-14 in fresh proceedings. Revenue has accepted this order and has become final. iii. Assessee s books of accounts are maintained regularly on day to day basis and are duly audited; there is no qualification or .....

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ITR 295 holding as under: Secondly, as noted by the Tribunal, a consistent view had been taken in favour of the assessee, starting with the AY 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there was no reason to take a different view unless there are very convincing reasons, none of which had been pointed out by the Revenue. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Ta .....

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t be allowed to flip-flop on the issue further. (Para 28, 29 & 31) 3.6 In our considered view these judgments are fully applicable to assessee s grounds relating to disallowance in all these years. Respectfully following them the department cannot be justified in adopting a flip flop attitude and repeatedly go on disallowing the same type of expenditure year after year. vii. The Hon ble Gujarat High Court in the case of Sayaji Iron and Eng. Co. (supra) is applicable to disallowance retained .....

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x provisions. 3.7 Considering the entirety of above observations we have no hesitation in deleting the disallowances/additions retained by Ld. CIT(A) out of various expenses mentioned in respective grounds for AY 2005-06, 2006-07 & 2008-09 which are deleted. Grounds raised by assesse in this behalf in all these years are allowed. 4.1 Adverting to assessee s remaining grounds about following disallowance of Marketing and Survey expenses in all these Years: AY Disallowed Exp Out of total Exps. .....

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meet with the local competition particularly from another newspaper DainikBhaskar in the state of Rajasthan and for other commercial reasons, it was felt as a business necessity to undertake aggressive marketing and survey operations on regular basis. Accordingly service of various independent agencies was hired for conducting door to door survey about news quality, suggestions for improvement of coverage and compilation of information from the readers about preference between the competing news .....

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n activities are needed to increase the sales and readership of the newspaper. 4. By such door to door survey, the company has information about the readers their liking of contents and subjects which they preferred in a newspaper. 4.3 A bare perusal of respective Schedules pertaining to - Sales & Advertisement receipts forming part of the audit report reflect that the revenue has increased from year to year. Assessee s turnover progressively increased from about ₹ 124.15 crores in AY .....

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mely: i. M/s Perfect N Marketing, Jaipur ii. M/s Aneu Marketing Jaipur iii. M/s A One Marketing They rendered the requisite services by conducting door to door surveys in different areas on different days through their self hired team of surveyors and collected following type of information:- 1. Number of houses where the newspaper published by the assessee company is read. 2. Number of houses where any other newspaper is read. 3. Number of houses where the newspapers published by the assessee c .....

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rs. 4.4 The details of services rendered by these independent parties and their survey reports were filed during the course of assessment proceedings vide letter dated 31.12.2007 for AY 2005-06 copy thereof is filed with PB 62-74 and subsequently for AYs 2006-07 and 08-09 with an abstract based on such survey reports. Ld. AO has not given any adverse comment on the information contained therein 4.5 The payments made to these agencies are duly vouched and supported with necessary evidence like in .....

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been made part of the assessment order. Ld. AO relied on some alleged inspection report for which no opportunity of cross examination of the persons denying the existence of agencies was allowed. Consequently the adverse inference drawn in this behalf is in violation of fundamental principles of natural justice. Besides ld. AO failed to appreciate the following crucial facts: 1) Assessee produced the proprietor of Perfect N Marketing Shri Hanuman Singh before the AO on 27.12.2007 i.e. the next d .....

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opted not to record his statements, the allegation of ld. AO is not tenable. 2) Copy of returns of income filed by these agencies were submitted with AO vide letter dated 27.12.2007 PB 13-18 wherein PAN and other relevant details were duly mentioned. 3) Abstracts of monthly survey reports were submitted before the AO vide letter dated 31.12.2007 PB 62-74. 4) Opportunity to cross examine the persons whose statements were recorded by the inspector was asked for which was never provided despite ass .....

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at these address and not the parties who are claimed to have rendered services. iii. The daily survey reports were prepared in hurry by some layman or temporary employees of the assessee. iv. The bank inquiries revealed that amounts paid by assessee were by transfer entries and the amounts were withdrawn on the same day leaving balance a small amount. This all indicated that the alleged marketing and survey expenses were accommodation entries. v. Shri Bhanwarlal s statement was recorded by Insp .....

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Hanuman Singh Prop. M/s Perfect Marketing ₹ 22,632/- and Smt. Shakuntala Singh prop. A One Marketing also paid small tax. 4.7 Ld. Counsel for the assessee contends that the monthly survey reports provided by these agencies were duly submitted before the Ld. CIT(A) on 25.11.2008 to be admitted as additional evidences. A remand report was called, following documents were submitted before the Ld. AO along with the letter dated 17.11.2009 & 08.03.2011in the remand proceedings, which are p .....

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etor at the same address to corroborate the existence of the concern. e) Statements of two independent residents near premise No. 119/504, Mansarovar confirming concerns working and existence 4.8 In remand proceedings, proprietor s of these concerns appeared before ld. AO and their statements were recorded which is admitted in the remand report. Ld. AO changed stand and doubted the rendering of service on vague reason that they were persons of small means. A detailed rejoinder on the remand repo .....

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transactions in question were wholly and exclusively in the normal course of business; requisite TDS on these payments was made and deposited in govt. treasury. The expenditure of similar nature was also claimed in the preceding assessment years which have been allowed as business expenditure by orders passed u/s 143(3). Facts and circumstances in the preceding years are identical to the years under appeal, on principal of consistency the AO should not be flip flop from the position which is ac .....

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s behalf was disclosed and assessed by their respective returns. Assessments for A.Y. 2006-07 were completed u/s 143(3), without making any adverse remarks on these receipts, copies of their orders were submitted before Ld. CIT(A). Since department itself has accepted their identity, genuineness of existence and accepted their income for rendering these services, there was no question of disbelieving their services in assessee s hands. 4.11 It is held in the case of Indian Molasses Co. P. Ltd. v .....

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case of the assessee fulfills all the conditions laid down therefore the expenditure as claimed is allowable in terms of the provisions of section 37(1) of the Income Tax Act, 1961. It is settled law that no addition can be made on the basis of surmises, suspicion and conjectures. Reliance for this proposition is placed on 37 ITR 271 (SC) Uma Charan Shaw & Bros. Co.Vs. CIT. It has been further held in the following cases that suspicion howsoever strong cannot take the place of proof: 1. 37 .....

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pediency. In this regard further reliance is placed on the following decisions. Empire Jute Co. Ltd. Vs. CIT 124 ITR 1(SC) S.A. Builders Vs. CIT 158 Taxman 74 (SC) 4.13 In the circumstances it is pleaded that the assessee having discharged its onus to prove the rendering of services and incurring of expenditure during the course of its business the entire expenditure in respect of Marketing & Survey may kindly be deleted and entire expenditure may be allowed u/s 37(1). 4.14 Ld. Sr. DR suppor .....

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iture. 4.15 We have heard the rival contentions and peruse the material available on record. As the facts emerge the record and evidence in this behalf has surfaced in piece meal and from time to time as the assessee attempted to fill in the gaps about inferences drawn by the authorities from time to time. Consequently a cohesive verification of material appears to be not made. Assessee has produced the income tax record of the survey agencies which in support of its version; there exist no reas .....

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e afresh after considering the entire evidence and giving the assessee an adequate opportunity of being heard. Revenue Appeals for AYs 2006-07 and 2008-09 5.1 Ld. CIT(DR) relied on the order of ld. AO and contends that: i) In AY 2006-07 since the expenditure for personal use of vehicles was disallowed, consequent depreciation has been rightly disallowed by AO. ii)The activity carried out by assessee i.e. printing and publishing newspaper does not amount to manufacture or production within the me .....

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production of any article or thing, a further sum equal to twenty percent (20%) of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : Provided that no deduction shall be allowed in respect of - A) any machinery or plant which, before installation by the assessee was used either within or outside India by any other person, or B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature .....

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be referred to which reads as under: (29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure; 5.4 A perusal of the above .....

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ructure. 5.5 Printing and publishing of newspaper and periodicals which are the final products emanating out of the activity carried on by the assessee. Newspapers and periodicals are clearly identifiable as a product , which is distinct from its ingredients i.e. paper and ink. Since a new commercial product is brought into existence, therefore, the process involved is production which amounts to manufacture as described in section 2(29BA) of the Income Tax Act, 1961. 5.6 The following activity .....

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on of that object in as much as the blank and raw roll of paper is converted into newspaper which is new/distinct object as compared to the raw paper. 3. Further, it is apparent and ostensible that a newspaper has a different name, identity, character and use as compared to the raw paper and ink and other chemicals etc. utilized. Reliance is placed on the judgment of Hon ble Delhi High Court in the case of CIT vs. Delhi Press Patra Prakashan Ltd. reported in (2013) 355 ITR 14 (Delhi). On a simil .....

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r underwent the process of printing, the character of blank paper changed completely and the content of the printed material became the identity of a printed paper. Blank paper and the printed article are not one and the same and it cannot be said that printing carried out in an industrial undertaking would not amount to manufacturing. A printed magazine or periodical even if it is not bound has a definite identity and its usage is completely different from the blank paper on which it is printed .....

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units did manufacture or produce an article or thing . Thus, even if the printed material, as produced by the second and third units, was taken as an intermediate product which required to be further bound for making it marketable, the word produce , occurring in section 80-I(2)(iii), would include it within its ambit. In the abovementioned case, it has clearly been held that printing amounts to manufacture / production and therefore it was held that the assessee was eligible for deduction u/s .....

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f the I.T. Act,1961 was firstly introduced by Finance Act 1980 w.e.f. 01-04-1981 which was omitted by taxation law (amendment & miscellaneous provisions) act 1986 w.e.f. 01-01-1988 but again reintroduced by Finance Act 2002 w.e.f. 01.04.2003 which was amended by finance Act 2004 w.e.f. 01-04-2005 and finally amended by finance Act 2005 w.e.f. 01-04-2006, it is submitted that the additional depreciation is available only on new plant or machinery. In these years assessee purchased new machine .....

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any manufacturing activities or production of any article or thing. The AO held that printing on paper did not tantamount to any manufacturing activity as no new commodity had come into existence. The AO was aggrieved with the fact that no such additional depreciation was claimed in the earlier years though it was admissible. Therefore the AO disallowed the claim of additional depreciation of ₹ 35,31,480/- On careful consideration of facts, I am inclined to accept the arguments of the appe .....

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re no such claim of additional depreciation was made. Since the word production was not defined in the Income Tax Act therefore it was imperative to construe its general meaning. The word production refers to applying human endeavor on some existing raw material. Therefore ever manufacture could be characterized as production, but every production did not amount to manufacture. The Hon ble Rajasthan High court in the cases of ITO Vs Arihant Tiles & Marble Pvt. Ltd. (295 ITR 148) has held tha .....

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