TMI Blog2009 (12) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... le maintenance expenses even though the assessee has failed to produce any evidence to the effect that these expenses were incurred wholly for the purpose of business. 3. On the facts and in the circumstances of the case, the ld.CIT(A) has erred on facts and in law in deleting the addition of ₹ 11,097/- made by the Assessing Officer on account of business promotion expenses even though no evidence or supporting documents were produced to prove that the expenses were incurred for the purpose of business. 4. On the facts and in the circumstances of the case, the ld.CIT(A) has erred on facts and in law in deleting the addition of ₹ 2,73,680/- made by the Assessing Officer on account of rebate and discount even though the genuineness of these expenses has not been established. 2. Rival contentions have been heard and record perused. Brief facts of the case are that the assessee company is engaged in the distribution of cable TV signals to the cable operators in the area of Faridabad through cable wire on behalf of the Siti Cable Network Limited which raises the bills and the assessee acts as a collection agent and gets management charges from Siti Cable Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant regarding the management charges of ₹ 23,68,503/- arrived at the basis of total billing raised to the cable operators for ₹ 1,57,90,022/-, the detailed annexure of billing raised at management charges of which has been examined by me, the AO has not accepted the appellant s explanations regarding the takeover of pay channel as per clause No.2.4-2.2(ii), wherein the details of 50% pay channels transferred to Siti Cable Network Ltd. on the basis of the total billing of ₹ 1,57,90,022/- i.e. ₹ 78,95,011/- were also attached and which have been also examined by me. I have again examined all these documents as well as the monthwise details of operational expenses with respect to the agreement between Siti Cable Network Limited and the appellant company filed during the course of assessment proceedings vide letter dated 23.11.2006 and which has also now been submitted during the course of appellant proceedings i.e. distribution cum management agreement between Siti Cable Network Ltd., and the appellant company dated 27.05.2002 and the addendum to DCM agreement dated 03.04.2003 which have also been perused by me. I find that all the operational expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in the case of Director of Income-tax Intl. Taxation Circle (i), Delhi V. Bumi Hiway (M) SDN, BHD, (2008) 21 SOT 311 (Del). 11. As to the books of accounts and vouchers maintained, they therefore reflect a true picture of the accounts of the appellant company. Hence the business results declared by the appellant company need not have been interfered by the AO in estimating its profits by applying an arbitrary rate of GP of 50%. Merely because the profits are low compared to the earlier year is not a circumstance or material to justify an estimate in the circumstances and facts of the case, as held by the jurisdictional High Court in the case of Pandit Bros. Vs. CIT 26 ITR 156 (P H). Similarly, the books of account can be rejected under Section 145 only where either no method of account was employed or the method employed was such that it did not disclose the true profits, in view of the decision of the jurisdictional High Court in the case of CIT Vs. K.S.Bhatia 269 ITR 257 (P H). In the instant case, neither of the two above premises are applicable. Thus, the addition of ₹ 13,88,866/- both on facts and law is meritless and hence stands deleted. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges on receipts basis or realization basis instead of mercantile basis while no justification or basis to claim the operational expenses had been furnished. Therefore, he rejected the book results shown by the assessee company u/s 145 of the Income Tax Act, 1961. He calculated the GP of this year at ₹ 12,37,607/- while the GP shown by the appellant was ₹ 1,51,259/- (Rs.24,75,215/- - ₹ 26,26,475/-) and thus he worked out the difference at ₹ 13,88,866/- and added it to the income of the appellant company. The CIT(A) after considering each and every head of expenditure, recorded a detailed finding at para 9, 10 11 and observed that assessee has genuinely incurred the expenditure. No defect was found in the books of account with regard to claim of various expenditure on account of operational expenses, administrative expenses, selling expenses. Due reasons for increase in operational expenses, which was due to increase in operational income of the assessee from ₹ 6.13 lakhs in the last year to ₹ 24.75 lakhs during the year under consideration were given. The CIT(A) has also examined the month-wise details of operational expenses with resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sunderstanding of the nature of subscription charges as per the agreement entered by the appellant company with M/s Siti Cable Network Limited. These expenses as detailed as per schedule-N of the audited accounts have been duly examined by me vis- -vis the method embedded in clause No.2.4 of the addendum to DCM agreement dated 03.04.2003. It has been found that 50% distribution charges are paid to the distributors from the realization of the service charges from the bills raised which amount to ₹ 1,57,90,022/- on behlaf of Siti Cable Network Limited. However, during the year under consideration, certain credit notes were issued by the Siti Cable to the clients/customers against whom the billing was raised by the appellant company and these credit notes are exactly the rebate and discount expenditure being incurred for the appellant company which amount to ₹ 2,73,680/-. As everything is transparent in the account maintained in a separate heads of rebate and discount, as against that of the subscription charges, and since the AO has not pointed out any defect or deficiency in the rebate and discount account, no adverse inference can be drawn as to the genuineness of these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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