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M/s Toshbro Medicals Private Limited Versus DCIT 1 (3) , Mumbai

Disallowance of payment made by the appellant to Global Vipassana Foundation - commercial expediency - in the nature of donation or expenditure - TDS liability - Held that:- We have observed that the assessee company has made payment of ₹ 25 lacs to Global Vipassana Foundation during the previous year relevant to the assessment year and the assessee company has claimed it as business promotion expenses (Rs. 20 lacs) and staff welfare expenses (Rs. 5 lacs) in its books of accounts and also .....

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The said receipt is also not produced before us. The assessee company is directed to produce the receipt and all other relevant documents in connection with the payment of ₹ 25 lacs to Global Vipassana Foundation to substantiate its claim before the learned CIT(A) for examination and verification by the authorities below as per the mandate of the Act and the Rules made thereof. - Matter remanded back. - I.T.A. No. 7064/Mum/2012 - Dated:- 13-5-2016 - Shri Saktijit Dey, Judicial Member And .....

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er dated 20-12-2011 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961(Hereinafter called the Act ). 2. The grounds raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) reads as under:- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in sustaining disallowance of ₹ 25,00,000 (b .....

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ting the correct interpretation of the agreement between the appellant and Global Vipassana Foundation, which makes it clear that the payment was made on account of commercial expediency. 3. The learned Commissioner of Income-tax (Appeals) erred even in his alternative reasoning that the payment was a capital expenditure and that no TDS had been made. He failed to appreciate that the payment was wholly of revenue character and allowable u/s 37 of the Income Tax Act. Even if the payment was assum .....

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me-tax (Appeals) are wrong, insufficient and contrary to law. 3. The brief facts of the case are that the assessee company is engaged in trading of medical equipments, supply of spares and accessories, providing services and acting as commission agents , having income under the head Income from Business . 4. During the course of the assessment proceedings u/s 143(3) r.w.s. 143(2) of the Act, the A.O. observed from the perusal of the P&L account that an amount of ₹ 25 lacs have been deb .....

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ween the assessee company and Global Vipassana Foundation was also attached. The assessee company submitted that Global Vipassana Foundation has tremendous following in the world and its Global Pagoda Mark is world famous. The assessee company obtained the permission to use this famous mark to reach its customers. The payment has been made for the use of this mark and there is no capital element in it. The assessee company submitted that the amount of ₹ 25 lacs has been paid keeping in vie .....

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for its employees and Vipasanna is a very powerful and effective method of meditation which has transformed the lives of numerous people. The assessee company submitted that the money has been paid to ensure access to various Vipassana Courses for its employees , which are an important management/refresher courses. Thus, the assessee company submitted that the expenses have been incurred for business expediency and are allowable as a business expenditure. It was submitted that there is no capit .....

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ow the valuation of ₹ 20 lacs was arrived at and how it can be quantified vis-à-vis the future potential of the expansion of the business of the assessee company . The AO observed that no such justification has been provided by the assessee company as to how the mark of Global Pagoda is useful for enhancing assessee company s business and there is no logo placed on the assessee company s letter heads or in its business correspondence. The A.O. observed that ₹ 5 lacs has been p .....

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61% of the children of the school established by the Trust, hence, the facts are entirely different in the instant case. The assessee company has failed to explain the business or commercial expediency of the expenditure claimed and no documentary evidences were provided by the assessee company. Thus , the claim of the assessee company u/s 37(1) of the Act was denied by the A.O. and in support the AO relied upon the decisions of Hon ble Bombay High Court in the cases of Goodlass Nerolac Paints .....

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t will get the benefit of workshop/courses for its employees for professional an intellectual development. Thus, this is a matter of commercial expediency hence the payments have been made. The assessee company submitted that it has the right to use the famous Global Pagoda Mark and all rights, benefit and interest in relation thereto. The assessee company was entitled to use the said mark on its products for its existing business. The assessee company submitted that the Global Vipassana Foundat .....

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vant previous year which was for right to use for a period of 10 years and for access for the employees and there was no condition that the mark had necessarily to be actually used . The assessee company submitted that relief may be allowed u/s 80G of the Act. The assessee company relied upon the decision of the Hon ble Supreme Court in the case of Sassoon J. David & Company Private Limited v. CIT, (1979)118 ITR 261(SC), in the case of CIT v. Dhanrajgirji, (!973)91 ITR 544(SC), ITAT decision .....

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ion The CIT(A) held that the assessee company has in form shown it as payment for the use of Global Vipassana Foundation s mark in the assessee company s business records, but in substance the payment is donation. The assessee company was asked by the learned CIT(A) to produce the receipts issued by Global Vipassana Foundation but the assessee company did not produced the receipt for making payment to Global Vipassana Foundation before the learned CIT(A). The conclusion of the learned CIT(A) is .....

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mpany as per provisions of the Act and hence it cannot be allowed as deduction as per section 40(a)(ia) of the Act. The learned CIT(A) concluded that this is a donation paid by the Directors for their spiritual satisfaction and not at all related to the business carried on by the assessee company . The additions made by the AO were sustained by the learned CIT(A) vide appellate orders dated 31.10.2012. 7. Aggrieved by the appellate order dated 31.10.2012 of the learned CIT(A), the assessee compa .....

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o. 447/Mum/2013 for the assessment year 2009-10 , the Mumbai Tribunal vide its orders dated 16-10-2015 , has held that this is a donation of ₹ 50 lacs to Global Vipassana Foundation which has been rightly allowed u/s 80G of the Act by the CIT(A) and the Tribunal refused to interfere with the orders of the CIT(A) in the case of sister concern of the assessee company, M/s. Chemito Technologies Private Limited(supra). The learned CIT(A) in the instant case of the assessee treated the amount a .....

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duce the receipt s issued by Global Vippassana Foundation. 10. We have considered the rival contentions and also perused the material available on record including the relied upon case laws. We have observed that the assessee company has made payment of ₹ 25 lacs to Global Vipassana Foundation during the previous year relevant to the assessment year and the assessee company has claimed it as business promotion expenses (Rs. 20 lacs) and staff welfare expenses (Rs. 5 lacs) in its books of a .....

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me. The said receipt is also not produced before us. The assessee company is directed to produce the receipt and all other relevant documents in connection with the payment of ₹ 25 lacs to Global Vipassana Foundation to substantiate its claim before the learned CIT(A) for examination and verification by the authorities below as per the mandate of the Act and the Rules made thereof. Accordingly , we set aside and restore this issue to the file of the learned CIT(A) for the purpose of de-nov .....

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llowed by the learned CIT(A) on merits in accordance with the law. The learned CIT(A) while deciding the appeal in set aside de-novo proceedings shall keep in view the decision of the co-ordinate benches of the Tribunal , Mumbai in the case of Chemito Technologies P. Ltd. (supra) whereby the Mumbai Tribunal in ITA no. 447/Mum/2013 for the assessment year 2009- 10 vide orders dated 16.10.2015 has given the following findings:- Keeping in view of the arguments advanced by the learned representativ .....

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