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2017 (5) TMI 118 - ITAT AHMEDABAD

2017 (5) TMI 118 - ITAT AHMEDABAD - TMI - Provision for foreign tour of sub-commission agent - disallowance - denial on the ground that it was a provision only, and not an ascertained liability - Held that: - The ld.CIT(A) theoretically allowed, but with a rider that in case provision is allowed to the assessee in Asstt.Year 2008-09, then the deduction granted in Asstt.Year 2009-10 on actual incurrence of the expenditure would be withdrawn. Since we have allowed the provision in the Asstt.Year 2 .....

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34D of the Act - granting of interest under section 244 of the Income Tax Act - Held that: - these are consequential in nature and hence, rejected. - Appeal allowed - decided partly in favor of assessee. - ITA No.2010/Ahd/2012, ITA No.354/Ahd/2013 - Dated:- 1-5-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER For The Assessee : Shri M.K. Patel, AR For The Revenue : Shri K. Madhusudan, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: Present two appeals are di .....

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land tour expenses in Asstt.Year 2009-10 respectively. The facts on this issue are common on all vital points, therefore, for the facility we take up facts from the Asstt.Year 2008-09. 4. The assessee company derives income from business of dealers and commission agent of engineering products and servicing activities. It has filed its return of income electronically on 29.8.2008 and 29.9.2009 declaring total income at ₹ 14,56,66,218/- and ₹ 17,63,31,404/- in the Asstt.year 2008-09 an .....

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to the assessee it has provided a scheme vide which if its sub-commission agent achieve a particular target then sub-agent will be entitled for a foreign tour provided by the assessee. For the purpose of providing such tour, the assessee has made provision, because these sub-agents have achieved their target. The ld.AO disallowed the claim of the assessee on the ground that it was a provision only, and not an ascertained liability. 5. Appeal to the ld.CIT(A) did not bring any relief to the asse .....

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r the assessee. 7. We have duly considered rival contentions and gone through the record carefully. We find that in Asstt.Year 2007-08, the assessee has made a provision of ₹ 24,88,000/- relating to Egypt tour. This was disallowed by the AO and the disallowance was confirmed by the ld.CIT(A). The Tribunal has deleted the disallowance. The discussion made by the Tribunal reads as under: ITA No. 1473/Ahd/2011 (Assessee s appeal) 9. Concised ground nos.1 & 2 of the assessee s appeal read .....

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clients, sub-commission agents and Engineers etc. As per such Scheme, the persons who achieved the target were entitled to Egypt tour. That on the basis of performance, during the accounting year relevant to assessment year under consideration tour was arranged next year. That the Assessing Officer disallowed the provision made towards the tour expenses on the only ground that the liability has not been accrued because the tour was actually arranged in the next year. He stated that the tour was .....

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sideration. He, therefore, submitted that when the genuineness of expenditure and the fact that the expenditure was incurred for the purpose of business was not disputed then necessary direction be given to Assessing Officer to allow the expenses either for the year under consideration or in the next year. Ld. DR, on the other hand, relied upon the order of authorities below and he stated that neither the liability had accrued during the year nor the expenditure was actually incurred. The assess .....

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promotion branch wise. On perusal of sales promotion of V.V. Nagar, it was found that it has gone to ₹ 26,90,730/- compared to last year's figure of ₹ 1,86,961. It was further explained that the assessee has arranged one tour to Egypt for its valued clients, sub commission agents, and engineers and due to which the sale promotion expenses of all the branches taken together has increased from 3.08 lac to 28.23 lacs. 3.3 The assessee has also furnished the photocopy of journal vou .....

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it Corporate Tours and Travels Pvt. Ltd. for Egypt tour (6 days and 7 nights) . The invoice of Orbit Corporate dated 22.5.2007 reveals that it was for air fare taxes, visa charges, arrangement charges, claim charges for 68 persons. Thus the invoice, the payment, the actual trip and everything took place in the subsequent year. 3.5 On perusal of the aforesaid facts, it is found the amount of ₹ 24,88,000/- represents merely a provision as on 31.3.2007. The tour was arranged in the subsequent .....

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ess the Trip Organiser gives the estimate. So, the amount estimated and provided was nothing but merely a contingent liability and the same cannot be allowed. Penalty proceeding under section 271(l)(c) is initiated separately as the assessee has furnished inaccurate particulars of its income by claiming a liability which has not accrued and crystallized during the year. From the above, it is evident that the Assessing Officer has not doubted that tour was to be arranged by assessee as a part of .....

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ight to go on tour as per the Scheme of assessee. Therefore, once the assessee s clients, commission agents and Engineers fulfill the target given to them, the assessee incurs the liability to take them on tour to Egypt as per the Scheme. Therefore, the provision for Egypt tour is to be allowed in the year under consideration. Now the only question is whether the provision made by the assessee is reasonable or not. From the details recorded by the Assessing Officer in para 3.3 and 3.4 of the ord .....

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allowed and consequentially ground no.2 of assessee s appeal has become infructuous. Same is rejected. 7. There is no disparity on facts. In the Asstt.Year 2008-09, the assessee has made a provision of ₹ 23,09,5000/-, but in actual it had incurred a sum of ₹ 47,77,500/- that is far more than the provision. This provision made by the assessee is based on the past experience and in the last three years, it was not required to write back the provision, on account of its non-user. Consi .....

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ed by the ld.CIT(A). On appeal, the Tribunal has allowed this disallowance. This amount was allowed in Asstt.Year 2007-08 itself. No question of its allowance again in Asstt.Year 2008-09 arose. Keeping in view this aspect, the ld.counsel for the assessee did not press this ground of appeal. Hence, it is rejected. 9. Next issue agitated in Asstt.Year 2008-09 is that the ld.AO did not grant credit of TDS amounting to ₹ 20,34,335/-. When this aspect brought to the notice of the ld.CIT(A), the .....

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f the AO. The AO shall verify the TDS details and thereafter decide whether the assessee has credit or not, and if it has credit, then same be given to the assessee. No other issue was pressed in the Asstt.Year 2008-09. Accordingly, the appeal of the assessee for A.Y.2008-09 is partly allowed. 11. In the Asstt.year 2009-10, the next issue agitated by the assessee is that the ld.CIT(A) has allowed a sum of ₹ 23,09,500/- on payment basis. 12. The facts regarding this issue are that in the as .....

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