TMI Blog2017 (11) TMI 1545X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee Ad-hoc disallowance of business promotion expenses - non rejection of books of accounts - Held that:- It is on record that assessee has made all the compliance from time to time. Purchases are fully vouched and accounts are not rejected. It is also a fact that no single item of expense is identified by AO which he could have stated as not incurred for business purposes. It is also borne out from order that such expenses are accepted in past when even % of expenses on sale was more in Ay 06-07. Sales have increased substantially. AR has relied on cases Ganpati Enterprises Ltd. (2013 (12) TMI 1097 - ITAT DELHI) and NATIONAL INDUSTRIAL CORP. LTD. Vs CIT [2002 (8) TMI 93 - DELHI High Court] in support of proposition that without reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to appreciate that material on record and related law on the issue, hence order is arbitrary. 4. That learned CIT (A) erred in sustaining the ad-hoc disallowance of ₹ 2,00,000/- out of business promotion expenses without appreciating that AO had accepted the book of accounts and had not found a single instance of exp. not related to business or unsupported or bogus/defective and in whole disregard of previous history. 5. That, in addition to above learned CIT (A) has wrongly observed that assessee could not conclusively reconcile distribution/purchase of gold/silver coins while Ld. AO had fully examined such details. 6. That learned CIT (A) erred in holding that replacement of compressor of cooling plant is a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dividend is only credited to UTI Liquid fund and small dividend is e-transfer with advise to assessee and claimed that AO has also not found any expenditure relating to dividend after examining the accounts in detail. He also contended that ld. AO has not recorded any satisfaction about incorrect claim of assessee or about incurrence of expenditure against dividend income etc. 7. The ld. CIT(A) found, assertion of ld. AO that reply of assessee is considered which is incorrect as assessee is regularly investing in UTI liquid funds and if the investment is like FDR than intt. On same is taxable, as sufficient to invoke s.14A and held that allegation of assessee about not recording satisfaction or not finding incurrence of any actual expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 3-4. Besides, the authorities below have not indicated any specific amount/item which is considered as related to above income. Ld. CIT(A) misdirected himself in stating about the decisions for investment that too on a probabilistic view but not for exempt income more so when funds etc. itself provided sufficient services as explained by assessee before AO. Investments are admittedly out of own funds for which no addition is made. Ld. AR also took us to the order for AY 2011-12 of assessee with identical facts on the issue which is on pages 15 to 19 of paper book where ld. AO has recorded in para 4 that, . It is evident that there is no expenditure which is directly attributable to exempt income (dividend). However, it cannot be rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment decision and so expenditure is embedded in indirect expenses( from para 36) and so s.14A invoked. Hon ble court after relying on Godrej Boyce Mfg. Co. Ltd. 394 ITR 449(SC) held that AO failed to record proper satisfaction. In the case of Taikisha Engineering, hon ble court has relied on hon ble Bombay HC decision in above case of Godrej reported in 328 ITR 81 for the proposition that that satisfaction has to be recorded with respect to accounts in terms of ss. (2)/(3) of s. 14A and the provisions does not ipso facto enable AO to apply method prescribed in rules. This satisfaction must be on an objective basis having regard to claim of assessee. Rule 8 D(1) itself start with the words, where the assessing officer, having regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, it was explained to be for various itemse specially silver/gold coins given under incentive scheme. Though the ld. AO found claim correct in principle to boost sale but held that it cannot be said they are fully for business purposes and disallowed ad-hoc amount of ₹ 2 lakhs. The ld. CIT(A) upheld the addition by observing that that only few instances of distribution of coins given so it is not clear how many were actually distributed in scheme. 17. Ld. AR placed on record ledger a/c of sales promotion expenses, example of scheme, example of receipts of coins by parties from pages 5-11 of paper book and relied submissions made before authorities below. 18. We have heard the rival submissions and perused the records. It is on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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