TMI Blog2018 (5) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred expenses on advertisement, gift, coupons, simple expenses and export expenses. The Assessing Officer disallowed the 20% on the basis of his discretion. The Ld. CIT(A) confirmed the disallowance without specifying any reason. Moreover, the lower authorities have not identified, if the payments made to related party is unreasonable, we have seen that advertisement and publicity is only 4.30% of the sales. In absence of any specific reason for disallowance @ 20% of the expenses, the adhoc disallowance is not sustainable. - Decided in favour of assessee Disallowance of 20% of share of common marketing expenses - Held that:- No period of validity of agreement is mentioned in this agreement as well. We have noted that the lower authority has not disputed the expenses incurred in relation to the agreement, only the validity of agreement was disputed. The lower authority has not brought any material on record that payment incurred on common marketing expenses is in-genuine or unreasonable. Considering the fact that neither any adverse material was brought on record nor any specific reason was mentioned before disallowing 20% only of the common marketing expenses. We have seen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 by treating it as not incurred wholly and exclusively for the purpose of business. 4) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of INR 13,47,200 being 20% of the Commission and Discount of INR 57,74,000 and INR 9,62,000 respectively by treating it as not incurred wholly and exclusively for the purpose of business. 2. Brief facts of the case are that the Assessee-Company is engaged in the business of manufacturing Piston Rings and Semi-finished castings, filed its return of income for Assessment Year 2011-12 on 28.09.2011 declaring total income of ₹ 4,21,15,198/-. The assessment was completed on 27.02.2014 under section 143(3) of the Act. The Assessing Officer while passing the assessment order made the disallowance of 20% of professional fees, advertisement and publishing expenses, common marketing expenses and commission and discount. On appeal before the Ld. CIT(A), all the disallowances @ 20% made by Assessing Officer was confirmed. Thus, further aggrieved by the order of Ld. CIT(A), the assessee has filed the present appeal before us. 3. We have heard the Ld. Authorized Representative (AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Systems Ltd. and disallowed 20% of the expenditure out of total paid amount debited under the head Legal Professional Fee of ₹ 1,99,40,000/-. The Assessing Officer worked out the disallowance to ₹ 39,88,000/-. During the course of first appellate stage, the Ld. CIT(A) observed that Anand Automotive Systems Ltd. is sister concern of the assessee. The assessee has not justified the expenses incurred wholly and exclusively for the purpose of business. The assessee failed to give exact nature and type of services rendered by its group concern and concur that the discretion applied by Assessing Officer in making disallowance at 20% of expenditure. We have noted that assessee has placed on record the corporate services agreement entered by assesseecompany with Anand Automotive Systems Ltd., copies of which available at page No. 56 to 63 of Paper Book. Details of professional fees are provided at page no. 64 to 71 of Paper Book. The perusal of corporate services agreement reveals that the assessee and its sister concern i.e. Anand Automotive Systems Ltd. entered for providing Human Resources Development Services, marketing, finance, legal and taxation, operation review, corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. We have noted that the lower authority has not given any finding on the documentary evidences furnished before them. We have seen that the assessee has shown to have incurred expenses on advertisement, gift, coupons, simple expenses and export expenses. The Assessing Officer disallowed the 20% on the basis of his discretion. The Ld. CIT(A) confirmed the disallowance without specifying any reason. Moreover, the lower authorities have not identified, if the payments made to related party is unreasonable, we have seen that advertisement and publicity is only 4.30% of the sales. In absence of any specific reason for disallowance @ 20% of the expenses, the adhoc disallowance is not sustainable. Hence, the adhoc disallowance made by Assessing Officer and confirmed by Ld. CIT(A) is deleted. 6. Ground No.3 relates to disallowance of 20% of share of common marketing expenses. The Assessing Officer disallowed 20% of marketing expenses out of ₹ 1,79,30,000/- holding that no proper justification and supporting documentary evidence was produced. The second reason for disallowance by Assessing Officer was that earlier year s addition was pending before the Ld. CIT(A). Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of commission and discount holding that no proper justification and supporting documentary evidence was filed. The Ld. CIT(A) confirmed the disallowance with similar observation. Before us, the assessee has placed on record the ledger account of commission, turnover discount, details of cash discount to various parties. Copy of which is available at page no. 95 to 115 of Paper Book. The assessee has further certified/verified that all these documents were placed before the Assessing Officer/Ld.CIT(A). We have noted that the lower authority has not given any finding on these documentary evidences. The lower authority has not discarded these documentary evidences before making disallowance/confirming the same. We have further noted that the lower authority has not disputed the genuinenity of the payment. Considering the fact that neither any adverse material was brought on record or any specific reason was mentioned before disallowing 20% of commission and discount payments. The lower authorities have no identified that the payment made on account of commission and discount is unreasonable. In our view when the lower authority has neither disputed the genuinenity nor given an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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