TMI Blog2018 (10) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... re justified in treating the said expenditure as unexplained expenditure and deemed income of the assessee. The ground of the appeal of the assessee is accordingly dismissed. Addition of foreign travel expenses - Held that:- We find that except standard explanation that participation of doctors in the International conferences helped in understanding the products, no documentary evidence which could specifically establish that expenses on hotel and registration of doctors was related to the business of the assessee are filed. The counsel of the assessee was asked by the bench to submit the detail of the conference in which the doctors participated and asked to explain, whether the products sold by the assessee were subject matter of those conferences, but no such evidences have been produced before us by the counsel of the assessee. The filing of copy of bills of expenditure on hotel or registration in itself cannot establish whether the expenditure has been incurred wholly and exclusively for the purpose of business. In view of the aforesaid discussion, we are of the opinion that action of the lower authorities in disallowing the expenses in dispute is justified in terms of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , add or modify any Grounds of Appeal before its disposal. 2. Briefly stated facts of the case are that the assessee company was engaged in importing medical equipments and materials from its associated company located at Berlin (Germany) and Bulach. In the period relevant to the year under consideration, a survey under section 133A of the Income-tax Act, 1961 (in short the Act ) was conducted on 06/12/2008 and during which certain discrepancy of stock of programmers for pacemakers was noticed. For the year under consideration, the assessee filed return of income on 29/09/2009, declaring total income of ₹ 4,85,45,268/-. The case was selected for scrutiny, and notice under section 143(2) of the Act was issued and complied with. In the scrutiny assessment completed under section 143(3) of the Act on 18/03/2013, the Assessing Officer made certain additions/disallowances and assessed the total income at ₹ 6,14,68,390/-. The assessee challenged the additions/disallowances before the Ld. CIT(A), however, could not succeed. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Both the parties were heard at length o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 05/03/2013 from its Associated Enterprises confirming that said items of the stock were provided free of cost (FOC) basis to the assessee and therefore value of the said items was taken at nil. In view of the failure of the assessee in submitting the documentary evidence asked for, he treated the difference in value of the stock amounting to ₹ 54,36,026/- as value short declared by the assessee. The detailed of working of ₹ 54,36,026/- made by the Assessing Officer is reproduced as under: Value of 40EA items as per Table-A Rs.22,59,840/- Less: Value declared by the assessee ₹ 6,27,200/- Value short declared Rs.16,32,640/- (X) The value of stock item 128113-PMS 1000 Plus INCL, ACC is short declared by Rs.38,03,386/- The Value of 22EA available with distributor as per Table-B Rs.23,90,700/- The value of remaining 13EA available with the assessee But value taken at Nil (Avg. value*x13) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Associated Enterprises, it was clearly mentioned that no payment was required in respect of those items. The Ld. counsel also referred to pages 47 to 50 of the paperbook, which is a copy of the confirmation issued by the Associated Enterprises stating that those items were supplied free of cost to the assessee. Further, the Ld. counsel relied on the submissions made before the Ld. CIT(A). According to him, when no purchase cost was recorded in books of account in respect of those items, the assessee was not required to take value of those items in the closing stock. 5.6 The Ld. DR, on the other hand, relied on the order of the lower authorities and submitted that values of the items are clearly recorded in the bills of entries issued by the Customs Department. In said bill of entry, invoice number, date and invoice values are clearly recorded. He also submitted that copy of the proforma invoice or the commercial invoice in respect of the items in dispute submitted before the Ld. CIT(A) are documents prepared separately and not submitted to the custom authorities. According to him, the Custom Authorities has duly valued those items and levied the custom duty, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, purchase cost corresponding to those items was not charged to books of accounts, is concerned, we do not find anything wrong in principle. If no cost has been incurred in respect of the purchases, then, corresponding value of the closing stock has to be taken according to the method of accounting regularly followed by the assessee, which may be cost or market value, whichever is less. In those circumstances, in principle, the contention of the Ld. counsel is not incorrect. 5.9 But, we find from the various pages of the paper book from page No. 2 to 26, that that custom duty has been paid in respect of all the programmers imported by the assessee and this custom duty paid has not been treated as value of the programmer for the purpose of valuation of closing stock. This practice of the assessee is against the principles of valuation of closing stock. Without prejudice to the authenticity of the claim of free of cost supply, the assessee was at least required to declare the custom duty paid in respect of those items as the value of the closing stock of those items, rather than showing the same at Nil. 5.10 The contention of the Revenue, on the other hand, is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unexplained expenditure and deemed income of the assessee. The ground of the appeal of the assessee is accordingly dismissed. 6. The ground No. 3 of the appeal relates to addition of ₹ 1,87,788/- out of foreign travel expenses. The facts qua the issue in dispute are that the Assessing Officer observed total expenses of ₹ 75,18,814/- under the head travelling and conveyance expenses and out of which expenses of ₹ 94,149/- was found to be sponsored by the assessee towards Hotel expenses of foreign tour of Dr. Mohan Nair to Rome and ₹ 93,639/- sponsored towards registration and hotel expenses of Dr. Ashwini Mehta for conference at Milan. The assessee was asked to explain whether the expenses incurred for the purpose of the business of the assessee and submit documentary evidence in support thereof. Before the Assessing Officer, the assessee submitted that expenses were not incurred in respect of the related persons. According to the assessee, company s products can be sold on the recommendation of the medical professional and the medical professional recommend when they are confident about the product. At the education programs, the medical professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whether the products sold by the assessee were subject matter of those conferences, but no such evidences have been produced before us by the counsel of the assessee. The filing of copy of bills of expenditure on hotel or registration in itself cannot establish whether the expenditure has been incurred wholly and exclusively for the purpose of business. In view of the aforesaid discussion, we are of the opinion that action of the lower authorities in disallowing the expenses in dispute is justified in terms of section 37(1) of the Act. The ground No. 3 of the appeal is accordingly dismissed. 7. The ground No. 4 of the appeal relates to addition of ₹ 72,99, 303/-on account of disallowance of 4/5th of advertising and expenses. The facts qua the issue in dispute are that the Assessing Officer observed advertisement and sales promotion expenses of ₹ 91,24,129/- in the profit and loss account. According to the Assessing Officer, the year under consideration being initial year of the company s business, the large sum of expenses incurred on advertisement and sales promotion should be capitalized. The Assessing Officer relied on the decision of the Hon ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses is heavy one or light one. Where ever law wanted any expenditure to be considered as deferred, the same in provided in I.T. Act e.g 35-D for preliminary expenses. 8. The Assessing Officer, however, relying on the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. Vs CIT. 225 ITR 820, wherein Hon'hie Supreme Court has held that considering the facts of a particular case, the revenue expenditure also can be spread over the years, allowed only 20% of the assessee s claim and disallowed the balance amount of ₹ 21,19,419/- treating the same being in capital field. 9. The Id. CIT(A) allowed the assessee s appeal, inter alia, observing that there is no concept of deferred revenue expenditure. He observed that the genuineness of the expenditure has no-where being disputed by A.O. He relied on following decisions: CIT Vs Citi Financial Consumer Fin. Ltd. (201 1) 335 ITR 29 (Del) Amar Raja Batteries Ltd. Vs ACIT (2004) 91 ITD 280 (Hyd.) JCIT Vs Modi Olivetti Ltd. (2005) 4 SOT 859 (Delhi) ACIT Vs Medicamen Biotech Ltd. (2005) 1 SOT 347 (Delhi) Hero Honda Motors Ltd. Vs JCIT (2005) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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