9911796707
TMI Blog2019 (2) TMI 1531X X X X Extracts X X X X X X X X Extracts X X X X ..... CLOSING WORK-IN-PROGRESS Rs. 1,93,41,623/-: 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the learned Assessing Officer for a sum of Rs. 1,93,41,623/- on account of alleged "Closing Work-in-Progress". 1.2 The learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the learned Assessing Officer for advance received from clients/ customers Rs. 37,12,744/-. The appellant prays that the additions made by the learned Assessing Officer may kindly be deleted and the total income of the appellant be reduced accordingly. II.DISALLOWANCE OF MARKETING AND SALES PROMOTION EXPENSES Rs. 10,47,381/-: On the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amed by Ld. Deputy Commissioner of Income Tax-Circle-4(1)(2), Mumbai [AO] in scrutiny assessment u/s 143(3) on 12/03/2015 wherein the income of the assessee was determined at Rs. 286.08 Lacs after certain additions / disallowances as against returned income of Rs. 55.32 lakhs e-filed by the assessee on 27/09/2012. The assessee being resident corporate entity stated to be engaged in the business of animations, visual effects & Computer Software Development. 2.1 As evident from grounds of appeal, the following additions / disallowances are the subject matter of present appeal before us: - No. Nature of addition Amount (Rs.) Extent of disallowance 1. Work in progress [WIP] Rs.1,93,41,623/- Ad hoc 20% 2. Marketing and sales pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments as cited before us. 4.2 Upon due consideration, we find that lower authorities fell in error by not considering the fact that the assessee was engaged in service industry. The material on record suggest that the assessee was providing high end visual effects VFX & Animation services and therefore, salary expenditure was a period cost for the assessee and therefore, there could not no occasion for the assessee to work out the work-in-progress in the financial statements. The assessee was consistently following completed service contract method in terms of Accounting Standard-9 to recognize the revenue in the books of accounts. Nothing on record suggest that there was any change in the consistent method of accounting while drawing up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... citizen & ADLD LLC respectively for providing sales and marketing services to assessee outside India. It has been submitted that initially the payment was made to Mr. Alan Dinoble who subsequently floated a company namely ADLD LLC and both these payments represent minimum payment pursuant to consultancy agreements entered into by the assessee with them. It was further submitted that consultancy agreement was aimed at widening the sales base of the assessee though overseas new clients and orders. In terms of the agreement, the consultant was to be paid @5% of work generated by them subject to a minimum payment of USD 10000 per month irrespective of sales orders procured. The documents on record demonstrate that it is undisputed fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
