TMI Blog2019 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... of advertisement expenditure - alleged that assessee is building a brand image of the parent company - revenue or capital in nature - - CIT-A deleted the addition - HELD THAT:- During the course of assessment proceedings, the case was referred to the TPO and the TPO framed order u/s 92CA(3) of the Act on 09.01.2014 and no adverse inference was drawn in respect of I.T. notification by the assessee during the year under consideration. This shows that the TPO was satisfied with the AMP expenses incurred by the assessee and did not make any adverse comment in so far as the issue of brand building is concerned. Thus public memory is very short and, therefore, the companies have to incur advertisement expenditure year after year to keep produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-filed on 27.09.2010 declaring loss of ₹ 7.83 crores. The return was selected for scrutiny assessment and, accordingly, statutory notices were issued and served upon the assessee. 4. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee has not commenced business during the first 7 months of the year under consideration. Accordingly, the Assessing Officer asked the assessee to reply as to why all the expenses for the first 7 months should not be treated as preoperative expenses, which need to be amortized over a period of five years. 5. The assessee filed reply contending that sales had commenced in F.Y. 2008-09 and high value purchase order of Euro 52,853 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced its business operations during F.Y. 2009-10 and the first two purchase orders from Ms Navin Electrotech Pvt Ltd and M/s Dhawal International Electronic Pvt Ltd have been received during the previous year 2008-09. Considering the facts of the case in the light of the remand report, the ld. CIT(A) deleted the addition on account of pre-operative expenses. 10. On the issue of disallowance of administrative expenses, the ld. CIT(A) held as under: I have gone through the arguments of the appellant and observations of the Assessing Officer. The Assessing Officer has observed that by incurring expenditure, the Assessing Officer is building a brand image of the parent company. If that was the case, then the Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Madras Industrial Corporation (supra), the expenditure can be allowed to be spread over that too when the assessee chooses to do so. (The decision has been subsequently affirmed by Supreme court.) Considering the facts circumstances of the case various judicial pronouncements in the matter, the addition made by the Assessing Officer is deleted. 11. In so far as Ground No. 1 is concerned, the ld. DR strongly supported the findings of the Assessing Officer and the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 12. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below. It would be perti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement for outsourced employees (including drivers, advisors positioned at dealer s sites and chef) 22-9-2008 Date of hiring of 6 senior employees Middle of the year Date of first local purchase 27-11-2008 Sales 4-12-2008 and 26-3-2009 Date of customer orders received from Dawar International Electronics Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-10-2009 Date of invoice raised on Dawar International Electronics Pvt Ltd. 28-11-2009, and 24-12-2009 and 30-12-2009 13. If the afore stated chronology of events is considered in the light of the remand report of the Assessing Officer, there remains no doubt that the assessee has commenced its business in earlier assessment year. Therefore, expenses considered as pre-operative expenses by the Assessing Officer have to be treated as legitimate business expenditure for the year under consideration. The findings of the ld. CIT(A) cannot be faulted with. Ground No. 1 according dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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