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2019 (6) TMI 661

iture incurred by the assessee towards sales promotion, advertisement and publicity expenses were incurred in line with the business of the assessee and that the revenue had not doubted the genuineness of the incurring of such expenditure.It is well settled that the revenue cannot step into the shoes of the assessee to decide whether the expenditure is required to be incurred by the assessee or not where the genuineness of the same is not questioned. AO has to see whether the particular expenditure incurred is not personal in nature , is not capital in nature and incurred wholly and exclusively for the purpose of business of the assessee. When assessee is able to provide the business nexus of incurrence of certain expenditure with supporting documents, it cannot be simply denied / rejected by the revenue merely on the ground of propriety, which action would lead to, travelling beyond the brief and stepping into the shoes of the assessee by the revenue. We therefore hold that the expenditure incurred by the assessee towards sales promotion, advertisement and publicity is an allowable expenditure. The assessee had only distributed the DVD players, silver coins, calenders and diaries .....

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t Pvt Ltd [2017 (6) TMI 1124 - ITAT DELHI] as held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be imported into in clause (f) of Explanation to Section 115JB(2) - disallowance of actual expenditure incurred for earning exempt income is required to be made under clause (f) of section 115JB(2) - the assessee itself had disallowed a sum of ₹ 9,89,496/- u/s 14A in the return of income on some actual basis. In order to settle the disputes to rest, we direct the AO to consider this sum of ₹ 9,89,496/- for disallowance under clause (f) of Explanation to Section 115JB(2) of the Act as direct expenditure incurred for earning exempt income. - I.T.A. No. 2793/CHNY/2017, C.O. No. 14/Chny/2018, I.T.A. No. 2755/CHNY/2018 - 7-6-2019 - Shri M. Balaganesh, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Assessee : Shri T. Banusekar, CA For the Revenue : Shri R.V. Aroon Prasad, JCIT ORDER PER M. BALAGANESH, ACCOUNTANT MEMBER: The appeal of the Revenue, the cross objection of the assessee and the cross appeal of the assessee are directed against the order of the Ld. Commissioner of Income Tax (Appeals)-6, Chennai vide proceedings in ITA N .....

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questioned by the revenue. The ld AR relied on the decisions of the Hon ble Supreme Court in the case of S.A.Builders Ltd V. CIT reported in 288 ITR 1 (SC) and in the case of Hero Cycles (P) Ltd V. CIT reported in 379 ITR 347 (SC) and also the decision of Hon ble Delhi High Court in the case of CIT V. Dalmia Cement (Bharat) Ltd reported in 254 ITR 377 (Del), wherein it was held that the assessee s nexus between the expenditure and the purpose of the business had to be looked into from the point of view of businessman and not from the point of the revenue. The ld AO cannot step into the shoes of the assessee to decide whether the expenditure is required to be incurred by the assessee or not. b) The ld AR stated that the CBDT Circular No.5 / 2012 which the ld AO relied on to hold the expenditure incurred by the assessee is an offence is dated 01.08.2012 and hence the same would not be applicable to the impugned assessment year i.e. AY 2012-13. In support of this proposition, he relied on the co-ordinate bench decision of Mumbai Tribunal in the case of Macleods Pharmaceuticals Ltd V. Additional CIT reported in 161 ITD 291 and Syncom Formulations (I) Ltd V. DCIT in ITA No.6429 / Mum / .....

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he medical practitioners are the receiving hands ( i.e the persons receiving the various gifts etc). Hence there is no need to segregated between two parties and that the Circular should be read in totality. 2.4. We find that the expenditure incurred by the assessee towards sales promotion, advertisement and publicity expenses were incurred in line with the business of the assessee and that the revenue had not doubted the genuineness of the incurring of such expenditure. We find that the only grievance of the revenue is that the assessee need not have incurred that expenditure (i.e getting into the propriety of a transaction) and further the said expenditure is hit by the CBDT Circular No.5 / 2012. It is well settled that the revenue cannot step into the shoes of the assessee to decide whether the expenditure is required to be incurred by the assessee or not where the genuineness of the same is not questioned. The ld AO has to see whether the particular expenditure incurred is not personal in nature , is not capital in nature and incurred wholly and exclusively for the purpose of business of the assessee. When assessee is able to provide the business nexus of incurrence of certain .....

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to an assessee claiming the expense then by implication, any impairment caused by Explanation 1 will apply to that assessee only. Any impairment or prohibition by any law/regulation on a different class of person/assessee will not impinge upon the assessee claiming the expenditure under this section. 24. We observe that the CBDT Circular dated 1-8-2012 (supra) in its clarification has enlarged the scope and applicability of 'Indian Medical Council Regulation 2002' by making it applicable to the pharmaceutical companies or allied health care sector industries. Such an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporaneaexpositio' in interpreting the statutory provisions a .....

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vered in favour of the assessee by the decisions in CIT V.Gem Plus Jewellery India Ltd 330 ITR 175 (Bom) and DCIT V. Vertex Infosoft Solution (P) Ltd 37 ITR (Trib) 521. Further it would be pertinent to hold that the issue now stands settled by the CBDT Circular No.37 / 2016 dated 02.11.2016 where the Board had clarified that the deduction under Chapter VI-A will be on such profits including disallowance under sections 32, 40(a)(ia), 40A(3), 43B etc of the Act which will include disallowance made u/s.37(1) as well. 2.9. We also find from the computation of income made by the ld AO, that the ld AO had disallowed the entire Sales promotion, advertisement and publicity expenses u/s 37(1) of the Act separately. Further he had again reduced the claim of deduction u/s 80IC of the Act by the very same amount of sales promotion, advertisement and publicity. This would effectively result in double disallowance made by the ld AO which we direct the ld AO to rectify. 2.10. The aforesaid findings on the issue of admissibility of sales promotion, advertisement and publicity would cover the assessee s appeal in ITA No. 2755/Chny/2017 and also Grounds 3.1. and 3.2. of Revenue s appeal in ITA No. 2 .....

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