TMI Blog2019 (9) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... EMBER: The Revenue filed the above appeals against the common order of the Commissioner of Income Tax(Appeals)-8, Chennai in ITA Nos.294 296/16-17 dated 20.11.2018 for the assessment years 2013-14 2014-15 respectively, while the assessee filed cross objection against the order related to assessment year 2013-14. 2. M/s. Mainetti (India) Pvt. Ltd., the assessee, is engaged in the business of manufacturing plastic and garment hangers. While making the assessments for the assessment years 2013-14 2014- 15, the AO found that the assessee has claimed nomination fee of ₹ 4,07,88,503/- ₹ 5,03,97,796/- for the assessment years 2013- 14 2014-15 respectively. On a query, the assessee explained the transaction as under:- Nomination fee business expenditure Note on our Business Model: We are into manufacture of Hangers. These hangers ore used both as a packaging/display product by the eventual buyer. We mainly service the global brands such as Old Navy, Asda George, C A, Arcadia etc., As far as garment sourcing is concerned, the same is always sourced along with hangers. So the garmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed business for the assessee, The business from these nominations are in addition to the regular business which the assessee was getting earlier. Further, the said arrangement secures business for the assessee, by way of Indian garment manufacturers procuring hangers only from the assessee upon receiving purchase orders from the non-resident retailers, which was not available prior to the agreement. Further being an accredited vendor to global brands gives us an edge in our business and also to procure fresh businesses/leads. The global competition/spurious products make the business very competitive. At this stage this nomination agreement was a new leg to the business entered into by the assessee with non-resident its retail customers, As mentioned above, by virtue of this agreement not only is business secured bill a continuous return on investment in tools made by the assessee company is ensured. In this connection, attention is drown to the decision of the Hon'ble Supreme Court in the case of SA, Builders Ltd v CIT(A) Anr [2007] 288 ITR I (SC), wherein it has been held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chny/2016 for the assessment years 2011-12 2012-13 dated 18.05.2018 decided the issue in favour of the assessee for both the assessment years. Since, the facts are similar for both the assessment years, in accordance with judicial discipline, he directed the AO to delete the disallowance made in this regard for the assessment years 2013-14 2014-15 respectively. 5. Aggrieved, the Revenue filed these appeals with similar grounds and hence, as a model, the grounds related to assessment year 2013-14 is extracted as under:- 1. The order of the Ld. CIT(A) is contrary to law and facts of the case. 2. The Ld.CIT(A) erred in deleting the disallowance of nomination fee made by the Assessing Officer to the extent of ₹ 4,07,88,503/- for the A.Y.2013-14. 2.1 The Ld.CIT(A) erred in allowing the assessee to claim nomination fees paid as allowable business expenditure to the tune of ₹ 4,07,88,503/- for the A.Y.2013-14. 2.2 The Ld.CIT(A) erred in allowing the nomination fees paid expenses claimed by the assessee despite the fact that the assessee failed to furnish any evidence in the form of tripartite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion fee which is to be worked out on a specified percentage on the sale value of the hangers to the assessee s clients ASDS Store Limited and C A owning the brands such as Old Navy, Asda George, C A, Arcadia, etc., (v) Due to the arrangement with the assessee s client, the assessee s has made huge investment in tools for manufacturing hangers to the requirement of the assessee s clients. (vi) The businesses procured from these clients are in addition to the regular business carried out by the assessee. (vii) Thus obviously the entire expenditure incurred towards nomination fees is directly attributable to the business carried on by the assessee. Now the contention of the Revenue were, it was unnecessary for the assessee to have incurred expenditure towards nomination fee, the assessee was not incurring such expenditure during the past, there is no direct nexus with respect to the expenditure incurred by the assessee and the business of the assessee and the huge investment on specialized tools made by the assessee has no relevance to the business model of the assessee. These findings of the Revenue are not appreciab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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