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TMI Blog2019 (9) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 4,07,88,503/- & Rs. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow scenario. This benefit/treatment is extended to us as we are part of "Mainetti Group" who is a preferred Global vendor. As a consideration, the assessee has to pay a "nomination fees" as a percentage on the sale value of hangers to ASDA, C&A, Old Navy & Arcadia for this referral/accredition as a preferred vendor. During the year under review company has paid Rs. 2,76,99,239/- break up for the same & nomination agreement copies is given in Annexure-I This arrangement for nomination fees was insisted upon on the assessee by the retailers since 4-5 years ago, The assessee had made huge investments in tools that can be used exclusively for the manufacture of hangers catering to the said retailers' specifications in the past years, Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case, No businessman can he compelled to maximize its profit. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman." By the ratio of the said decision, it is clear from the above cited facts that there is a nexus between the nomination fees paid and the business of the assessee company, and is determinative of the fact that expenditure has been incurred wholly and exclusively for the business of the assessee." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Rs. 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 Rs. 4,07,88,503/- for the A.Y.2013-14. 2.2 The Ld.CIT(A) erred in allowing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- "4.3 We have heard the rival submissions and carefully perused the materials available on record. The following fact emerges from the orders of the Ld.Revenue Authorities and cannot be disputed:- (i) The assessee is in the business of manufacturing various kinds of hangers which are used both as a packaging / display product by the buyers. (ii) The assessee's main clients were owning global branded such as Old Navy, Asda George, C&A, Arcadia, etc., (iii) The assessee's clients purchase garments from the garment vendors along with the hangers which are to be supplied by the assessee as per the direction of the assessee's clients and the garment vendors were liable to make payment for the hangers supplied by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us dimensions and complexities which have to be prudently tackled by the entity in order to survive in that business. Further the general practice in any business is that when an entity obtains certain benefits from another entity, a portion of the benefit is passed on to that entity in some manner or the other in order to nourish healthy business environment. In the case of the assessee, the proximity of the assessee's clients and the garment suppliers who are purchasing the hangers from the assessee are not in dispute and is also genuine. More over the clients of the assessee are in a position to influence the purchase price of the hangers purchased by the garment suppliers from the assessee. In these circumstances when the clients of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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