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TMI Blog2019 (10) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... ertisement expenses by treating the same as deferred revenue expenditure or expenditure of enduring benefit without understanding the nature of expenditure or business needs of Appellate. iii. Rs. 13,32,095/- out of travelling and conveyance expenses without understanding the nature of expenditure or business needs of Appellate on hypothetical grounds. iv. Rs. 5,53,05,206/- out of various expenses on ground that there is fall in GP ratio/NP ratio, without considering submissions of Appellate and also considering fact that TPO has accepted the net results of Appellate in TP Assessment. All the above additions are totally hypothetical, based on conjectures & surmises, without any basis, are illegal, bad in law, against Income Tax Act, against facts & circumstances of the case, ignoring the submissions made by Appellate and also against law of natural justice, need to be deleted by your Honours." 2. Brief facts shows that Assessee Company deals in life-saving medical devices/equipments. The company is importing this material from Berlin and has filed its return of income at Rs. 21154731/-. The assessment u/s 143 (3) of the act was passed on 28/3/2014 determining the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uised nature of payment which has been examined by the learned CIT - A and confirmed the disallowance. 9. We have carefully considered the rival contention and perused the orders of the lower authorities. The assessee has entered into a memorandum of understanding dated 6th day of February 2010 wherein the assessee has paid a compensation of INR 1 30000/- to Messer Absolute Life Care for taking an undertaking that it shall not interfere by any means in the appointment of the distributor by the 2nd party and shall also not stake claim to be appointed as distributor. Absolute Life Care has also undertaken and accepted this amount which an undertaking that it shall not raise any dispute in future arising out of or making any claim against the 2nd party of any nature. It is further undertaken by him that it shall not approach any doctor or any third person with respect to the product of second party, assessee, and it will not make any complaint against the assessee. The recipient of the income is also issued an objection certificate to the assessee that it has no objection if assessee appoints any company from a person as its authorised distributor for the territory of Bihar or any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the assessee. He further stated that identical issue arose in the assessment year 2008-09 in case of the assessee wherein the ITAT as per order dated 30/6/2014 has allowed the claim of the assessee. 12. The learned departmental representative supported the orders of the lower authorities. 13. We have carefully considered the rival contentions and perused the orders of the lower authorities. The identical issue arose in ITA number 1263/del/2013 for assessment year 2008 - 09 wherein the learned assessing officer held that advertisement expenditure of INR to 119499/- is a capital expenditure resulting into enduring benefit. For that year the learned CIT - A deleted the above addition. The matter reached to the coordinate bench. The coordinate bench as per para number 10 of that order has allowed the claim of the assessee confirming the order of the learned CIT - A that heavy expenditure and sales promotion was incurred because of the initial years of the company. Therefore, there is no justification for spreading over of the revenue expenditure, which is not disputed over the years. It was further held that the claim of the assessee is squarely covered by the various decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure and Ledger account of the local conveyance expenditure. In absence of any defect in these details, it was stated that the learned assessing officer could not have say that there is no supporting evidences of the purposes have not been submitted by the assessee. In view of this, it is submitted that merely because the purpose of the each of the expenditure has not been mentioned the learned assessing officer should not have disallowed the ad hoc expenditure. 16. The learned departmental representative vehemently supported the order of the lower authorities. 17. We have carefully considered the rival contention and find that assessee has submitted the copy of the Ledger account of the travelling expenses for the whole year placed at page number 101 - 118 of the paper book. The narration given in the Ledger account clearly shows the purpose of those such expenditure. The travelling expenses are of small amounts considering to the nature of the business of the assessee. It is also specified the name of the person to whom it has been paid. Similarly, the assessee placed on record the details of the entertainment expenses at page number 119 - 138 of the paper book these expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised during the assessment proceedings, the assessee did not file tenable details and the arguments of the assessee are two general in nature. 20. The learned authorised representative submitted before us the copy of the submission made by the assessee before assessing officer on 24/8/2015, 30/08/2015 and 25/04/2014. It was explained that assessee has given the complete reasons for the variation in expenditure compared to the earlier years. It was further stated that in absence of any defect in the books of accounts the ad hoc disallowance of 80% of the expenditure is not sustainable and should be deleted. 21. The learned departmental representative also vehemently supported the orders of the lower authorities and submitted that assessee has failed to explain the unusual increase in the expenditure compared to the gross receipt of the assessee and therefore in absence of any tenable information and explanation the lower authorities have confirmed the above disallowance. 22. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned assessing officer has merely compared the gross profit and net profit ratios of earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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