TMI Blog2014 (8) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... the character of the write off. In such circumstances, we are of the opinion, that disallowance was rightly sustained by the CIT(A). Write off of service tax - What we find is that the list of invoices placed at page no.109 to110 does not show the nature of the purchases made by the assessee from M/s IBM Ind.Pvt.Ltd., Assessee could have very well bifurcated the nature of in-put at the stage of purchase itself, viz, what would be the items that would go to manufacturing section and what would be the items that would go to trading segment. Once such a bifurcation is made it will not be necessary to divide the service tax paid on purchase from M/s IBM based on total turnover. Nevertheless, there is substance in the argument of the assessee that it could never claim any service tax credit against service tax paid on items which were intended for trading. Additional evidence filed by the assessee in the nature of service tax return can, in our opinion, be taken up for consideration, since it is a statutory record. Nevertheless, in order to ascertain the amount that the assessee can legitimately claim a write off from the total service tax paid, a thorough verification by the AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- held by the CIT(A) as allowable. 3. Taking up the assessee s appeal first, assessee is engaged in the business of manufacturing and marketing of personal computers. For the impugned assessment year the assessee filed return of income declaring a loss of ₹ 105,750,031/- which was subsequently revised to ₹ 109,013,943/-. During the assessment proceedings it was noted by the AO that the assessee had in its Profit Loss account claimed write off of advance ₹ 12,099,000/- and write off of deposits ₹ 61,065,000/-. The AO sought explanations from the assessee on these claims. The submission of the assessee was that the advance written off represented customs duty deposited by M/s IBM Products Ind. Pvt. Ltd., and subsequently recognized by it as a receivable when the business of M/s IBM Products Pvt.Ltd., was acquired by it. As per the assessee during the impugned assessment year it was found that there was no probability of recovering money from the customs department. As for the deficit of ₹ 61,065,000/- written off, submission of the assessee was that this was service tax paid classified initially as an asset and later written off. 4. As per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the allowability of duty free replacement service which were written off. 7. However, learned CIT(A) was not appreciative of the above arguments. According to him, the assessee had failed to furnish details which would show the basic nature and character of the amounts written off. The details furnished by the assesee with regard to the deposit written off of ₹ 6,10,65,000/- did not show whether it pertained to trading asset or capital asset. Thus, as per the CIT(A) the assessee had failed in discharging the onus resting on it to establish, that the claim of write off were allowable. 8. Now before us, learned AR submitted that the sum of ₹ 1,20,99,000/-was additional customs duty paid by M/s IBM and treated by it as current asset. As per the learned AR, when the business of M/s IBM was acquired by the assessee, the nature of the asset and liabilities remained very same. Customs duty earlier paid by M/s IBM which was treated as refundable and due from the customs department, was not at all recoverable. Having recognized this, assesseee had effected a write off of the amount during the relevant previous year. As for the claim of service tax write off the arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the lower authorities, since there was confusion in the office due to the acquisition of business from M/s IBM. Nevertheless, according to him, it was critical evidence which required consideration for deciding the issue. 11. We have perused the orders and heard the rival contentions. First we take up the issue of write off of ₹ 1,20,99,000/-. The claim of assessee is that it represented additional custom duty deposited by M/s IBM Ind. Pvt. Ltd., which was found to be not recoverable subsequent to acquisition of business from M/s IBM Ind. Pvt. Ltd., However, nothing has been brought on record by the assessee to show that the additional customs duty deposited by M/s IBM Ind. Pvt.Ltd., was not on capital account, but on trading account only. Assessee also did not furnish the agreement relating to global transfer of business between M/.s IBM and M/s Lenovo. There was no evidence as to which products were imported by M/s IBM Ind.,Pvt Ltd., on which the additional customs duty was deposited by it. Assessee had simply effected a write off and failed to support its claim for allowance under the IT Act. CIT(A) has specifically mentioned in its order that even before him the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2006-07 of this Tribunal. 16. The claim of the assessee was with regard to marketing support and transition fees amounting to ₹ 6,78,19,000/- paid to M/s IBM Ind. Pvt. Ltd., towards various services rendered by the said company to the assessee. This was disallowed for by the AO for the reason that the expenditure was incurred by the assessee for retaining the customer/dealer base of M/s IBM Ind.Pvt.Ltd., which resulted in acquiring an enduring benefit. In its appeal before the CITA) the argument of the assessee was that similar issue was decided by this Tribunal in assessee s own case for the assessment year 2006-07. Learned CIT(A) relying on the decision of the Tribunal mentioned supra, allowed the claim. Learned DR has fairly admitted that the issue stood covered in favour of the assessee. However, according to him, the marketing support service agreement was only an appendix to the main agreement for acquiring business from M/s IBM Ind. Pvt. Ltd., and therefore, the outgo was essential in the capital field. Nevertheless, we find that Co-ordinate Bench of the Tribunal has allowed the claim of the assessee in its order dated 16-03-2012 in ITA No.1457(B)/10 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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