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TMI Blog2021 (9) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... D/R has not raised any objection in this regard. The said delay of 49 days is accordingly condoned and the appeal of the assessee is being disposed off on merit. 3. The issue raised in ground No. 1 relates to the addition of Rs. 4,08,200/- made by the Assessing Officer (hereinafter the 'AO') and confirmed by the ld. CIT(A) u/s. 28(iv) of the Act being the amount of cost of demo van disbursed by M/s. Usha International Ltd. 3.1. The assessee in the present case is a partnership firm which is engaged in the business of distribution of agro machineries i.e. pumping set, generator set, agricultural engines, power tiller, lubricants, spare parts etc. It works as dealer/redistributor of companies like M/s. Cotton Grieves and M/s. Usha International Ltd. The return of income for the year under consideration was filed by it on 29.09.2011 declaring total income at Rs. 11,88,753/-. The said return was selected for scrutiny through CASS. It was noticed by the AO that the assessee on 31.03.2011 had received "Special Redistributors' Incentive" of Rs. 4,08,200/- from M/s. Usha International Ltd. in the form of credit notes. As noted by the AO, this incentive was given for the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertible into money or not. arising from business or the exercise of a profession (shall he chargeable to income lax under the head of profits and gains of business or profession)' This incentive has been given by the parent company, in the course of it business with the assessee. So, simply it is a trading receipt. There would have been no occasion for the assessee to receive this amount had it not been a dealer for the Usha International. The very object of this incentive is also to promote the sales of the product. To achieve higher targets of sales, these types of incentives are offered by the companies. Not all the dealers of Usha International' were provided with this incentive. Assessee is among the very few dealers who received it due to his larger sales. So, this incentive is directly linked with the turnover of the assessee. The incentive so received is not very different from what a staff of Usha International would have received by way of production bonus for achieving higher production. Even Conditionality of spending it for the purpose of purchasing a van and painting it with the Logo of parent company doesn't make it a liability for the assessee, as this v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he distributors of the companies. These types of incentives are extra benefit to the distributors provided by the companies to boost them so that sale of the company may be increased. 5.3.4. For the sake of clarity provision of section 28(iv) is produced here under which reads- The following income shall be chargeable to income tax under the head "profits and gains of business of professions-the value of any benefit or perquisite whether convertible into money or not arising from business or the exercise of the profession." 5.3.5. From the above discussion, it is clear that appellant firm has received incentive which has been arises from the carrying out the business activity as distributor of M/s. Usha International. Though, as per claim of the assessee, it has been given for purchase of Van which has to be utilized for the demonstration of product of the M/s. Usha International but there is no doubt that it is benefit to the appellant as owner of the said Van. 5.3.6. In a latest decision in the case of M/s. Mahindra & Mahindra Ltd, the Hon'ble Apex Court has given their view on the provision of section 28(iv) that "provision of section 28(iv) will be applicable on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation 10 to Section 43(1) of the Act which reads as under: "Explanation 10.--Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee." 4.1. As rightly contended by the ld. Counsel for the assessee, the amount of incentive in question thus was received from M/s. Usha International Ltd. for the specific purpose of purchase of van which was to be utilised for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has submitted that there is no specific instance pointed out by the AO to show the unverifiable element involved in the freight inward expenses claimed by the assessee, it is observed that the freight inward expenses claimed by the assessee to the extent of Rs. 12,82,558/- were incurred in cash and the same were supported by only self-made vouchers. The claim of the assessee for the freight inward expenses to that extent, in my opinion, therefore was not fully verifiable as rightly held by the authorities. However, I find some merit in the alternative contention raised by the ld. Counsel for the assessee that the disallowance of 15% made by the AO and confirmed by the ld. CIT(A) is excessive and unreasonable keeping in view the nature of the business of the assessee and it would be fair and reasonable to restrict the same to 7.5%. I accordingly modify the order of the ld. CIT(A) on this issue and direct the AO to restrict the disallowance of 15% to 7.5%. Ground No. 2 of the assessee's appeal is treated as partly allowed. 7. The third ground raised by the assessee in this appeal relating to the issue of addition of Rs. 15,014/- on account of difference in closing bala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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