TMI Blog2023 (1) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the aforesaid decision of the Tribunal, learned Departmental Representative has submitted before us to remit the issue to the Assessing Officer. However, we have observed, while deciding identical issue in assessee s own case in assessment year 2015-16 [ 2020 (1) TMI 861 - ITAT DELHI ] the Tribunal has decided the issue in favour of the assessee. Disallowance Being expenditure incurred on credit card - HELD THAT:- It is evident, in compliance with the directions of learned DRP, the AO has accepted major part of the expenditure incurred by the assessee. However, he disallowed an amount alleging a difference between the payment actually made as per the assessee and payment as per AIR information, which the assessee failed to reconcile. Before us, it is the contention of the learned counsel for the assessee that the actual difference would work out to an amount. Keeping the assessee, we restore the issue back to the AO for verifying the factual details filed by the assessee and thereafter restrict the disallowance to the actual difference which the assessee will be unable to reconcile. This ground is allowed for statistical purposes. Disallowance being expenditure on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expenditure incurred on conveyance and traveling purely on ad hoc basis. He has not pointed out any deficiency either in the accounts maintained by the assessee or the evidence furnished. When assessee s books of account are under statutory audit, such ad hoc disallowance in absence of any valid reasoning is unsustainable. Accordingly, we delete the disallowance. This ground is allowed. Disallowance being expenses on account of presents/gifts and personnel compensation cost and personnel relocation expenses - HELD THAT:- The relocation expenses are incurred by the assessee at the time of relocation/transfer of the employees from one state to another. The expenditure on account of gifts and presents are incurred by assessee towards gifts given to employees, trade partners, distributors etc. at the time of festivals or office celebrations or at the time of marriage of the employees. Thus, considering the nature of expenditure incurred by assessee, it cannot be said that they are not wholly and exclusively for the purpose of business. After all, from the nature of expenditure incurred, it is very much clear that they are for the benefit of employees. That being the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing carried out the economic analysis, as aforesaid, the assessee claimed the international transaction with the AE to be at arm s length. The TPO, though, accepted assessee s benchmarking of the international transactions with the AE, however, he noticed that the assessee has incurred expenditure of Rs.60,75,36,000 towards AMP which works out to 1.39% of the sales. Therefore, he called upon the assessee to show-cause why the transaction relating to AMP expenditure should not be benchmarked separately, since, by incurring such expenditure the assessee has promoted the brand/market intangibles owned by the foreign AE. In its reply, assessee strongly objected to proposed action of the TPO and submitted that AMP expenditure incurred by the assessee cannot be treated as an international transaction as per the definition contained under Section 92B of the Act. The TPO, however, was not convinced with the submissions of the assessee. He held that while incurring AMP expenditures since, the assessee has promoted the brand and marketing intangible of the overseas AE, it has to be treated as international transaction. 6. Having held so, he proceeded to determine the ALP of transaction by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod applied by the TPO has been rejected by the Hon'ble Delhi High Court on numerous occasions. Finally, he submitted, in assessee s own case in assessment years 2014-15 and 2015-16 the issue has been decided in favour of the assessee by the Tribunal. 10. Learned Departmental Representative submitted, the facts of the impugned assessment year are different from the preceding assessment years. Therefore, the decision of the Hon'ble Delhi High Court and the Tribunal in earlier years would not apply. Proceeding further, he submitted, in the impugned assessment year, the TPO has made the substantive addition by using Transactional Net Margin Method (TNMM) which was not the case in the preceding assessment years. Thus, he submitted, the issue stands in a different footing in the impugned assessment year. Without prejudice, he submitted, if the bench is of the view that the decision in the preceding assessment years are applicable to the facts of the impugned assessment year, then considering the fact that Revenue s Special Leave Petition (SLP) on identical issue is pending before the Hon'ble Supreme Court, the matter may be restored to the Assessing Officer for taking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins same as in earlier years i.e. assessment years 2014-15 and 2015-16. Thus, in sum and substance, it has to be concluded that there is no difference in factual position between the preceding assessment years and the impugned assessment year, in so far as, the disputed issue is concerned. Having held so, we proceed to examine how this issue has been decided in preceding assessment years in assessee s own case. 13. It is observed, for the first time, this issue cropped up in assessee s own case in assessment year 2008-09. The TPO while determining the ALP of international transaction between the assessee and the AE held that AMP expenditure incurred by the assessee is basically to promote the brand of the AE, hence, would come within the ambit of international transaction. Accordingly, he determined the ALP of AMP expenses and proposed an adjustment. When the matter travelled to the Tribunal, following the decision of Special Bench of the ITAT in case of LG Electronics, the Tribunal held that overall AMP expenses had to be analyzed to find out what portion of it was spent on brand building for the foreign AE and then disallowance should be made for such amount with proper mark-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO, the Assessing Officer held that since the AMP expenses amounting to Rs.60,67,69,273 was incurred for promoting the brand of the AE, it cannot be regarded as the expenditure incurred wholly and exclusively for the purpose of assessee s own business. Accordingly, he disallowed the expenses. 17. Learned counsel for the assessee submitted, the issue is squarely covered by the decisions of the Hon'ble Delhi High Court and the Tribunal in assessee s own case in preceding assessment years. 18. The learned Departmental Representative could not controvert the aforesaid submission of the assessee. 19. Having considered rival submissions, we notice that while deciding identical issue in assessment year 2008-09 the Hon'ble Delhi High Court has taken a view favourable to the assessee, while dismissing the appeal filed by the Revenue. The aforesaid decision of the Hon'ble Delhi High Court has been consistently followed by the Tribunal while deciding the appeal for assessment years 2009-10 to 2015-16. In the latest order passed for the assessment year 2015-16, the Tribunal has held as under: 12. We have gone through the order of the Hon'ble High Court wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails to reconcile the difference between the statement of credit card and actual vouchers. In this context, he drew our attention to the factual paper book. He submitted, the Assessing Officer has not explained how difference works out to Rs.26,20,527. He submitted, the actual difference between the AIR information and assessee s record is only to the extent of Rs.1,35,450 and not what has been disallowed by the Assessing Officer. Without prejudice, he submitted, no disallowance can be made based on AIR information. Finally, he submitted, while considering similar nature of dispute in assessee s own case in assessment year 2015-16, the Tribunal has restored the matter back to the Assessing Officer to verify the evidences filed by the assessee. 24. The learned Departmental Representative relied upon the observations of the Assessing Officer. 25. We have considered rival submissions and perused the material available on record. It is evident, in compliance with the directions of learned DRP, the Assessing Officer has accepted major part of the expenditure incurred by the assessee. However, he disallowed an amount of Rs.26,20,527 alleging a difference between the payment actuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee quite for a long time and all through these years no disallowance was made by the learned Assessing Officer. Learned Assessing Officer, however, disallowed the expenditure claimed by the assessee on the basis that the assessee is not a company registered under section 25 of the Companies Act so as to carry out welfare activities and the expenditure incurred in marriage of the employees daughters is not wholly and exclusively for the purpose of business of the assessee. 22. Basing on the de4cision of the Hon ble Apex Court in the case of Shahzada Nand Sons vs. CIT 108 ITR 358, Ld. AR submitted that the ex-gratia compensation paid to an employee is an allowable expenditure. He further submitted that under section 37(1) of the Act, deduction is admissible for expenditure incurred wholly and exclusively for the purpose of business and such expenditure is justified by business consideration and incurred out of commercial expediency is allowable deduction. He drew our attention to details of the expenditure incorporated at page Nos. 485 to 490 of the paper book in respect of the beneficiaries of this expense. 24. Insofar as the alliance of this expense in the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to notes to the financial statement and submitted that the loss may be allowed. 34. Strongly relying upon the observations of the Assessing Officer and learned DRP, the learned Departmental Representative submitted, when assessee s claim has not been settled by the insurer in the impugned assessment year, assessee s claim cannot be allowed. 35. We have considered rival submissions and perused the material available on record. The facts on record clearly reveal that the loss of Rs.80,00,000 claimed by the assessee is only in the nature of a provision and is a projected figure. No material has been placed on record before us to demonstrate that the insurer has settled the claim in the financial year relevant to assessment year under dispute. On a specific query from the bench, learned counsel for the assessee has submitted that the insurance claim was settled in the next financial year relevant to assessment year 2017-18. Learned counsel was not able to furnish any documentary evidence, being any communication received from the insurer to demonstrate that the claim was settled at a particular amount in the impugned assessment year. This being the factual position emergin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer disallowed 10% out of such expenditure purely on ad hoc basis. 46. Learned DRP upheld such disallowance. 47. Before us, learned counsel for the assessee submitted, not only assessee maintains regular books of account but the accounts are also audited. He submitted, in course of assessment proceedings, assessee has furnished complete details of all the expenditure incurred on travelling and conveyance. He submitted, without properly verifying the evidences filed by assessee, assessing officer has disallowed a part of the expenditure. Thus, he submitted, disallowance made should be deleted. 48. Learned Departmental Representative strongly relied upon the observations of the assessing officer and learned DRP. 49. We have considered rival submissions and perused the material on record. 50. It is evident, the assessing officer has rejected a part of the expenditure incurred on conveyance and traveling purely on ad hoc basis. He has not pointed out any deficiency either in the accounts maintained by the assessee or the evidence furnished. When assessee s books of account are under statutory audit, such ad hoc disallowance in absence of any valid reasoning is unsu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng assessee s objection on the issue has directed the assessing officer to allow foreign tax credit as per law. Assessing Officer has disallowed assessee s claim of foreign tax credit, on the reasoning that the assessee failed to furnish any certificate from the parties indicating the details of income and quantum of tax withheld thereon. It is the allegation of the Assessing Officer that, though, in the reply dated 10.03.2021, the assessee stated that statement of reconciliation of income received from foreign sources along with the copy of certificate received from the parties are enclosed, however, no such enclosure was found on e-filing portal. Thus, in absence of the required documentary evidences, Assessing Officer disallowed the claim of foreign tax credit. 61. Before us, learned counsel for the assessee submitted, during the year under consideration, two of the overseas associated enterprises of assessee had withheld tax aggregating to Rs.1,17,50,021. He submitted, before the departmental authorities, assessee had furnished the details of tax deducted by the AEs. In this regard, he drew our attention to the details furnished in the paper book. 62. Further, he submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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