×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
07-06-2019, Heal Kraft India, Section 32, 40(a)(ia), 40A(3), Tribunal Chennai
The appeal of the Revenue, the cross objection of the assessee and the cross appeal of the assessee are directed against the order of the Ld. Commissioner of Income Tax (Appeals)-6, Chennai vide proceedings in ITA Nos. 137/CIT(A)-6/2015-16 dated 14.09.2017 for the assessment year 2012-13 against the order of assessment passed by the ACIT(OSD), Corporate Circle-2, Chennai (herein after referred to as Ld. AO) u/s. 143(3) of the Income Tax Act,1961 (herein after referred to as the Act). As the issues involved in all these appeals, cross objection are common in nature, the same are taken up together and disposed off by this common order for the sake of convenience.
2. Let us take up the assessee appeal for Asst Year 2012-13 in ITA No. 2755/Chny/2017 first . The first issue involved in this appeal is as to whether the ld CITA was justified in upholding the disallowance of Sales Promotion, Advertisement and Publicity Expenses in the facts and circumstances of the case. The inter connected issue involved therein is as to whether the said disallowances would correspondingly increase the claim of deduction u/s 80IC of the Act in the facts and circumstances of the case.
2.1. The brief facts of the appeal are that the ld AO disallowed sales promotion expenses of Rs.27,05,841/- and advertisement and publicity expenses of Rs.16,56,638/- totaling to Rs.43,62,479 as expenditure not allowable u/s.37. The ld AO disallowed the expenditure for the reason that the said expend tures were incurred for marketing the products and that the same is not incidental to the manufacturing activity. In addition to that, the ld AO in respect of the sale promotion expenses had stated that the said expenditure incurred by the assessee is an offence as it has been incurred in violation of the code of ethics by the Medical Council. The ld AO placed reliance on the CBDT Circular No.5 / 2012 dated 01.08.2012 in making the disallowance. The said disallowance was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.
2.2. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a manufacturer of pharmaceutical products. The various arguments of the ld AR could be summarized as under:-
a) The assessee, who is a manufacturer of pharmaceutical products had marketed its products through Tablets (India) Ltd. Based on an agreement with Tablets (India) Ltd, the assessee had accepted to share a part of the sales promotion, advertisement and publicity expenses. It is a commercial decision taken by the assessee and the same cannot be questioned by the revenue. The ld AR relied on the decisions of the Hon’ble Supreme Court in the case of S.A.Builders Ltd V. CIT reported in 288 ITR 1 (SC) and in the case of Hero Cycles (P) Ltd V. CIT reported in 379 ITR 347 (SC) and also the decision of Hon’ble Delhi High Court in the case of CIT V. Dalmia Cement (Bharat) Ltd reported in 254 ITR 377 (Del), wherein it was held that the assessee’s nexus between the expenditure and the purpose of the business had to be looked into from the point of view of businessman and not from the point of the revenue. The ld AO cannot step into the shoes of the assessee to decide whether the expenditure is required to be incurred by the assessee or not.
b) The ld AR stated that the CBDT Circular No.5 / 2012 which the ld AO relied on to hold the expenditure incurred by the assessee is an offence is dated 01.08.2012 and hence the same would not be