DCIT 13(2)(1), MUMBAI vs. SPYKAR LIFESTYLES P.LTD, MUMBAI

Briefly the facts are, the assessee is a resident company and is engaged in the business of trading in readymade garment, apparel through multi-brand outlets, large retail chains and business outlets. For the assessment year under dispute, assessee filed its return of income on 10.09.2011 declaring loss Rs. 13,74,27,494/-. In course of assessment proceedings, the AO found that as

Having considered rival submissions and perused the material on record, we find that though there may be some doubt regarding the source of purchases, however, the facts on record reveal that the assessee indeed had purchased the goods, may be, from unverified sources. Therefore, the entire purchases cannot be disallowed, but, only the profit element embedded in such not only of different Benches of the Tribunal but even of the higher Courts. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds raised, both, by the assessee and the revenue are dismissed.

Only other surviving issue raised in ground no. 2 and 3 of assessee’s appeal relates to disallowance of certain expenditure incurred by the assessee towards store renovation/interior designing.

Briefly the facts are, in course of assessment proceedings, the AO noticed that the assessee had claimed deduction of Rs. 11,80,204/- being payment made to Aperion architects and Rs. 17,12,268/- to N Power & Company. On further verification, he found that as per assessee’s claim, these expenditures were incurred for designing and conceptualizing the look and appearance of the stores, outlets and shops and based on such design furniture and fixture are purchased and installed. It was submitted, since such expenditure on designing and conceptualizing are with regard to seasons, trends etc. and are in the nature of advisory services/design, consultancy fees paid to professional designers to improve the outlook of the stores/outlets are in the nature of revenue expenditure. The AO, however, was not convinced with the submissions of the assessee. He observed, similar payment made to Aperion architects was disallowed in the assessment order passed for assessment year 2009-10. Accordingly, he disallowed the payment of Rs. 11,80,204/-. As regards, the payment made to N Power & Company, the AO on examining the CEO of the said entity concluded that the payment made is not a genuine expenditure incurred is of capital nature. Accordingly, he disallowed the expenditure. While considering the issue in appeal, learned Commissioner (Appeals) sustained the disallowance of payment made to Aperion architect by referring to the assessment order passed for assessment year 2009-10. As regards, the payment made to N Power & Company, learned Commissioner (Appeals) did not agree with the AO that the expenditure is not genuine.

We have considered rival submissions and perused the materials on record. Learned Counsel for the assessee submitted that while deciding assessee’s appeal in assessment year 2009-10, the Tribunal in dated 23.03.2017 has restored the issue relating to the payments made to Aperion architects and N Power & Company to the AO for deciding afresh after examining the additional evidences filed by the assessee.

The aforesaid factual position has not been controverted by the learned Departmental Representative. Considering the fact that identical issue arising in assessment year 2009-10 has been restored back to the AO, which is still pending before him, as a matter of consistency, we restore the issue to the AO in the impugned assessment year as well. The AO must examine the issue in accordance with the directions given by the Tribunal in assessment year 2009-

Needless to mention, due opportunity of being heard must be provided to the assessee. These grounds are allowed for statistical purposes.