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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
In this appeal filed by the assessee, it assails an order dated 01.07.2016 of the ld. Commissioner of Income Tax (Appeals)- Puducherry. It has altogether raised six grounds of which ground No.1 is general in nature needing no specific adjudication.
ITA No.2303/Mds/2016 :- 2 -:
Vide its ground Nos.2 to 4, grievance raised by the assessee is on a disallowance of marketing and brand promotion expenditure of �9,68,943/-, which was confirmed ld. Commissioner of Income Tax (Appeals).
Facts apropos are that assessee deriving royalty income and 3. had filed its return of income disclosing a loss of �3,39,380/-. Assessee was receiving royalty income from M/s. Ravikumar Distilleries Ltd for use of its trade marks and brand name. Ld. Assessing Officer noting that assessee was not doing any manufacturing and was also not doing any trading selling activities, sought to disallow the marketing and brand promotion expenses of �9,68,943/- claimed by the assessee. Explanation of the assessee was that as per the policy of Government of Pondicherry, sales tax rebate was available only were liquor was sold at a minimum price of �600/- per case. One case required forty eight bottles of liquor having 180 ML or twenty four bottles with 380 ML or twelve bottles with 650 ML. Contention of the assessee was that though actual sale price was less than �600/- billings had to be done at �600/- for availing the sales tax benefits. As per the assessee the difference was being booked as brand and marketing promotion expenses. Ld. Assessing Officer however did not accept this contention. According to him, M/s.
Ravikumar Distilleries Ltd was marketing and selling on behalf of :- 3 -: assessee company. Claim of brand and marketing promotion expenditure as per the ld. Assessing Officer was only to get the Sales tax benefit and this was not an acceptable method. According to him, it was hit by Explanation to Sec. 37(1) of the Act. He disallowed claim of marketing and brand promotion expenditure.
Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that it was indentifying prospective buyers for M/s. Ravikumar Distilleries Ltd and in the process incurring marketing expenditure. As
per assessee, it was not a business expenditure as such but deficiency in income. Further according to it, if it was not considered as business expenditure it had to be allowed as business loss. However, ld. Commissioner of Income Tax (Appeals) was not impressed. He confirmed the order of ld. Assessing Officer.
Now before us, ld. Authorised Representative submitted 5. that billed amount was not receivable since there was an agreement by the assessee with its customers to receive lower amount than what was billed. Hence, the difference could only be considered as irrecoverable debt or business loss. As per ld. Authorised Representative the claim was disallowed arbitrarily.
Per Contra, ld. Authorised Representative strongly supported the orders of the authorities below.
ITA No.2303/Mds/2016 :- 4 -:
We have considered the rival contentions and perused the orders of the authorities below. It is an admitted fact that assessee was not doing any manufacturing and also assessee not doing any trading or selling activities. If we are to believe what has been stated in the assessment order, M/s. Ravikumar Distilleries Ltd was manufacturing the liquor. Except for stating that it was providing marketing expenditure, no evidence was produced by the assessee to support the claim. If assessee’s version is to be believed, the claim was on account of realization from sales being less than the billed amount.
Admittedly, billed amounts were kept artificially higher so as to claim sales tax benefits. Whatever angle we look at it, expenditure claimed was not allowable. If it was to evade sales tax, it was definitely hit by Explanation to Sec.37(1) of the Act. If it was incurred for selling no evidence in support was produced. If it was a claim of bad debts, assessee could not show a write- off of bad debts in its books. In such circumstances, in our opinion the disallowance was rightly made by the lower authorities. We do not find any reason to interfere with the orders of the lower authorities.
Grounds No.2 to 4 stand dismissed.
Vide its ground Nos.5 & 6, grievance of the assessee is that 9. vehicle maintenance of � 53,746/- was disallowed by the ld. Assessing Officer. :- 5 -: 10. Ld. Assessing Officer disallowed above claim, since assessee could not produce details of vehicles nor evidence for expenditure. Fixed assets schedule of the assessee did not show any vehicle. Though assessee argued before the ld. Commissioner of Income Tax (Appeals) that expenditure was incurred on vehicles owned by its employees, there was no evidence produced in support. Ld.CIT(A) also noted that vouchers produced by the assessee did not show the name of the employees. Before us also, ld. Authorised Representative could not provide any evidence to justify the claim of the expenditure. We do not find any reason to interfere with the orders of the lower authorities. Ground Nos. 5 & 6 stand dismissed.
In the result, the appeal of the assessee is dismissed. 11. Order pronounced on Wednesday, the 23rd day of November, 2016, at Chennai.