DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, DELHI V. ANAND NVH PRODUCTS PVT LTD, DELHI

ITA 3612/DEL/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) contesting the decision of the Commissioner of Income Tax (Appeals) (CIT(A)) which had deleted several disallowances made on the expenses claimed by Anand NVH Products Private Limited for the Assessment Year 2016-17. The disallowances included marketing support expenses amounting to Rs. 4,38,72,325, directors' remuneration of Rs. 4,69,84,889, and R&D expenses of Rs. 78,73,302. The DCIT argued that these expenses were not justifiable based on business expediency and the declining turnover of the company. However, the CIT(A) found that the expenses were incurred wholly and exclusively for the purpose of the business and were supported by adequate documentation and previous assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793642 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2024
• Other Referred Cases: CIT v. Dalmia Cement (P.) Ltd, CIT v. Walchand & Co. (P.) Ltd., J.K. Woollen Mfrs. v. CIT, Aluminium Corpn. of India Ltd. v. CIT, CIT v. Panipat Woollen & General Mills Co. Ltd., Jamna Auto Industries, Sigma Research & Consulting Pvt. Ltd. vs. CIT, Radhasoami Satsang Vs CIT, PCIT Vs Patel Alloy Steel Co. Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: MUKESH BUTANI
• Keywords: Business income; Revenue expenditure; Transfer pricing; Business expenditure; Rule of consistency; TDS; Maximum Marginal Rate
• Section: 37; 37(1)

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 3612/Del/2024, A.Y.2016-17 Deputy Commissioner of Income Tax, Circle -1(1), C. R. Building, I. P. Estate New Delhi Vs. Anand NVH Products Private Limited, F-3/5, Vasant Vihar, New Delhi PAN: AAECA0297J (Appellant) (Respondent) Appellant by Sh. Ajay Kumar Arora, Sr.DR Respondent by Sh. Mukesh Butani, Advocate Sh. Saurabh Nandy, Advocate Ms. Drishti Goyal, Advocate Date of Hearing 01/07/2025 Date of Pronouncement 26/09/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal of the Revenue for Assessment Year (‘AY’) 2016-17 is directed against the order dated 11.06.2024 of the Commissioner of Income Tax (appeal), NFAC, New Delhi [‘CIT(A)’]. 2. The Revenue has raised following grounds: “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Marketing Support Expenses at Rs.4,38,72,325/ without appreciating the facts that there is no sanctity of the furnished agreement dated 15.10.2014 between Anand NVH Products Inc. and the assessee Company as it is written neither on the letter head of the either company nor on stamp paper. Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 2 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Marketing Support Expenses at Rs.4,38,72,325/- without appreciating the facts that there is no business expediency of huge expenses incurred on account of marketing support expenses to its foreign entity. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the Disallowance of remuneration to directors at Rs.4,69,84,889/- without appreciating the facts that the turnover of the business is shrinking year by year on the other had the remuneration paid to the directors is increasing substantially year to year and the assessee failed to justify and explain such inconsistency in payment of director’s remuneration. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the Disallowance of R & D Expenses at Rs.78,73,302/- without appreciating the facts that the expenditure incurred on in house research activities before 29.06.2015 as the certificate u/s 35(2AB) of the Act had been issued by the Ministry of Service & Technology, govt. of India w.e.f. 29.06.2015 5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 3. The relevant facts giving rise to this appeal are that the respondent assessee engaged in the business of manufacturing of automobile and auto parts, filed its Income Tax Return (‘ITR’) on 28.11.2016 declaring income of Rs.5,82,67,931/-. Later on, the ITR was revised on 30.03.2018 declaring income of Rs.3,76,03,750/-. The case was picked up for scrutiny and consequential assessment was completed at income of Rs.14,51,64,940/- wherein the Assessing officer (‘AO’) made following additions/disallowances: S. No. Particulars Amount (Rs.) 1. Suppliers written off 47,50,179 2. Marketing Support Expenses 4,38,72,325 Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 3 3. Travel Expenses 40,80,491 4. Remuneration paid to Directors 4,69,84,889 5. R & D Expenses 78,73,302 3.1 Aggrieved, the assessee filed appeal before the Ld. CIT(A), who deleted the following three disallowances: S. No. Particulars Amount (Rs.) 1. Marketing Support Expenses 4,38,72,325 2. Remuneration paid to Directors 4,69,84,889 3. R & D Expenses 78,73,302 3.2 The relevant part of impugned order, dealing with the above mentioned three disallowances under challenge in this appeal, reads as under: “4.2 Ground of appeal No.2 - disallowed the marketing support expense of Rs.4,38,72,325/- As regards to the above ground, it is noticed that the AO has disallowed the marketing support expense of Rs.4,38,72,325/- paid to Anand NVH Products Inc., an associate entity, by concluding that the appellant could not prove the business expediency of such expenses beyond doubt. While making such addition the AO has pointed out that such payment was made to its own foreign subsidiary without any positive and beneficial result, as during the year sales to USA has fallen down from Rs.99.4 Crores as in F.Y 13-14 to Rs.38.72 Crores as in F.Y 15-16 whereas in same period Marketing support expense increased substantially. On the other hand, the appellant submitted before AO as well as during the appellate proceedings that marketing support expense is different from sales promotion expenses which are directly linked to sales whereas the former are not directly linked with the sales and profit. The said expenses were incurred to make itself a global player though enhancing technical strength & marketing support through marketing support office of Anand NVH Inc. in North America. Further, the appellant has submitted that the such program has definite life cycle of 5-7 years. In the instant case, it can be seen that said expenses has given positive results in subsequent years as turnover and profit has increase substantially. Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 4 The appellant has also filed copy of agreement between the appellant company and its subsidiary, TDS details, Audited B/S of Anand NVH Products INC, necessary explanation regarding nature of expenses and its allowability, relevant case laws, etc. Sec. 37 is residuary Section deals with allowability of business expenses and the same is given below- …….. ……. As per the above, conditions for allowance u/s 37 are as under: - 1. Such expenditure should not be covered under specific Section i.e Section 30 to 36. 2. Expenses should not be capital in nature. 3. The expense should be incurred during the Financial Year. 4. The expense should not be of personal nature 5. The expense should have been incurred wholly & exclusively for the purpose of business or profession. 6. The business should be commenced. Here in the case on hand, the AO has not questioned any of the conditions mentioned above except saying that business expediency of such expenditure has not been proved. However, the fact of the matter is that the appellant has explained the nature of such expenses in detail, which clearly established that the expense has been incurred wholly & exclusively for the purpose of business or profession. The appellant has also filed necessary documentary evidences in the form of Audited Balance sheet ITR & Service agreement with M/s Anand NVH Products Inc., USA, Form 16 for TDS deducted on such services, copy of bills raised by the service provider etc. The appellant could also demonstrate with supporting proof that such expenses has life cycle of 5-7 years and in the subsequent years it has given positive & beneficial results i.e. A.Y. 18-19 & 19-20. The exponential growth in export business vis-à-vis its existing business has also proved the reasonableness of such expenses. From the above, it is clear that the expenses incurred towards market support expenses of Rs.4,38,72,325/- are allowable as per Section 37(1) of Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 5 the Act. Moreover, the AO could not bring anything on record to establish that the expenditure is not linked with the export turnover though the same has been explained by the appellant. Case laws relied upon by the appellant are directly applicable in the case. 1. Hon’ble Delhi High Court in CIT v. Dalmia Cement (P.) Ltd [Del. HC] [2002] 121 Taxman 706 (Delhi) 2. CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 (SC) 3. J.K. Woollen Mfrs. v. CIT [1969] 72 ITR 612 (SC), 4. Aluminium Corpn. of India Ltd. v. CIT [1972]86 ITR 11 (SC) 5. CIT v. Panipat Woollen & General Mills Co. Ltd. [1976] 103 ITR 66 (SC) 6. Punjab & Haryana High Court in Jamna Auto Industries [2008] 167 Taxman 192 (Punjab & Haryana) Considering the above discussion and case laws relied upon, it is held that the expenses claimed by the appellant are genuine business expenses exclusively for business expediency of the business of the appellant and hence are allowable as business expenses. Therefore, the disallowance made on this account is deleted and grounds of appeal is allowed accordingly. 4.4 Ground No.4 – disallowed Director’s remuneration – The AO has disallowed director’s remuneration of Rs.4,69,84,884/- by treating the same as excessive and unreasonable. While finalizing the assessment, the A.O. has observed that total turnover of the business & total profit before remuneration was decreasing by year to year but on the other hand salary paid to its directors has increased substantially. The A.O has also relied on the decision of ITAT Pune in the case of Shri Laxmi Marketing Pvt. Ltd vs. ACIT, Pune (2009) 119 ITD 390 Pune & DCIT vs. M/s. Liberty Phosphate Ltd., ITA No.2997/Ahd./2009 wherein it was held that excessive and unreasonable remuneration paid to the directors without maintaining consistency is not allowed. On the other hand, the appellant submitted that the remuneration paid to the directors is as per its Board resolution which was submitted before the AO at the time of assessment proceedings. The appellant also submitted the copy of ITRs of the directors alongwith financial information of last five years which clearly indicates that the directors are assessed at maximum rate of tax. It was also submitted that remuneration paid to the Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 6 directors are allowed in earlier year & subsequent year and hence, the same cannot be disallowed during the year by treating it as unreasonable and excessive. Further, the profit & loss or turnover can’t be sole criteria to judge the reasonableness of a directors remuneration. Ongoing through the facts of the case and submission of the appellant, it is a fact that the directors are having work experience of 10-15 years and they are assessed at maximum rate of tax. As per the decision of Hon’ble HC Delhi in the case of Sigma Research & Consulting Pvt. Ltd., vs. CIT (2019) 103 taxmann.com 397 (Delhi) where directors have earned income, which was taxable at maximum rate of tax and hence it was not the case where an attempt was made to evade taxes, impugned disallowance deserves to be deleted. Further, it is also a fact that the said remuneration has not been disputed in preceding years and subsequent years despite of the fact that there was increase in directors remuneration in the A.Y.2014-15 & 2015-16 as well. Therefore, it can be said that the AO wrongly disallowed the director’s remuneration without following the rule of consistency as laid down by the Hon’ble SC in the case of Radhasormi Satsang Vs CIT 193 ITR 321. Similarly, in the case of PCIT Vs Patel Alloy Steel Co. Pvt. Ltd., (SC) (2019) 103 taxmann.com 432 Hon’ble SC has held that – once remuneration paid by assessee company to its directors in preceding year was accepted, the same cannot be disregarded during the year in question. Remuneration paid to its directors cannot directly be linked with turnover or profit of the company as in the balance sheet it comes under indirect expenses means thereby it is not directly linked with turnover or profit. There are various variables that determine the extent of profit or turnover of a business and hence, any disallowance of director’s remuneration solely on the basis of profit or turnover is not justifiable. In view of the above discussion, the disallowance made on account of director’s remuneration of Rs.4,69,84,889/- is deleted and grounds of appeal is allowed accordingly. 4.5. Ground No.5 - disallowed revenue expenditure of Rs.78,73,302/- The AO has disallowed revenue expenditure of Rs.78,73,302/- incurred on in house research activities before 29/06/2015 as the Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 7 certificate u/s 35(2AB) of the Act had been issued by the Ministry of Service & Technology, Govt. of India w.e.f. 29/06/2015. On the other hand, the appellant submitted that while finalizing the assessment, the AO has ignored the decision of jurisdiction High Court in the case of Maruti Udyog Ltd., (2017) 397 ITR 728 (Delhi) and decision of Hon’ble Gujarat High Court in the case of CIT Vs. Claris Lifesciences Ltd., (2010) 326 ITR 251 without assigning any reason despite of the fact that on identical issue the Hon’ble Courts have decided the issue in favour of assessee by saying that if the approval is granted by DSIR during the previous year relevant to the assessment year in question, the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred u/s 35 (2AB) of the Act. I have gone through the facts of the case and case laws cited by the appellant. On perusal of the decision of Hon’ble Delhi High Court in the case of Maruti Udyog Ltd., wherein decision of Hon’ble Gujarat High court in the case of CIT vs Claris Lifesciences Ltd., has also been referred, it is noticed that the said decisions are squarely covered in present case. In its decision Hon’ble Delhi High Court has held that “The settled position in law is that, for availing the benefit under Section 35 (2AB) of the Act what is relevant is not the date of recognition or the cut off date mentioned in the certificate of the DSIR or even the date of approval but the existence of the recognition. If a R&D Centre is not recognised it is not entitled to deduction but if it is recognized, it is entitled to the benefit. The Gujarat High Court in Claris Lifesciences (supra) has rightly observed that the date of approval of the R&D Centre, not being a part of the provision, extending benefit only from the date of recognition \"amounts to reading more in the law which is not expressly provided”. In view of the above disallowance made on account of revenue R & D expenses incurred before the grant of the certificate by DSIR is deleted and grounds of appeal is allowed accordingly.” [Emphasis supplied] Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 8 4. Sh. Ajay Kumar Arora, Ld. Senior Departmental Representative (‘Sr. DR’), placing emphasis on various paragraphs of the assessment order, argued the case vehemently and prayed for setting aside the impugned order and allowing the appeal of the Revenue. 5. On the other hand, Sh. Mukesh Butani, Ld. Counsel representing the assessee, drew our attention to the above extracted part of the impugned order. He contended that the Ld. CIT(A)’s order had dealt in every aspects of the issues in detail and passed very well-reasoned order. Marketing support expense of Rs.4,38,72,325/-: 6. The Ld. Counsel submitted that the Ld. AO had disallowed the marketing support expenditure of Rs.4,38,72,325/- paid to Anand NVH Products Inc., an Associate Enterprise (‘AE’) on the reasoning that the assessee could not prove the business expediency and justification of such expenditure paid to its AE without any positive and beneficial result, as sales to USA had gone down from Rs.99.4 Crores in FY 13-14 to Rs.38.72 Crores in FY 15-16. The Ld. Counsel contended that the Ld. AO had not properly appreciated the marketing support expenditure, which had no direct nexus with the sales as it boosted the overall growth of business in long term. He submitted that ‘marketing support expenditure’ and ‘sales promotion expenditure’ were different as the former had no direct link to sales whereas the later had direct nexus with the sales and profit. He submitted that ‘marketing support expenditure’ were incurred by the assessee to emerge as Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 9 global player by enhancing technical strength & marketing support through marketing support office of Anand NVH Inc. in North America. He contended that the impact of ‘marketing support expenditure’ was visible in subsequent years as it had life cycle of 5-7 years. In the support of this proposition, he drew our attention to page 37 to 48 of the Ld. CIT(A), which reads as under: “To understand this issue, the assessee wishes to place on record following facts and assertions: The Appellant is an Original Equipment Manufacturer (OEM) supplier to Ford General Motors, Volkswagen, Maruti, etc and is not in after sales market, sales are based on vehicle programme / project of different OEMs. Initially company was manufacturing parts which were bid by Tier[1]1 multinational players like ZF, Contitech, Magna etc with OEM, due to their technical & marketing strength. Business were procured by those big players and orders were issued by them for supplies. To make the appellant a global player the appellant had to enhance its technical strength & marketing support Marketing support office of Anand NVH Products Inc. (hereinafter called as Anand NVH USA), in North America was required for directly working with customers in North American Free Trade Agreement (NAFTA) area, as it was not possible to meet day to day customer meeting requirements from India. With the help of marketing office, the appellant company was able to procure Global Vendor code of Ford. This lead us to directly bid for different programs in our area of manufacturing strength. Each programme has definite life cycle which is generally 5-7 years. Once our design is accepted, then the sales volume is materialized within 20-24 months as per practiced adopted by OEMs. We were able to obtain a high [1]volume order of Ford programme name \"CD6\". The Global sales for this business will be around US $5 million annually. The marketing team was able to procure another running business programme name \"U502\" with annuals sales of US $8 million in two locations of NAFTA area. The company has been awarded in September 2018 another business from Ford for a New Global program called \"T6\" for which we will add sales of $3.5 Million in 2020. Marketing team in NAFTA is a win-win situation for our business as from India we are not in position to bid for orders & increase our exports. The key to success in the automotive OEM business is to have Local sales and marketing in USA and we are sure that the expenses being incurred in USA will pay for themselves in the long-term. Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 10 There is difference in Sales promotion expenses and marketing expenses. Sales promotion expenses are directly linked with the sales eg sales incentives to distributors, agents & employees, sales commission etc. These will increase / decrease in proportionate to increase / decrease in sales. But same is not valid in case of marketing expenses. In case marketing expenses. you try to place your products in existing / new market / customers/ programme and which may / may not materialise. Thus, these expenses can't be linked with Sales. So, our Marketing Support Charges are not directly linked with Sales. As stated here in above, the appellant is engaged in the manufacturing of auto parts and selling the same in international market primarily in USA. The total sales of the appellant and export sales for the previous three years is as under: As per Audited Balance Sheet Asstt. Year 2014-15 (Rs.) in crore Asstt year 2015- 16 (Rs.) in crore Asstt Year 2016- 17 (Rs.) in crore Sales- Export 149.12 123.08 69.39 Sales-Domestic 41.91 49.39 51.18 Total Turnover as per audited P & L A/c 191.03 172.47 120.57 The appellant had been facing lot of complaints from its Buyers in United States (USA) with regard to quality of the products, which resulted in starting loosing the confidence of Buyers. To get rid of the quality issues, the appellant was required to place its own technical team in USA so that the complaints of the Buyers could be addressed personally by the Appellant, which also would boost the confidence of the Buyers in general. Moreover, the USA is very big market and Hub of Auto manufacturers, and by having an office in USA, the Appellant expected huge business prospects in US market. Therefore, the appellant, in order to have presence in the US market, incorporated a company in US under the name & style of M/s Anand NVH Inc. as subsidiary of the assessee. The main object of the said new entity is obviously, to represent the assessee company before the prospective Buyers for new business and also to cater the needs of the existing buyers and to address the Buyers, on various day to day technical and non-technical issues. It is also not out of context to mention here that in the each programme has definite life cycle of 5 to 7 years business cycle. Once the designs are approved, then the sales is materialized within 20 months to 24 months generally and which may observe following stages: a. Requisition of component/part from OEM b. Discussion and Eligibilty test by OEM and tentative price c. If agrees. Technical drawings d. Development of Tools and dies e. Development of component f. Sample testing to OEM Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 11 g. Sending Sample for testing and getting its report h. If any correction is required, then corrections in Tools/dies etc. i. Pilot production and supply j. Testing of Pilot lot and report k. If ok, then raising of PO l. Checking Plant & Machinery, Tools and dies for desired quantity m. If ok, then commercial production starts. If not sufficient then placement of necessary, Plant & machinery / Tools / dies. And so on. It is clear from the above, that before start of commercial production of any one component, the assessee has to undergo many time-consuming processes, which may take, as stated here in above, from 20 months to 24 months from the date of approval of the product and sometimes may be even more. So, the assessee with the support of the USA office and hard work, had positive results in subsequent years, which is clear from the following Table: As per Audited Balance Sheet AY 2016-17 (Rs.) in crore AY 2017-18 (Rs.) in crore AY 2018-19 (Rs.) in crore AY 2019-20 (Rs.) in crore Sales-Export 69.39 58.27 77.29 141.17 Sales-Domestic 51.18 56.04 55.35 50.55 Total turnover as per audited P&L account 120.57 114.31 132.64 191.72 On perusal of the above chart, it is clear that there has been exponential growth in export sales of the Appellant Company, which has increased from Rs. 69.39 crore in AY 2016-17 to Rs. 141.17 lacs in A.Y. 2019-20. The growth in turnover in the case of following parties would also support to our contention. Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 12 M/s Anand NVH USA has also helped the assessee (india) to enlarge the customer base, which is evident from the fact that the various new projects got from customers were added with the hard work and efforts made by M/s Anand NVH USA.” 7. The Ld. Counsel further submitted that the Ld. AO had referred the ‘marketing support expenditure’ paid to the assessee’s foreign AE for Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 13 benchmarking to the Ld. Transfer Pricing Officer (‘TPO’), who found it at Arm’s length and did not propose any adjustment in this regard. 8. The Ld. Counsel contended that the disallowance of ‘marketing support expenditure’ had been done by questioning the business expediency and validity of agreement though the Ld. AO had not brought any material on the record to establish that the conditions of allowability of expenditure under section 37 of the Income Tax Act, 1961 (‘Act’) were not met and agreement had to be always on the letter head/stamp paper (reference was invited to various judicial pronouncements including the decision of the Tribunal in the case of Indus Mobile Distribution (P) Ltd. 109 taxmann.com 404). He submitted that the Sales-Export of the company had gradually increased over the years, from Rs.69.39 crores to Rs.141.17 crores within a span of four years, i.e. from AY 2016-17 to 2019-20. Further, he drew our attention to various pages of the Paper Book (‘PB’) containing invoices raised by the assessee’s AE with respect to the expenditure on maintenance & support services. Further, he placed reliance on a various case laws: i. S.A. Builders 288 ITR 1 (SC) ii. Sasson J David & Co. Pvt. Ltd. 118 ITR 261 (SC) iii. Dalmia Cement (P) Ltd. 254 ITR 377 (Del. HC) 9. The Ld. Counsel further submitted that the commercial production of any auto-component from the date of designing/approval of the product was time consuming process and it took a year or two. It was submitted that Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 14 since the assessee was engaged in producing auto parts of Ford General Motors, Volkswagen, Maruti, etc. etc. as Original Equipment Manufacturer; therefore, it entered into an agreement with its AE to make the assessee a global player by enhancing its technical strength and marketing support, for which it had made payment of Rs.4,38,72,325/-. The said payment was made to Anand NVH Products Inc. (US-based company), which looked after the various requirements of customers of North America. Due to the support of the AE, the assessee got the business from Ford. The marketing expenses required a particular product to be approved by the customer, and thereafter manufacturing commenced as per orders placed by customers. This process was a time consuming process; therefore, marketing support charges were linked with the future prospects of the assessee as evident from sales of subsequent years. 10. We have heard both parties and have perused material available on the record. We find merit in the arguments/contentions/submission of the Ld. Counsel. We, therefore, in view of the facts of this issue, reasoning mentioned in the impugned order, above discussion and judicial pronouncements relied upon, are of considered view that there is no infirmity in the finding of the Ld. CIT(A) that the ‘marketing support expenditure’ of Rs.4,38,72,325/- is justified and thus, the same is allowable expenditure under section 37 of the Act. Hence, we decline to interfere with the finding of the Ld. CIT(A) in this regard. Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 15 Disallowance of Directors’ remuneration of Rs.4,69,84,889/-: 11. The Ld. AO, questioning excessiveness and unreasonableness of Directors’ remuneration, decline in turnover of the assessee and relying on decisions of the Tribunal in the case of Shri Laxmi Marketing Pvt. Ltd vs. ACIT, Pune (2009) 119 ITD 390 Pune & DCIT vs. M/s. Liberty Phosphate Ltd., ITA No.2997/Ahd./009, disallowed it as there was no justification in increase in Directors’ remuneration when the sales were declining. On the other hand, the Ld. Counsel submitted that the Directors’ remuneration was paid as per its Board resolution. Further, he contended that the tax was paid on the remuneration by directors at maximum marginal rate and there was no tax evasion. ITRs of Directors of five years were placed on the record. Further, it was contended that remuneration paid to directors had never been disallowed in preceding and subsequent years. Hence, the same could not be disallowed during the year on the reasoning of unreasonableness and excessiveness as directors’ remuneration has no direct nexus with the turnover of the company, contended the Ld. Counsel. He argued the case on principle of consistency also. The Ld. Counsel placed reliance on following decisions: i. Radhasoami satsang 193 ITR 321 (SC) ii. MLS CBRE [2020] 116 taxmann.com 133 (DHC) iii. Future First Info Services (P) Ltd. [2022] 145 taxmann.com 35 (DHC) iv. Sonar Airotech (P) Ltd. [1993] 69 taxmann.com 429 (CHC) v. Sigma Research & Consulting P Ltd. [2019] 103 taxmann.com 397 (DHC) Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 16 12. We have heard both parties and have perused material available on the record. We find merit in the arguments/contentions/submission of the Ld. Counsel. We, therefore, in view of the facts of this issue, reasoning mentioned in the impugned order, above discussion and judicial pronouncements relied upon, are of considered view that there is no infirmity in the finding of the Ld. CIT(A) that the Directos’ remuneration of Rs.4,69,84,889/- is justified and thus, the same is allowable expenditure under section 37 of the Act. Hence, we decline to interfere with the finding of the Ld. CIT(A) in this regard. Disallowance of R & D expenditure of Rs.78,73,302/-: 13. The Ld. AO has disallowed the R & D expenditure of Rs.78,73,302/- on the reasoning that the expenditure incurred after the issuance of certificate under section 35(2AB) of the Act by the Ministry of Service & Technology, Govt. of India w.e.f. 29/06/2015 was allowable and not of the entire FY. The Ld. Counsel submitted that the Ld. AO ignored the decision of jurisdictional High Court in the case of Maruti Udyog Ltd., (2017) 397 ITR 728 (Delhi) and decision of Hon’ble Gujarat High Court in the case of Claris Lifesciences Ltd., (2010) 326 ITR 251 without assigning any reason despite of the fact that these case laws were cited during the assessment proceedings. It was contended that the identical issue had been decided by the Hon’ble Courts in favour of the assessee by holding that if the approval is granted by DSIR during the previous year relevant to the assessment year in Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 17 question, the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under section 35 (2AB) of the Act. 14. We have heard both parties and have perused material available on the record. We find merit in the arguments/contentions/submission of the Ld. Counsel. We, therefore, in view of the facts of this issue, reasoning mentioned in the impugned order, above discussion and judicial pronouncements relied upon, are of considered view that this issue is squarely covered by the decisions of the Hon’ble High Courts in the cases of Maruti Udyog Ltd., (supra) Claris Lifesciences Ltd. (supra) and thus, hold that there is no infirmity in the finding of the Ld. CIT(A) that the R & D expenditure of Rs.78,73,302/- is allowable under section 35(2AB) of the Act. Hence, we decline to interfere with the finding of the Ld. CIT(A) in this regard. 15. In the result, the appeal of assessee is allowed as above. Order pronounced in open Court on 26th September, 2025 Sd/- Sd/- (YOGESH KUMAR U.S.) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26/09/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT/CIT Printed from counselvise.com ITA No. 3612/Del/2024 Anand NVH Products Pvt. Ltd. 18 4. CIT(A) 5. Sr. DR-ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "