DCIT, New Delhi V. M/s. Earthline Apparels Pvt. Ltd., Delhi

ITA 1456/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0558 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Keywords: Maximum Marginal Rate; Proportionate interest; Additional evidence; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1456/DEL/2017 : ASSTT. YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8(1), NEW DELHI VS M/S EARTHLINE APPARELS PVT. LTD., 2168, GURUDWARA ROAD, KAROL BAGH, DELHI-110005 (APPELLANT) (RESPONDENT) PAN NO. AABCE4236G ASSESSEE BY : SH. PRADEEP DINODIA, FCA REVENUE BY : SH. SARAS KUMAR, SR. DR DATE OF HEARING: 18.12.2019 DATE OF PRONOUNCEMENT: 20.12.2019 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF LD. CIT (A)-3, DELHI DATED 16.12.2016. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS O F THE CASE IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES O F RS.25,92,188/-. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS OF THE CAS E IN ADMITTING ADDITIONAL EVIDENCE IN THE SHAPE OF DETAILS OF LOAN TAKEN FROM BANK AND WORKING OF INTEREST, IN VIOLATION OF THE P ROVISIONS OF RULE 46A OF THE I.T. RULES AND WITHOUT CONFRONTING TO A.O. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS OF THE CAS E IN DELETING THE ADDITION OF RS.3,11,34,517/- MADE BY THE AO ON ACCOUNT OF ENHANCEMENT OF GROSS PROFIT. ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 2 3. THE GROUND NO.1 OF THE APPEAL HAS BEEN RAISED BY THE ASSESSEE REGARDING THE ADDITION OF RS.25,92,188/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF EXCESS INTEREST. THE SUBMISSIONS OF THE ASSESSEE FILED BEFORE THE LD. CIT(A) IN THIS REGARD WHICH ARE RELIED BY T HE LD. AR ARE REPRODUCED AS UNDER:- ' AS REGARDS THE ADDITION ON ACCOUNT OF EXCESS INTERE ST CHARGED TO PROFIT & LOSS ACCOUNTS, IT IS BROUGHT TO YOUR KI ND NOTICE THAT THE LEARNED A.O. HAS ADDED BACK THE INTEREST OF RS. 2S,92,188/- AS THE APPELLANT HAS TRANSFERRED THE LE SSER AMOUNT OF INTEREST TO HIS SISTER CONCERN NAMELY M/S AERO CLUB AND CLAIM THE HIGHER AMOUNT OF INTEREST. WE WOULD LIKE TO INFORM YOU THAT THE APPELLANT HAS TAKEN LOAN OF RS. 12 CR. & 4 CR. FROM KOTAK MAHINDRA BANK AND PROPORTIONATE AMOUNT OF RS. 5.50 CR & 3.65 CR HAS B EEN TRANSFERRED TO M/S AERO CLUB RESPECTIVELY. THE APPE LLANT HAS NOT CLAIMED THE TOTAL INTEREST ON LOAN AS ITS EXPEN SES RATHER IT HAS TRANSFERRED THE PROPORTIONATE AMOUNT OF INTERES T TO M/S AERO CLUB. THE APPELLANT HAS TRANSFERRED THE INTERE ST AMOUNT ON DIMINISHING BALANCE BASIS I.E. IN THE RATIO OF T HE PRINCIPAL AMOUNT HAS BEEN REPAID BY THE SISTER CONCERN NAMELY M/S AERO CLUB. WE RELY ON THE JUDGEMENTS WHICH CLEARLY STATES THAT THE EXPENSES I.E. INTEREST SHOULD BE USED 'FOR THE PURP OSE OF BUSINESS' INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A TH IRD PARTY ALSO BENEFITS THEREBY:- I. SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD., V. COMMISSIONER OF INCOME TAX (APPEALS) AND ANOTHER REPORTED IN 2007 (288) ITR THE EXTRACT OF RELEVANT PORTION OF THE JUDGEMENT IS REPRODUCED AS UNDER:- 'WE AGREE WITH THE VIEW BY THE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. DALMIA CEMENT (P.) LT D. [(2002) 254 ITR 377], THAT ONCE IT IS ESTABLISHED T HAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE O F THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINES S OF THE ASSESSEE ITSELF), THE REVENUE CANNOT JUSTIFIABLY CL AIM TO PUT ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 3 ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN TH E POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECID E HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. IT IS FURTHER HELD THAT NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT AND THE INCOME-TAX AUTHORITIES MUST OUT THEMSELVES IN THE S HOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOUL D ACT AND THEY MUST NOT LOOK AT THE MATTER FROM THEIR OWN POINT BUT THAT OF A PRUDENT BUSINESSMAN. AS ALREADY STATED AB OVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDI ENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS A DVANCED FOR EARNING PROFITS.' II. SIMILAR VIEW HAS BEEN TAKEN BY THE APEX COURT I N THE CASE OF HERO CYCLES (P) LTD VS. CIT 514/2008 AND III. GUJARAT HIGH COURT IN THE CASE OF NITIN K MEHT A VS COMMISSIONER OF INCOME TAX (APPEALS) 333 ITA 2014' 2.1 HAVING GONE THROUGH THE SUBMISSIONS OF THE APPE LLANT, ORDER OF THE ASSESSMENT MADE BY THE ASSESSING OFFIC ER AND THE MATERIAL EVIDENCES PLACED ON THE RECORD, IT EME RGES FROM THE FACTS OF THE CASE THAT THE ASSESSING OFFICER HA S MADE THE DISALLOWANCE OF THE INTEREST OF RS.25,92,188/-. THE COUNSEL SUBMITTED THAT THE COMPANY HAS TAKEN LOAN OF RS. 16,00,00,000/- FROM THE BANK AND TRANSFERRED RS.9,15,00,000/- TO M/S AERO CLUB AND TRANSFERRED I NTEREST OF RS.9.15 CRORE TO M/S AERO CLUB. THE ASSESSING OFFIC ER ACCORDINGLY, DISALLOWED THE PROPORTIONATE INTEREST OF RS.25,92,188/-. 4. DURING THE ARGUMENTS BEFORE US, THE LD. AR ARGUE D THAT THE ENTIRE REPAYMENT OF THE LOAN TAKEN BY THE ASSESSEE ALONG W ITH THE INTEREST HAS BEEN PAID BY M/S AERO CLUB. HENCE, THE DISALLOWANCE IS UNCALLED FOR. THE LD. DR SUPPORTED THE ARGUMENTS OF THE ASSESSING OFF ICER AND SUBMITTED THAT THE INTEREST PAID BY THE ASSESSEE ON THE LOAN WHICH WAS NOT USED WHOLLY AND FULLY FOR THE PURPOSE OF THE BUSINESS AN D HENCE, A NON- ALLOWABLE DEDUCTION. ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 4 5. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 6. WE FIND THE COMPLETE DETAILS OF THE LOAN TAKEN F ROM THE BANK WERE CALLED FOR AND EXAMINED DURING THE APPELLATE PROCEE DINGS BY THE LD. CIT (A). THE INTEREST HAS BEEN WORKED OUT ON THE REDUCE D AMOUNT OF THE BALANCE OUTSTANDING WITH M/S AERO CLUB. WE FIND THA T THE REPAYMENT OF THE ENTIRE LOAN INCLUDING THE INTEREST AMOUNT OUTST ANDING WITH THE ASSESSEE HAS BEEN MADE BY M/S AERO CLUB. IN VIEW OF THE FACTS ON THE RECORD THERE IS NO JUSTIFICATION FOR MAKING THE DIS ALLOWANCE OF THE INTEREST, HENCE WE DECLINE TO INTERFERE WITH ORDER OF THE LD. CIT (A). 7. REGARDING THE GROUND NO. 2, WE FIND NO MATERIAL ON RECORD TO PROVE THAT THE LD. CIT (A) HAS ADMITTED ANY ADDITIONAL EV IDENCE WHICH HAVE NOT BEEN FILED BEFORE THE ASSESSING OFFICER. REGARDING THE LOAN, THE TOTAL COST OF INTEREST ON THE LOAN AMOUNT HAVE BEEN DULY BORNE BY THE RECIPIENT M/S AERO CLUB ON DIMINUTION BALANCES. THE LD. CIT (A) H AS ONLY EXAMINED THE DETAILS OF THE BANK, LOANS AND THE REPAYMENTS. HENC E, THE APPEAL OF THE REVENUE TAKEN UP AT GROUND NO. 2 WITH REGARD TO RUL ES 46A IS HEREBY DISMISSED. 8. IN GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS R AISED THE ISSUE OF ADDITION OF RS.3,11,34,517/- ON ACCOUNT OF ENHANCEM ENT OF THE GROSS PROFIT. THE ASSESSING OFFICER HELD THAT THE ASSESSE E HAS DISPROPORTIONATELY TRANSFERRED THE PROFIT TO ITS SISTER CONCERN. THE S UBMISSIONS OF THE ASSESSEE FILED BEFORE THE LD. CIT (A) IN THIS REGAR D ARE REPRODUCED AS UNDER:- 'AS REGARDS TO ADDITION ON ACCOUNTS OF ESTIMATED GR OSS PROFIT, IT IS BROUGHT TO YOUR KIND NOTICE THAT THE LEARNED A.O . HAS ADDED BACK AN AMOUNT OF RS. 3,11,34,517/- ALLEGING THAT T HE APPELLANT HAS DISPROPORTIONATELY TRANSFERRED ITS PROFIT TO IT S SISTER CONCERN I.E. M/S AERO CLUB. ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 5 THE APPELLANT HAS PAID EXCISE DUTY ON RETAIL SALE P RICE BASIS AS THE GOVERNMENT HAS NOTIFIED BRANDED READY-MADE GARM ENTS AND MADE-UP ARTICLES FOR VALUATION WITH REFERENCE TO RE TAILS SALES PRICE. SECTION 4A OF CENTRAL EXCISE ACT 1944 READ W ITH RULE 9 OF VALUATION RULES IN RESPECT OF VALUATION OF EXCISABLE GOODS WITH REFERENCE TO RETAIL SALE PRICE IS AS UNDER: (1) .. (2) WHERE THE GOODS SPECIFIED UNDER SUB-SECTION (1 ) ARE EXCISABLE GOODS AND ARE CHARGEABLE TO DUTY OF EXCIS E WITH REFERENCE TO VALUE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 4, SUCH VALUE SHALL BE DEEMED TO BE THE RET AIL SALE PRICE DECLARED ON SUCH GOODS LESS SUCH AMOUNT OF ABATEMEN T, IF ANY, FROM SUCH RETAIL SALE PRICE AS THE CENTRAL GOVERNME NT MAY ALLOW BY NOTIFICATION IN THE OFFICIAL GAZETTE. (3) (4) .. EXPLANATION 1 FOR THE PURPOSES OF THIS SECTION, ' RETAIL SALE PRICE' MEANS THE MAXIMUM PRICE AT WHICH THE EXCISAB LE GOODS IN PACKAGED FORM MAY BE SOLD TO THE ULTIMATE CONSUMER AND INCLUDES ALL TAXES, LOCAL OR OTHERWISE, FREIGHT, TR ANSPORT CHARGES, COMMISSION PAYABLE TO DEALERS, AND ALL CHARGES TOWA RDS ADVERTISEMENT, DELIVERY, PACKING, FORWARDING AND TH E LIKE AND THE PRICE IS THE SOLE CONSIDERATION FOR SUCH SALE: WE WOULD LIKE TO INFORM YOU THAT THE LEARNED AO HAS FAILED TO CONSIDER THAT THE APPELLANT HAS MADE ALL SALES TO M /S AERO CLUB, AS IT WAS EXCLUSIVELY MANUFACTURING GARMENTS FOR DU RING THE YEAR UNDER APPEAL. THE ASSESSEE SOLD THE GARMENTS TO M/S AERO CLUB AT COST PLUS PROFIT MARGIN WHICH WORKED OUT APPROXI MATELY 30% TO 35% OF THE MRP / RETAIL SALES PRICE OF M/S AERO CLUB VARYING FOR DIFFERENT GARMENTS. THE LD. AO HAS TAKEN A VIEW THAT APPELLANT HAS DISPROPORTIONATELY TRANSFERRED ITS PR OFIT TO M/S AERO CLUB, IT INCURS HEAVY MARKETING AND ADMINISTRATIVE EXPENSES AND DERIVES ITS MRP BY LOADING ALL THESE COSTS TO THE P URCHASE COST. WE HUMBLY SUBMIT THAT THE APPELLANT DOES NOT NEED T O INCUR HEAVY EXPENDITURE ON MARKETING EXPENSE AS IT EXCLUS IVELY MANUFACTURE FOR AERO CLUB, ON THE OTHER HAND, AERO CLUB SELLS THOSE GARMENTS THROUGH ITS EXCLUSIVE RETAIL OUTLETS SITUATED PAN INDIA FOR WHICH IS THE SALE PRICE FOR THE APPELLANT . MOREOVER, AS GARMENT IS NOT THE MAIN PRODUCT FOR AERO CLUB, IT S ELLS THESE PRODUCTS @ 40% TO 50% DISCOUNT. ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 6 THE LD. AO HAS FAILED TO CONSIDER OUR AFORESAID SUB MISSION SUBMITTED BEFORE HIM VIDE OUR LETTER DATED 27.01.20 15 VIDE PARA NO 4 AND 6 & DATED 16.03.201.5 VIDE PARA NO 3. I. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE O F CST VS ESUFALI (1973) 90 ITR 271 'THAT WHERE THE ASSESSEE HAS ADMITTEDLY FILED ACCOUNTS, BALANCE SHEET: ETC THERE IS NO SUGGESTION THAT THE ACCOUNTS ARE FALSE OR FRAUDULEN T, AN ASSESSMENT ON BEST JUDGEMENT MUST BE BASED ON SUCH ACCOUNTS. AND ESTIMATE MODE BY THE ASSESSING OFFICER MUST BE BONAFIDE AND ON RATIONALE BASIS.' II. IT HAS ALSO BEEN HELD IN THE CASE OF SHRI SHAN KER SUGAR MILLS 1993 ITR 669 'THAT EVEN IF GUESS WORK IS RESO RTED TO FOR ESTIMATION OF GROSS PROFIT ETC. IT SHOULD NOT BE A WILD GUESS BUT BASED ON FACTS AND CIRCUMSTANCES OF THE CASE. IT HA S ALSO BEEN HELD THAT THE ORDER SHOULD BE WELL REASONED ORDER A ND MERELY GENERAL COMMENTS GIVEN IN THE ASSESSMENT ORDER WITH OUT GIVING THE FACTS OR CIRCUMSTANCES OF THE CASE DOES NOT EMP OWER THE LEARNED ASSESSING OFFICER TO MAKE HUGE ADDITION OF APPROX. RS. 10 LACS. IT IS FURTHER RESPECTFULLY SUBMITTED THAT IN THE CASE OF THE ASSESSEE. THE ESTIMATE MADE IS NOT A WELL REASONED ESTIMATE AND DESERVES TO BE REJECTED.' III. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN C. VALIMUTTY (1996) 60 ITR 339 'THAT THE BEST JUDGEMEN T ASSESSMENT MUST HAVE REASONABLE NEXUS TO THE MATERI AL AVAILABLE'. AND IT WAS HELD IN THE CASE OF BRIJ BHUSHAN LAL P K UMAR 1987 115 ITR 524 SC 'THAT THE ESTIMATE MUST BE HONEST AND FA IR'. IV. DHAKESHWARI COTTON MILLS LTD. VS. COMMISSIONER OF INCOME-TAX [26 ITR 775 (SC)] - 'IN MAKING THE ASSES SMENT U/S.143, THE ASSESSING OFFICER IS NOT ENTITLED TO M AKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO A NY EVIDENCE OR ANY MATERIAL AT ALL. THERE MUST BE SOME THING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT.' THE LD. AO HAS FAILED TO APPRECIATE THAT THE BUSINE SS MODEL OF THE APPELLANT AND ITS SISTER CONCERN IS ALTOGETHER DIFFERENT, WHITE THE APPELLANT IS A MANUFACTURING CONCERN EXCLUSIVEL Y PRODUCING APPARELS FOR M/S AERO CLUB, IT HAS FAILED TO CONSID ER THE FACT THAT EVEN AERO CLUB IS NOT ABLE TO SELL THESE APPARELS A T THE MRP AS IT IS NOT A BRAND KNOWN FOR CASUAL FOOTWEAR AND DUE TO THIS IT HAS TO OFFER 40% TO 50% FLAT DISCOUNT ON APPARELS BROUGHT FROM THE APPELLANT. MOREOVER, THE ASSUMPTIONS TAKEN BY THE I D. AO WHILE ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 7 ARRIVING AT GROSS PROFIT RATIO OF THE APPELLANT IS ARBITRARY AND WITHOUT ANY BASIS. IN VIEW OF THE ABOVE SUBMISSION IT IS MOST HUMBLY P RAYED THAT THE ABOVE MENTIONED ADDITIONS MADE BY LEARNED ASSES SING OFFICER ARE FULLY MISCONCEIVED AND DESERVES TO BE D ELETED.' 9. DURING THE ARGUMENTS BEFORE US, THE LD. DR RELIE D ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). 10. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE REASO NING GIVEN BY THE LD. CIT (A) WHICH IS AS UNDER: HAVING GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT, ORDER OF THE ASSESSMENT MADE BY THE ASSESSING OFFICER AND TH E MATERIAL EVIDENCES PLACED ON THE RECORD, IT EMERGES FROM THE FACTS THAT THE COMPANY IS MANUFACTURING THE DIFFERENT VARIETY OF BRANDED READYMADE GARMENTS AS PER THE SPECIFIC DIRECTIONS O F THE PURCHASE. THE ENTIRE SALES ARE MADE TO THE AERO CLU B WHO HAS CREATED ITS MARKET FOR THE BRAND AERO'. THE EVIDEN CE ADDUCED DURING THE APPELLATE PROCEEDINGS SHOW THAT THE COMP ANY HAS PAID THE EXCISE DUTY AT THE RETAIL SALES PRICE OF T HE AERO CLUB. THE COMPANY HAS SOLD THE GARMENTS TO M/S AERO CLUB AT T HE COST PLUS PROFIT MARGIN OF 30% TO 35% OF THE MAXIMUM RETAIL P RICE OF M/S AERO CLUB WITHOUT INCURRING ANY ADMINISTRATIVE MARK ETING AND DISTRIBUTION COST WHEREAS M/S AERO CLUB HAS INCURRE D THE ADMINISTRATIVE COST OF RS. 41 CRORE AND MARKETING A ND DISTRIBUTION COST OF RS.142 CRORE. THE POTENTIAL AD MINISTRATIVE MARKETING AND DISTRIBUTION COST FOR THE SALES MADE BY THE COMPANY IS NIL. THE FINANCIAL ACCOUNTS OF M/S AERO CLUB FOR THE YEAR ENDING 31ST MARCH 2012 WERE EXAMINED AT IT WAS NOTED THAT THE FIRM HAS SHOWN THE PROFIT OF RS.67,49,53,737. T HE BUSINESS MODEL OF THE COMPANY IS ENTIRELY DIFFERENT AS COMPA RED TO M/S AERO CLUB AND SELLS THE PRODUCT WITHOUT INCURRING T HE ADMINISTRATIVE, MARKETING AND DISTRIBUTION COST. TH E AERO CLUB SELLS THE GARMENTS THROUGH ITS EXCLUSIVE RETAIL OUT LETS SITUATED PAN INDIA OF THE INCURRING THE HEAVY ADMINISTRATIVE , MARKETING AND DISTRIBUTION COST. THE EVIDENCE ADDUCED REGARDI NG THE SALES MADE BY M/S AERO CLUB SHOW THAT THE READYMADE GARME NTS HAVE BEEN SOLD IN THE RETAIL MARKET AT 40% DISCOUNT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY SALES HAVE BEEN F OUND TO BE SUPPRESSED OR ANY EXPENDITURE HAS BEEN INFLATED TO REDUCE THE ITA NO. 1456/DEL/2017 EARTHLINE APPARELS PV T. LTD. 8 TAXABLE PROFITS. IN VIEW OF THE FACTS DISCUSSED ABO VE, THE ESTIMATED ADDITION OF RS.3,11,34,577/- MADE TO THE GROSS PROFIT OF THE COMPANY IS DELETED. 11. SINCE, THE REVENUE HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THE SUPPRESSION OF THE SALES EXCEPT FINANCIAL RECALCULA TION OF THE GP, NP AND EXPENSES. THE ASSESSEE DOES NOT INCUR ANY ADVERTISI NG, MARKETING AND SALES PROMOTION EXPENSES AS THE ENTIRE PRODUCTION O F THE GOODS IS SOLD TO M/S AERO CLUB. THE ASSESSEE DEBITED ONLY THE MANUFA CTURING EXPENSES IN THEIR P&L ACCOUNT. ALL THE ADVERTISING, MARKETING A ND PROMOTION EXPENSES ARE INCURRED BY THE M/S AERO CLUB, THUS, INDICATING THE BUSINESS MODELS OF BOTH THE ENTITIES ARE DIFFERENT. WE ALSO GONE THROU GH THE COMPETITION OF INCOME OF THE M/S AERO CLUB AND FOUND IT TO BE A TA X PAYING COMPANY AT MAXIMUM MARGINAL RATE. HENCE, THE REVENUES ALLEGAT ION THAT THE SALE IS A DIVERSION OF PROFIT OF SCHEME CANNOT BE GIVEN ANY C REDENCE. HENCE, KEEPING IN VIEW, THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED ORDER PRONOUNCED IN THE OPEN COURT ON 20/12/2019. SD/- SD/- (H. S. SIDHU) (DR . B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 20/12/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR