Sports & Leisure Apparel Ltd., New Delhi V. DCIT, New Delhi

ITA 3270/DEL/2010

• Counselvise Citation: 327020114 RSA 2010
• Duration Of Justice: 3 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 28-10-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 02-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS REN UKA JAIN GUPTA SENIOR
• Keywords: Capital asset; Gift; Corroborative evidences; Tax effect; Revenue expenditure; Capital expenditure
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G: NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NOS.3270, 3271 & 3272/DEL/ 2010 (ASSESSMENT YEARS : 2003-04, 2004-05 & 2005-06) SPORTS & LEISURE APPAREL LTD., VS. DCIT, CIRCLE 9 (1), B 25, QUTAB INSTITUTIONAL AREA, NEW DELHI. NEW DELHI. (PAN : AAACS2959M) ITA NO.3713/DEL/ 2010 (ASSESSMENT YEAR : 2003-04) DCIT, CIRCLE 9 (1), VS. SPORTS & LEISURE APPAREL LTD., NEW DELHI. B 25, QUTAB INSTITUTIONAL AREA, NEW DELHI. (PAN : AAACS2959M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADVOCATE RESPONDENT BY : MRS. REN UKA JAIN GUPTA, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : ITA NOS.3270/DEL/2010 & 3713/DEL/2010 ARE CROSS AP PEALS FOR ASSESSMENT YEAR 2003-04 EMANATING FROM THE ORDER OF CIT (A)-XII, NEW DELHI DATED 05.03.2012. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF GARMENTS UNDER THE BRAND NAME OF LACOST E. ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 2 3. THE GROUNDS OF ASSESSEES APPEAL IN ITA NO.3270/ DEL/2010 READ AS UNDER :- 1. THE LEARNED CIT [A] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,86,019 ON ACCOUNT OF EXTRA CLA IMS BY DEALERS ON ACCOUNT OF SALES RELATING TO LAST YEAR. 2.1 THE LEARNED CIT [A] HAS ERRED IN NOT DELETING T HE DISALLOWANCE- AS CONTINGENT LIABILITY- OF RS.11,11, 500 -ON ACCOUNT OF GIFT/DISCOUNT VOUCHERS ISSUED TO CUSTOME RS AS SALES PROMOTION SCHEMES THE VALIDITY OF WHICH HAD N OT EXPIRED. 2.2 BOTH THE AUTHORITIES BELOW HAVE IGNORED THAT TH E APPELLANT HAS REVERSED THE LIABILITY TO THE EXTENT NOT UTILIZED AND ADMITTED AS INCOME U/S 41 IN THE NEXT YEAR -RES ULTING IN DOUBLE ADDITION. 3. THE LEARNED CIT [A] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,82,308 BEING 10% OUT OF ADVERT ISEMENT EXPENSES DEEMED AS RESULTING IN ENDURING ADVANTAGE. 4 THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHO UT PREJUDICE TO EACH OTHER. 5 THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, AL TER, ABANDON OR SUBSTITUTE ANY OF THE ABOVE GROUNDS DURI NG THE HEARING OF THE APPEAL. 4. IN THE GROUND NO.1, THE ISSUE RAISED IS REGARDIN G CONFIRMING THE DISALLOWANCE OF RS.7,86,019/-. THE ASSESSEE HAS CLA IMED THAT THE AMOUNT HAS BEEN PAID TO ITS FOUR FRANCHISES, NAMELY, KHAJU RAHO APPARELS, AGRA, INDIA SAFETY VAULTS LTD., PUNE, RIDDHI SIDDHI, UDAI PUR AND SPORTS LIFE STYLE, LUDHIANA. THIS AMOUNT IS CLAIMED TO BE PAID FOR LOSSES DUE TO LACK OF SALES IN 2001-02. THE ASSESSEE CLAIMED THAT THE DECISION TO PAY THE ADDITIONAL CLAIM AS COMMISSION WAS TAKEN IN THE FIN ANCIAL YEAR 2002-03 ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 3 PERTAINING TO ASSESSMENT YEAR 2003-04, THEREFORE, I T HAS BEEN CLAIMED IN THIS YEAR ONLY. THE ASSESSING OFFICER HELD THAT ASS ESSEE COLD NOT GIVE ANY DOCUMENTARY EVIDENCE REGARDING THE MANAGEMENT DECIS ION WHY THIS AMOUNT IS PAID IN THIS YEAR AND WHAT WAS THE GROUND OF COMMERCIAL AND BUSINESS EXPEDIENCY. THE ASSESSING OFFICER HELD TH AT THIS PRIOR PERIOD EXPENSES DOES NOT PERTAIN TO THE BUSINESS ACTIVITIE S OF THE RELEVANT FINANCIAL YEAR 2002-03, THEREFORE, IT CANNOT BE ALL OWED IN THIS YEAR. THE CIT (A) HAS CONFIRMED THE ADDITION BY HOLDING THAT THE ASSESSEE HAS GIVEN FRANCHISE OUTLETS TO THESE PERSONS AS SUCH THERE WA S NO OBLIGATION, LEGAL OR COMMERCIAL TO COMPENSATE THE DEALERS. THE CIT (A) A LSO DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSEE BEFORE HI M IN THE CASE OF CIT VS. SHRI RAM PISTON AND RINGS 174 TAXMAN 147. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LD. AR SUBMITTED THAT THIS AMOUNT WAS GIVEN TO COMPENSATE THE DEALERS FOR THEI R LOSSES DUE TO LACK OF SALES FOR THE FINANCIAL YEAR 2001-02. IT WAS ALS O SUBMITTED THAT THIS DECISION WAS TAKEN DUE TO BUSINESS EXPEDIENCY AND I T CAN BE SAID THAT LIABILITY TO PAY THE COMMISSION ACCRUED IN THE CURR ENT YEAR ONLY. THE LD. AR ALSO SUBMITTED THAT AS PER TERMS OF AGREEMENT OF CONTRACT, THE ASSESSEE WAS NOT DUTY BOUND OR REQUIRED TO COMPENSA TE THE DEALERS, HOWEVER, DUE TO COMMERCIAL AND BUSINESS EXPEDIENCY, THE AMOUNT WAS PAID AS THE DEALERS SUFFERED THE BUSINESS LOSS. ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 4 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE ASS ESSEE HAS NOT SUBMITTED ANY PROOF REGARDING THE MINIMUM GUARANTEE OF GROSS MARGIN TO THE DEALERS. SECONDLY, HE PLEADED THAT THERE WAS N O PROVISION IN THE CONTRACT TO COMPENSATE THE DEALERS FOR LOSS INCURRE D DUE TO LACK OF THE SALE. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS D EBITED THIS AMOUNT DURING THIS YEAR BY CLAIMING THAT IT HAS BEEN PAID TO COMPENSATE THE DEALERS DUE TO LACK OF SALE IN THE FINANCIAL YEAR 2 001-02. THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE REGARDIN G THE DECISION OF MANAGEMENT WHEN AND WHY THIS DECISION WAS TAKEN AND SHE PLEADED THAT IN ABSENCE OF ANY DOCUMENTARY EVIDENCE, THIS EXPEND ITURE CANNOT BE ALLOWED FOR THIS ASSESSMENT YEAR. 7. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE H AVE ALSO PERUSED THE RECORDS AVAILABLE BEFORE US. THE RECORDS SHOW T HAT THE ASSESSEE HAS NOT GIVEN ANY DOCUMENTARY EVIDENCE WITH REGARD TO T HE DECISION TAKEN BY THE MANAGEMENT WHEN AND WHY THESE EXPENSES WERE PAI D TO THE DEALERS. THERE IS NOTHING ON RECORD WHICH COULD SHOW THAT TH E DECISION WAS TO COMPENSATE THE DEALERS FOR BUSINESS EXPEDIENCY FOR THE SALES RELATED TO FINANCIAL YEAR 2001-02 AND HOW THIS PAYMENT CAN BE RELATED TO BUSINESS EXPEDIENCY OF THAT PARTICULAR YEAR. IN VIEW OF THES E FACTS, WE ALSO FIND THAT RELIANCE PLACED ON THE CASE OF CIT VS. SHRI RAM PIS TON AND RINGS 174 TAMAN 147, CITED SUPRA, SHALL NOT HELP THE ASSESSEE . IN VIEW OF THESE FACTS, ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 5 WE FIND NO FAULT IN THE ORDERS OF THE AUTHORITIES B ELOW AND WE SUSTAIN THE SAME ON THIS ISSUE. 8. IN THE GROUND NOS.2.1 & 2.2, THE ISSUE RAISED IS REGARDING THE CONFIRMATION OF DISALLOWANCE AS CONTINGENT LIABILIT Y OF RS.11,11,500/- ON ACCOUNT OF GIFTS AND DISCOUNT VOUCHERS ISSUED TO TH E CUSTOMERS AS SALES PROMOTION SCHEMES OF WHICH THE VALIDITY HAS NOT EXP IRED. 9. WHILE PLEADING ON BEHALF OF THE ASSESSEE THE LD. AR SUBMITTED THAT THE ASSESSEE HAS DEBITED PROFIT AND LOSS ACCOUNT FO R THE YEAR ENDING 31.03.2002 BY RS.11,11,500/- AS EXPENSES PAYABLE UN DER THE HEAD GIFT VOUCHERS ISSUED BUT NOT REDEEMED. THE LD. AR SUBMI TTED THAT THE COMPANY HAS LAUNCHED A SCHEME FOR ISSUING GIFT VOUC HERS/REWARDED POINTS TO CUSTOMERS PURCHASING THE PRODUCTS OF THE COMPANY ABOVE RS.5,000/- AT ONE TIME. IT WAS AT THE RATE OF 5% ON VALUE OF PURCHASES. THIS WAS PART OF THE SALES PROMOTION SCHEME TO BOOS T THE SALES. INSTEAD OF GRANTING OUTRIGHT DISCOUNT IN PRICES, THE ASSESSEE GRANTED VOUCHERS COUNTING REWARDED POINTS. THESE VOUCHERS ARE ENCASH ABLE ON SUBSEQUENT PURCHASES AND WERE VALID FOR 2 YEARS. THE LIABILITY IS QUANTIFIED ON THE ISSUE OF THE VOUCHERS, THEREFORE, IT IS ALLOWABLE E XPENDITURE AND HE RELIED ON THE FOLLOWING DECISIONS :- (I) CALCUTTA CO. LTD. V. COMMISSIONER OF INCOME-TAX 37 ITR 1 (SC); (II) METAL BOX COMPANY OF INDIA LTD. V. THEIR WORKM EN 73 ITR 53 (SC); ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 6 (III) COMMISSIONER OF INCOME-TAX V. HONDA SIEL POWE R PRODUCTS LTD. 300 ITR 56 (DEL); AND (IV) ROTORK CONTROLS INDIA P. LTD V. COMMISSIONER O F INCOME-TAX 314 ITR 62 (SC). 9. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE GIFT VOUCHERS ISSUED TO THE CUSTOMERS WERE ENCASHABLE ON SUBSEQUE NT PURCHASES. IT IS NOT CERTAIN WHETHER THESE VOUCHERS WILL BE ENCAHSED OR NOT IN THE VALID PERIOD. THE LIABILITY OF ENCASHMENTS OF THESE VOUCH ERS WILL ONLY CRYSTALLIZE WHEN THE SAID CUSTOMER ACTUALLY MAKES U SE OF THESE VOUCHERS. FURTHER THESE VOUCHERS SHALL EFFECT THE TRADING RES ULTS OF THE ASSESSEE ONLY IN THE YEAR IN WHICH THESE ARE ENCASHED. THEREFORE, DURING THE YEAR, THIS LIABILITY WAS CONTINGENT AND UNCERTAIN AND NOT CRYS TALLIZED, THEREFORE, SAME IS NOT ALLOWABLE. 10. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE OF NO T ALLOWING RS.11,11,500/- PERTAINING TO GIFT/DISCOUNT VOUCHERS ISSUED TO CUSTOMERS ON ACCOUNT OF SALES MADE DURING THE YEAR UNDER THE SALES PROMOTION SCHEMES. AFTER HEARING BOTH THE SIDES, WE FIND THAT THIS LIABILITY OF THE ASSESSEE HAS BEEN ON ACCOUNT OF ISSUANCE OF GIFT VO UCHERS/REWARD POINTS TO THE CUSTOMERS FOR PURCHASING THE PRODUCT OF THE COMPANY ABOVE RS.5,000/- AT A TIME. IT WAS @ 5% OF THE VALUE OF T HE TOTAL PURCHASES AND THIS WAS A PART OF THE SALES PROMOTION SCHEME TO BO OST THE SALES OF THE ASSESSEE. INSTEAD OF GRANTING OUTRIGHT DISCOUNT IN THE PRICE, THE CUSTOMERS WERE GRANTED GIFT VOUCHERS/REWARD POINTS WHICH WERE ENCASHABLE ON ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 7 SUBSEQUENT PURCHASES AND WERE VALUED FOR TWO YEARS AND EACH REWARD POINT SHALL EQUAL TO ONE. THUS, THESE WERE THE ASCE RTAINED LIABILITY FOR THE COMPANY AND HAS BEEN RELATED TO THE SALES ALREADY E FFECTED BY THE ASSESSEE. LD. AR HAS SUBMITTED THAT ASSESSEE IS CRE DITING THE AMOUNT AFTER EXPIRY OF THE DISCOUNT COUPONS IF THE SAME ARE NOT ENCASHED. IN VIEW OF THESE FACTS, WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND ALLOW THIS GROUND OF ASSESSEES APPEAL. 11. IN THE GROUND NO.3, THE ISSUE INVOLVED IS CONFI RMING THE DISALLOWANCE OF RS.1,82,308/- BEING 10% OF ADVERTIS EMENT EXPENSES DEEMED AS RESULTING IN ENDURING ADVANTAGE. 12. THE ASSESSEE HAS CLAIMED ADVERTISEMENT EXPENSES IN THE PROFIT & LOSS ACCOUNT OF RS.18,23,089/-. THE ASSESSING OFFIC ER TREATED 10% OF THIS EXPENSE AS RELATABLE TO BRAND IMAGE AND THEREBY CON SIDERED AS CAPITAL EXPENDITURE AND ADDED BACK TO THE INCOME. THE CIT ( A) CONFIRMED THIS ADDITION. 13. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT ADVERTISEMENT IN INDIA OF GARMENTS PRODUCED BY THE ASSESSEE UNDER THE BRAND LACOSTE HAS A DIRECT AND INEXTRICABLE LINK TO ITS BUSINESS OF THE ASSESSEE AND ASSESSEE DERIVED DIRECT BUSINESS ADVAN TAGE BY MAKING THE CUSTOMERS IN INDIA AWARE OF THE GARMENTS MADE UNDER THE BRAND LACOSTE AS WELL AS THE OUTLETS AT WHICH THEY ARE AVAILABLE. THEREFORE, THIS EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR THE BUSI NESS PURPOSE OF THE ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 8 ASSESSEE AND IT WAS A REVENUE EXPENDITURE AND IT HA S NOT CREDITED ANY CAPITAL ASSETS. 14. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER O F THE ASSESSING OFFICER. 15. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE ASSESSING OFFICER SIMPLY MADE AD HOC DISALLOWANCE OF 10% OF EXPENSES RELATABLE TO BRAND IMAGE AND EXPENDITURE FOR AS CAPITAL EXPENDITURE WI THOUT SPECIFYING THE NATURE OF EXPENDITURE. THE ASSESSEE IS PRODUCING TH E GARMENTS IN THE NAME OF LACOSTE AND SELLING THE SAME IN INDIA. THER EFORE, SUCH EXPENDITURE INCURRED ARE DIRECTLY RELATED TO BUSINE SS OF THE ASSESSEE AND IN OUR CONSIDERED VIEW, SUCH EXPENDITURE HAS NOT CREDI TED ANY CAPITAL ASSETS, THEREFORE, THE EXPENDITURE WAS REVENUE IN NATURE AN D WE DIRECT TO DELETE THIS ADDITION. 16. THE GROUND NOS.4 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION, HENCE DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.3270/DEL/2010 IS PARTLY ALLOWED. 18. THE GROUND OF REVENUES APPEAL IN ITA NO.3713/D EL/2010 READ AS UNDER :- LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING THE ADDITION OF RS.6,97,546/- MADE BY THE A.O. U/S 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE I.T. ACT ON ACCO UNT OF PF. ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 9 19. IN THIS CASE, THE REVENUE HAS CHALLENGED THE DE LETION OF ADDITION OF RS.6,97,546/- WHICH IS MADE BY THE ASSESSING OFFICE R U/S 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE INCOME-TAX ACT, 1961 ON ACCOUNT OF PROVIDENT FUND. THE TOTAL DELETION OF ADDITION IS O F RS.6,97,546/- AND IN VIEW OF THE INSTRUCTION NO. 3/2011 DATED 09.02.201 1 OF THE CBDT, THIS APPEAL IS HAVING TAX EFFECT OF LESS THAN RS.3 LACS AND CANNOT BE TREATED AS MAINTAINABLE. HOWEVER, ON MERITS ALSO, WE FIND THAT THE AMOUNT HAS BEEN PAID DURING THE GRACE PERIOD. WE FIND THAT IT WAS DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN, HENCE ALLOWABLE IN VI EW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. AIMIL LTD. REPORTED IN 229 CTR 448 AND HON'BLE SUPREME COURT I N THE CASE OF CIT VS. VINAY CEMENTS LIMITED REPORTED IN 213 CTR 286 ( SC). THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AI MIL LIMITED, CITED SUPRA, HAS HELD AS UNDER :- AS SOON AS EMPLOYEES' CONTRIBUTION TOWARDS PF OR E SI IS RECEIVED BY THE ASSESSEE BY WAY OF DEDUCTION OR OTH ERWISE FROM THE SALARY/WAGES OF THE EMPLOYEES, IT WILL BE TREATED AS 'INCOME' AT THE HANDS OF THE ASSESSEE. IT CLEARL Y FOLLOWS THEREFROM THAT IF THE ASSESSEE DOES NOT DEPOSIT THI S CONTRIBUTION WITH PF/ESI AUTHORITIES, IT WILL BE TA XED AS INCOME AT THE HANDS OF THE ASSESSEE. HOWEVER, ON MA KING DEPOSIT WITH THE CONCERNED AUTHORITIES, THE ASSESSE E BECOMES ENTITLED TO DEDUCTION UNDER THE PROVISIONS OF S. 36(1)(VA). SEC. 43B(B), HOWEVER, STIPULATES THAT SU CH DEDUCTION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYME NT. THIS IS THE SCHEME OF THE ACT FOR MAKING AN ASSESSE E ENTITLED TO GET DEDUCTION FROM INCOME INSOFAR AS EMPLOYEES' CONTRIBUTION IS CONCERNED. DELETION OF T HE ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 10 SECOND PROVISO HAS BEEN TREATED AS RETROSPECTIVE IN NATURE AND WOULD NOT APPLY AT ALL. THE CASE IS TO BE GOVER NED WITH THE APPLICATION OF THE FIRST PROVISO. IF THE EMPLOY EES' CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESC RIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN I NCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE M ADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THER EFORE, THE ACTS PERMIT THE EMPLOYER TO MAKE THE DEPOSIT WI TH SOME DELAYS, SUBJECT TO THE AFORESAID SEQUENCES. IN SOFAR AS THE IT ACT IS CONCERNED, THE ASSESSEE CAN GET THE B ENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FIL ED. CIT VS.VINAY CEMENT LTD., (2007) 213 CTR (SC) 268, CIT VS. DHARMENDRA SHARMA (2007) 213 CTR (DEL) 609 : (2008) 297 ITR 320 (DEL) AND CIT VS. P.M. ELECTRONICS LTD. (2008) 220 CTR (DEL) 635 : (2008) 15 DTR (DEL) 258 FOLLOWED. IN VIEW OF THE DECISION, THE DEDUCTION OF PAYMENT O F EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND CANNOT BE DISAL LOWED, IF PAID BEFORE THE DUE DATE OF FILING THE RETURN. IN VIEW OF THIS FACT, WE DISMISS THE GROUND OF REVENUES APPEAL. 20. IN THE RESULT, THE REVENUES APPEAL IN ITA NO.3 713/DEL/2010 IS DISMISSED. 21. IN THE ASSESSEES APPEAL IN ITA NO.3271/DEL/201 0 FOR ASSESSMENT YEAR 2004-05, THE ISSUE RAISED IS AGAINST CONFIRMIN G THE DISALLOWANCE OF RS.4,15,000/- OUT OF REBATES AND DISCOUNTS WRITTEN OFF / ADJUSTED ON ACCOUNT OF UNCOLLECTED / SHORT COLLECTED SALE PROCE EDS FROM CUSTOMERS. 22. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT STAFF OF THE COMPANY WAS NOT KEEPING PROPER TRACK O F THE DETAILS OF THE ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 11 COLLECTIONS AGAINST CREDIT CARDS AND FOLLOWING THEM UP FOR PAYMENT IN CASE OF DEFAULTS. THE JOB OF LINKING OF CREDIT CARD S COLLECTION TO SALES OF WHOLE OF THE YEAR AND THEN DETERMINED THE DEFAULT W AS A HUGE TASK AND IT WAS NOT COST EFFECTIVE. THE RECOVERY WAS ALSO NOT S URE. IN THAT EVENT, THE ASSESSEE DECIDED TO WRITE OFF THE EXCESS CREDIT CAR DS BALANCE OF RS.89,774/- WHICH WAS FOUND AS NOT RECOVERABLE AND SAME HAS SHOWN AS REBATES AND DISCOUNTS. FURTHER, THE STAFF OF THE VA RIOUS OUTLETS WAS DIRECTED TO DEPOSIT THE CASH RECEIPTS ON ACCOUNT OF SALES. IN THE BANK ACCOUNT IMMEDIATELY, HOWEVER, THERE WERE DEFAULTS I N FOLLOW UP OF THESE INSTRUCTIONS. THE NEW PERSON WHO HAS TAKEN CHARGE T OOK THE CASH THAT WAS GIVEN TO HIM AND THEN MAINTAINED HIS OWN CASH SCROL LS ON THE BASIS OF WHICH ALONE THEY WERE DEPOSITING CASH IN BANK. MANY OF THE SALES STAFF LEFT THE SERVICES AND BY NOT REPORTING FOR DUTY. TH EREFORE, IT WAS DIFFICULT TO FIX THE RESPONSIBILITY FOR THE CASH NOT PROPERLY DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. THE TOTAL CASH FOUND SHORT AT VARIOUS OUTLETS WAS OF RS.3,25,540/- WHICH WAS WRITTEN OFF IN THE FORM OF REBATES AND DISCOUNTS. SINCE THIS CLAIM WAS ALLOWABLE ON THE WR ITE OFF, THEREFORE, THE ASSESSEE HAS TAKEN THE SAME TO THE PROFIT AND LOSS ACCOUNT AND SUCH EXPENDITURE ALLOWABLE U/S 36(1) AND 37 OF THE INCOM E-TAX ACT, 1961. 23. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. EXC EPT THE CLAIM THAT THE ASSESSEE HAS WRITTEN OFF THE NOT RECOVERABLE AM OUNT ON CREDIT CARD SALES AND ALSO SHORTAGE OF THE CASH TO BE DEPOSITED IN THE BANK, NO ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 12 EVIDENCE HAS BEEN FILED BY THE ASSESSEE IN THIS REG ARD. IN THE ABSENCE OF ANY SUPPORTING EVIDENCE, THE ASSESSEES CLAIM CANNO T BE HELD TO BE ALLOWABLE U/S 36(1) AND 37 OF THE ACT, THEREFORE, I N OUR CONSIDERED VIEW, THE AUTHORITIES BELOW WERE JUSTIFIED IN SUSTAINING THE ADDITION. WE SUSTAIN THE ORDER OF THE AUTHORITIES BELOW. 24. IN THE RESULT, THE ASSESSEES APPEAL IN ITA NO. 3271/DEL/2010 IS DISMISSED. 25. IN THE ITA NO.3272/DEL/2010 FOR ASSESSMENT YEAR 2005-06, THE ISSUE IS AGAINST CONFIRMING THE DISALLOWANCE OF RS. 7,84,754/- AS PRIOR PERIOD EXPENSES. 26. LD. AR SUBMITTED THAT HIS PLEADINGS ARE THE SAM E AS MADE ON GROUND NO.1 IN ITA NO.3270/DEL/2010 FOR ASSESSMENT YEAR 2003-04. LD. AR PLEADED THAT THE LIABILITY TO PAY THESE EXPENSES ACCRUED DURING THIS FINANCIAL YEAR ONLY. THE TDS WAS ALSO DEDUCTED IN T HE YEAR UNDER CONSIDERATION. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40(A)(IA), THIS IS AN ALLOWABLE EXPENDITURE. LD. ARS MAIN CONTENTI ON IS THAT THE DETAILS WERE RECEIVED BY THE ASSESSEE ONLY IN THE CURRENT F INANCIAL YEAR, THEREFORE, COULD NOT MAKE PAYMENT EARLIER AND RELIANCE WAS PLA CED ON THE DECISION OF CIT VS. SHRI RAM PISTON AND RINGS 174 TAXMAN 1 47 FOR THE PLEADING THAT SINCE THERE IS NO CHANGE IN THE RATE OF TAX, T HEREFORE, NO ENERGY SHOULD BE WASTED TO DETERMINE THE TAXABILITY OF THE AMOUNT . ITA NOS.3270 TO 3272/DEL/2010 ITA NO.3713/DEL/2010 13 27. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THESE EXPENSES SHOULD HAVE BEEN BOOKED IN THE YEAR OF ACCRUAL UNDER THE MERCANTILE SYSTEM OF ACCO UNTING AND SAME IS NOT ALLOWABLE EXPENSES IN THE YEAR UNDER CONSIDERATION. 28. WE HEARD BOTH THE SIDES ON THE ISSUE. THE ISSU E RAISED IN ITA NO.3272/DEL/2010 FOR THE ASSESSMENT YEAR 2005-06 RE GARDING THE ALLOWABILITY OF PRIOR PERIOD EXPENSES OF RS.7,84,75 4/- HAS ALREADY BEEN DISMISSED BY US ABOVE IN ITA NO.3270DEL/2010 FOR AS SESSMENT YEAR 2003-04. FOR THE SAME REASONS, WE DISMISS THIS GROU ND OF ASSESSEES APPEAL. 29. IN THE RESULT, ITA NO.3272/DEL/2010 STANDS DISM ISSED. 30. TO SUM UP : ITA NO.3270/DEL/2010 FILED BY THE A SSESSEE IS PARTLY ALLOWED, ITA NOS.3271/DEL/2010 & 3272/DEL/2010 FILE D BY THE ASSESSEE ARE DISMISSED AND ITA NO.3713/DEL/2010 FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF NOVEMBER, 2013. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 28 TH DAY OF NOVEMBER, 2013/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI