M/S GILLETTE INDIA LIMITED, Alwar V. ASSISTANT COMMISSIONER OF INCOME TAX, Alwar

ITA 388/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0387 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Transfer pricing; International transaction; Question of law; Corroborative evidences
• Section: 92B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 388/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-2013 M/S GILLETTE INDIA LTD. SPA-65-A, INDUSTRIAL AREA, BHIWADI. ALWAR. CUKE VS. THE ACIT, CIRCLE-2 ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACI 3924 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 634/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 THE ACIT, CIRCLE-2 ALWAR. CUKE VS. M/S GILLETTE INDIA LTD. SPA-65-A, INDUSTRIAL AREA, BHIWADI. ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACI 3924 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 29/08/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 26/11/2018 VKNS'K@ ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE DIRECTED AGAINST THE ORDER OF LD. CIT(A), A LWAR DATED ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 2 12.03.2018 FOR A.Y. 2012-13. THESE APPEALS WERE HEA RD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. THE RESPECTIVE GROUNDS OF THE APPEAL ARE AS UNDER:- REVENUES GROUNDS OF APPEAL (ITA NO. 634/JP/2018) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,53,19,40,929/- IN RESPECT OF TP ADJUSTMENT MA DE BY THE AO ON ACCOUNT OF AMP EXPENSES WITHOUT APPRECIATING THE MATERIAL FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF 4, 20,57,362/- MADE BY AO ON ACCOUNT OF INVENTORY WRITTEN OFF WITH OUT APPRECIATING THE MATERIAL FACTS OF THE CASE. ASSEESSES GROUNDS OF APPEAL (ITA NO. 388/JP/2018) 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF RS. 44,02,900/- OUT OF TRAVELLI NG & CONVEYANCE EXPENSES. HE HAS FURTHER ERRED IN HOLDIN G THAT ASSESSEE HAS NOT PRODUCED BILLS &VOUCHERS IGNORING THAT HEAD WISE DETAILS AND SAMPLE VOUCHERS WERE FILED BEFORE THE AO. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 1,95,03,707/- OUT OF OTHER EXPE NSES. HE HAS FURTHER ERRED IN HOLDING THAT ASSESSEE HAS NOT PROD UCED BILLS & VOUCHERS IGNORING THAT HEAD WISE DETAILS AND SAMPLE VOUCHERS WERE FILED BEFORE THE AO. 2. FIRSTLY, WE TAKE UP THE REVENUES APPEAL. IN GR OUND NO. 1 OF THE REVENUES APPEAL, IT HAS CHALLENGED THE ACTION OF T HE LD. CIT(A) IN DELETING THE ADDITION OF RS. 1,53,19,40,929/- BEING ALP OF INTERNATIONAL TRANSACTION RELATING TO NON-ROUTINE ADVERTISEMENT E XPENDITURE IN PRINT ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 3 MEDIA INCURRED BY THE ASSESSEE COMPANY FOR THE BRAN D NOT OWNED BY THE ASSESSEE COMPANY. 3. IN THIS REGARD, BRIEFLY THE FACTS OF THE CASE AR E THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE MATTER RELATI NG TO DETERMINATION OF ARMS LENGTH PRICE WAS REFERRED BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER (TPO). THE TPO OBSERVED TH AT THE LEVEL OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES (A MP)/SALES RATIO IS MUCH HIGHER THAN THAT OF THE COMPARABLES. FURTHER, THE TPO OBSERVED THAT YEAR AFTER YEAR, THE ASSESSEE HAS BEEN CARRYIN G OUT THIS HIGH INTENSITY OF AMP ACTIVITIES WHICH BY ITSELF PROOF T HAT THERE EXISTS AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE THAT CO MPELS THE ASSESSEE TO CARRY OUT THIS LEVEL OF EXPENDITURE. IT WAS HELD BY THE TPO THAT BY INCURRING THIS KIND OF EXPENDITURE WHEN VIE WED ALONGWITH ALL THE SURROUNDING CIRCUMSTANCES, IT GIVES RISE TO AN INTE RNATIONAL TRANSACTION IN THE FORM OF CREATION OF A MARKETING INTANGIBLE I N INDIA IN FAVOUR OF ITS ASSOCIATE ENTERPRISE (AE) WHICH OWNED THE BRAND. IT WAS HELD BY THE TPO THAT THE BENEFIT TO THE AE IS MUCH MORE THAN TH E BENEFIT BEING RECEIVED BY THE ASSESSEE AND SIGNIFICANT BENEFIT GO ES TO THE AE AND ONLY INCIDENTAL BENEFIT IS RECEIVED BY THE ASSESSEE. TH EREAFTER, ON THE EXPENDITURE ON ADVERTISEMENT IN PRINT MEDIA AMOUNTI NG TO RS. 1,45,89,91,261/-, THE TPO DETERMINED A MARGIN OF 5% AND PROPOSED AN ADJUSTMENT OF RS. 1,53,19,40,929/- TO THE INCOME OF THE ASSESSEE COMPANY, BEING THE ALP OF INTERNATIONAL TRANSACTION RELATING TO NON- ROUTINE EXPENDITURE INCURRED BY THE ASSESSEE AND WH ICH HAS BEEN ADDED TO THE ASSESSEES INCOME BY THE AO. THE SAID ADDITION HAS SINCE BEEN DELETED BY THE LD. CIT(A) BY FOLLOWING THE COO RDINATE BENCH ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 4 DECISIONS IN THE EARLIER YEARS AS WELL AS DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE. 4. IN IT(TP)A NO. 01& 02/JP/2016 DATED 04.07.2017 FOR THE ASSESSMENT YEAR 2011-12, THE COORDINATE BENCH HAS H ELD AS UNDER:- 3.8 THE COORDINATE BENCH (WHERE ONE OF US WAS A PA RTY) HAS EXAMINED THE SUBJECT MATTER AT LENGTH IN ASSESSEES OWN CASE IN ITA NOS. 01/JP/2013 & 02/JP/2015 AND AFTER TAKING INTO CONSI DERATION THE RIVAL CONTENTIONS AND THE DECISION OF THE HONBLE DELHI H IGH COURT IN CASE OF MARUTI SUZUKI INDIA LTD (ITA NO. 11/2014) HAS DECID ED IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF THE ORDER OF THE C OORDINATE BENCH DATED 12.08.2016 READS AS UNDER: 4.17 APPLYING THE ABOVE LEGAL PROPOSITION TO THE F ACTS OF THE PRESENT CASE, IT IS NOT A CASE OF THE REVENUE THAT THERE EXISTED AN UNDERSTANDING OR AN ARRANGEMENT OR AN ACTION IN CONCERT BETWEEN THE ASSESSEE-COMPANY AND ITS FOREIGN AE TO INCUR AMP EXPENDITURE TO PROMOTE THE BRAND VALUE OF THE P RODUCTS MANUFACTURED AND DISTRIBUTED BY THE ASSESSEE COMPAN Y. MERELY BECAUSE THE ASSESSEE-COMPANY INCURRED EXCESS IVE AMP EXPENDITURE COMPARED TO THE EXPENDITURE INCURRED BY COMPARABLE COMPANIES, IT CANNOT BE INFERRED THAT TH ERE EXISTED INTERNATIONAL TRANSACTION BETWEEN ASSESSEE-COMPANY AND ITS FOREIGN AE. AS HELD IN THE CASE OF SONY ERICSSON CA SE, APPLICATION OF BRIGHT LINE TEST AS A TOOL TO ASCERT AIN AN ALLEGED INTERNATIONAL TRANSACTION IS NOT PERMISSIBLE UNDER THE INDIAN TP REGULATIONS. THE ONUS IS ON THE REVENUE TO DEMONSTR ATE THAT DE HORS THE BLT AN AMP EXPENSE INCURRED BY THE TAXP AYER CONSTITUTES AN INTERNATIONAL TRANSACTION WHICH HAS NOT BEEN DISCHARGED IN THE INSTANT CASE. THE REVENUE HAS FAI LED TO DEMONSTRATE THE EXISTENCE OF AN INTERNATIONAL TRANS ACTION. THEREFORE, THE QUESTION OF DETERMINATION OF ALP ON SUCH TRANSACTION DOES NOT ARISE. RESPECTFULLY FOLLOWING THE RATIO DECIDENDI OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF MARUTI ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 5 SUZUKI AND SUBSEQUENT HONBLE DELHI HIGH COURT DECI SIONS REFERRED SUPRA, WE HOLD THAT AMP EXPENDITURE INCURR ED BY THE ASSESSEE CANNOT BE TREATED AND CATEGORISED AS AN IN TERNATIONAL TRANSACTION UNDER SECTION 92B OF THE ACT. IN LIGHT OF THE ABOVE, THE ADDITIONAL GROUND NO. 7 RAISED BY THE ASSESSEE COMPANY IS ALLOWED IN FAVOUR OF THE ASSESSEE COMPANY. IN VIEW OF ADDITIONAL GROUND DECIDED IN FAVOUR OF THE ASSESSEE -COMPANY, GROUND NO. 2 DOESNT ARISE FOR CONSIDERATION. THE A O IS DIRECTED TO DELETE THE ADJUSTMENT ON ACCOUNT OF AMP SPEND BY THE ASSESSEE. 3.9 UNDISPUTEDLY, THERE IS NO CHANGE IN FACTS AND C IRCUMSTANCES OF THE CASE AND NO CONTRARY AUTHORITY HAS BEEN BROUGHT TO OUR NOTICE. THE LD CIT DR FAIRLY CONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEES BY EARLIER DECISION OF THE COORDINATE BE NCH. GIVEN THE ABOVE FACTUAL MATRIX AND RESPECTFULLY FOLLOWING THE DECIS ION OF HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZUKI AND COORDINATE BENCH DECISION IN ASSESSEES OWN CASE, AMP EXPENDITURE INCURRED BY TH E ASSESSE COULD NOT BE TREATED AND CATEGORIZED AS AN INTERNATIONAL TRAN SACTION U/S. 92B OF THE ACT AND THEREBY, THE ADJUSTMENT ON ACCOUNT OF A MP EXPENDITURE IS HEREBY DELETED AND GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 5. IN DB ITA NO. 40/2017 & 39/2017 DATED 18.07.2017 , THE SUBSTANTIAL QUESTION OF LAW BEFORE THE HONBLE RAJA STHAN HIGH COURT READS AS UNDER:- 3. COUNSEL FOR THE DEPARTMENT HAS FRAMED FOLLOWING SUBSTANTIAL QUESTION OF LAW NO. 1,2, & 3 WHICH ARE COMMON IN BO TH THESE APPEAL AND THE SAME READS AS UNDER:- 1. WHETHER THE TRIBUNAL WAS ILLEGALLY JUSTIFIED IN DELETING THE ADDITION OF RS. 87,12,49,257/- (IN APPEAL NO. 39/20 17) AND RS. 1,10,87,46,190/- (IN APPEAL NO. 40/2017) BEING ADJU STMENT ON ACCOUNT OF COMPENSATION TO BE RECEIVED BY THE ASSES SEE FROM ITS ASSOCIATED ENTERPRISE (AE) FOR CREATING MARKETING I NTANGIBLES AND PROMOTING THE BRAND NAME OF ITS AE, SPECIALLY WHEN THE ASSESSEE ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 6 COMPANY WAS PROMOTING MARKETING INTANGIBLES OF ITS AE THOUGH THE BRAND BELONGS TO THE AE AND NOT TO THE ASSESSEE AND THE PRODUCTS MANUFACTURED BY THE ASSESSEE ARE ALSO MANU FACTURED BY THE AE AND ITS OTHER SUBSIDIARIES IN DIFFERENT COU NTRIES WITH THE SAME NAME? 2. WHETHER THE TRIBUNAL WAS LEGALLY JUSTIFIED IN HO LDING THAT ADVERTISEMENT MARKETING AND PROMOTION (AMP) EXPENDI TURE WAS NOT AN INTERNATIONAL TRANSACTION EVEN THOUGH THE AS SESSEE WAS PERFORMING DEVELOPMENT, ENHANCEMENT, MAINTENANCE, P ROTECTION AND EXPLOITATION (DEMPE) FUNCTIONS FOR ITS AE AND D OING ACTIVITY OF BRAND BUILDING? AND THE RELEVANT FINDINGS OF THE HONBLE RAJASTHAN HIGH COURT WHEREIN THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE READS AS UNDER:- 6.1 REGARDING ISSUE NO. 1,2 &3, TRIBUNAL WHILE CON SIDERING THE EXPENSES OF THE ASSOCIATED ENTERPRISE (AE) FOR CREA TING MARKETING INTANGIBLES AND PROMOTING THE BRAND NAME OF ITS AE, IT IS FOR THE MARKETING PEOPLE TO LOOK NEW PRODUCTS WHICH HAS COM PETITION IN THE NATIONAL LEVEL OR GRASS ROUTE LEVEL AND INTERNA TIONAL LEVEL. IT IS ALWAYS FOR THE COMPANY TO DECIDE ON WHAT RATIO THE EXPENSES ARE TO BE INCURRED AT GRASS ROUTE AND ON THAT RATIO FOR PROMOTING THEIR PRODUCT. 6.2 IN THAT VIEW OF THE MATTER, UNLESS THE AMOUNT W HICH WAS FOUND TO BE NOT GENUINE MERELY BECAUSE EXCESS AMOUN T HAS BEEN SPENT ON ADVERTISEMENT, WILL NOT BE A GROUND FOR DI SALLOWING THE EXPENSES. 6.3 IN THAT VIEW OF THE MATTER, ON ISSUE NO. 1 & 2, WE ARE OF THE VIEW THAT THE TRIBUNAL HAS NOT COMMITTED ANY ERROR. THE ISSUE ARE ANSWERED IN FAVOUR OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE ARE NO CHA NGES IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS COMPARED TO THE EARLIE R YEARS WHEREIN THE ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 7 MATTER HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF T HE ASSESSEE BY THE COORDINATE BENCHES AND WHICH HAS SINCE BEEN UPHELD BY THE HONBLE RAJASTHAN HIGH COURT. THEREFORE, RESPECTFULLY FOLL OWING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE , WE DONOT SEE ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) WHICH IS HE REBY CONFIRMED. IN THE RESULT, GROUND NO. 1 OF THE REVENUES APPEAL IS HER EBY DISMISSED. 7. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE DELETING THE DISALLOWANCE OF RS. 4,20,57,362/- MADE BY THE AO ON ACCOUNT OF INVENTORIES WRITTEN OFF. 8. AT THE OUTSET, THE LD AR SUBMITTED THAT THE MATT ER HAS BEEN DECIDED BY THE HONBLE RAJASTHAN HIGH COURT IN ASSE SSEES OWN CASE FOR AY 2006-07 IN DBITA NO. 134/2014 WHERE AT PARA 4, T HE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT FOLLOWING THIS ORDER, APPEAL FOR AY 2002-03 IN DBIT A NO.65/2015, AY 2007-08 IN DBITA NO.33/2016 & AY 2008-09 IN DBITA N O.125/2016 FILED BY THE REVENUE WERE ALSO DISMISSED. FOR AY 20 03-04 IN DBITA NO.291/2010, APPEAL OF THE ASSESSEE ON THE ISSUE OF WRITE OFF OF RAW MATERIAL OF DURACELL BATTERIES IS ALSO DECIDED IN F AVOUR OF THE ASSESSEE. THUS, IT WAS SUBMITTED THAT THIS ISSUE IS NOW SETTL ED IN FAVOUR OF THE ASSESSEE BY HONBLE RAJASTHAN HIGH COURT. 9. PER CONTRA, THE LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 8 10. IN DB APPEAL NO. 134/2014 FOR AY 2006-07 DATED 23.05.2017, THE SUBSTANTIAL QUESTION OF LAW BEFORE THE HONBLE RAJASTHAN HIGH COURT READS AS UNDER:- (II) WHETHER THE TRIBUNAL WAS LEGALLY JUSTIFIED IN DELETING THE ADDITION OF RS. 8,28,35,757/- MADE ON ACCOUNT OF INVENTORIES WR ITTEN OFF SPECIFICALLY WHEN NEITHER ANY DETAILS WERE FURNISHED BY THE COMP ANY AND NOR THERE WAS ANY SUPPORTING EVIDENCE TO JUSTIFY AND ESTABLIS H THAT THE INVENTORIES WERE ACTUALLY DESTROYED? AND THE RELEVANT FINDINGS OF THE HONBLE RAJASTHAN HIGH COURT WHEREIN THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE READS AS UNDER:- 4 IN SO FAR AS THE ISSUE NO. (II) IS CONCERNED, TH E TRIBUNAL WHILE CONSIDERING THE CASE IN PARA 4.1 HAS OBSERVED AS UN DER:- 4.1 AFTER CONSIDERING THE RIVAL SUBMISSION, WE NOT ED THAT THE DETAILS OF INVENTORY WRITTEN OFF AS WELL AS PROCEDURE OR WR ITTEN OFF IS EXPLAINED BEFORE THE AO AND THE SAME IS ALSO PLACED BEFORE US AT PB PAGE 421-664. WE ALSO FIND THAT SIMILAR ISSUE IS DE CIDED BY THIS BENCH IN A.Y. 03-04 IN ITA NO. 188/JP/07 DATED 09.0 8.2010 IN ASSESSEE'S FAVOUR AND FOLLOWED IN A.Y. 0405 IN ITA NO. 180/JP/09 DATED 27.05.2011 AND IN A.Y. 05-06 IN ITA NO. 1234/ JP/2010 DATED 11.02.2011. THE RELEVANT PORTION OF THE DECISION OF TRIBUNAL IN PARA 16 IN A.Y. 03-04 IS REPRODUCED AS UNDER:- 'AS REGARD TO THE DISALLOWANCE OF RS 8,37,10,704/- IN RESPECT OF DAMAGED GOODS RETAIL AND RS 3,64,71,703/- IN RESPEC T OF PROVISION FOR OBSOLESCE MADE BY THE AO FOR WANT OF ITEM WISE DETAILS AND THE PROCEDURE THEREOF, THE LD. CIT(A) AFTER CONSIDERING THE ITEM WISE ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 9 DETAILS AND CONSIDERING THE PROCEDURE ADOPTED FOR D ISPOSAL AND DESTRUCTION OF SUCH STOCK, COPY OF WHICH IS PLACED IN THE PAPER BOOK HAS RIGHTLY DELETED THE DISALLOWANCE OF RS 8,37,10, 704/- BUT AT THE SAME TIME HE DID NOT ALLOWED THE CLAIM OF RS.3,64,7 1,703/-ON THE GROUND THAT IT IS ONLY A PROVISION AND NOT ACTUALLY DESTROYED. WE FIND THAT IN RESPECT OF BOTH THESE AMOUNTS ITEM WISE DET AILS IS FILED. THE PROCEDURE ADOPTED AND THE RECOMMENDATION OF APPROPR IATE AUTHORITIES IS PLACED ON RECORD. THE DISALLOWANCE O F RS 3,64,71,703/- CONFIRMED BY THE ID. CIT(A) ONLY FOR THE REASON THA T THESE ITEMS ARE NOT ACTUALLY DESTROYED AND IS ONLY A PROVISION CAN' T BE UPHELD FOR THE REASON THAT ITEM WISE DETAILS OF THE SAME IS FILED, THESE ARE THE IDENTIFIED ITEMS AND HAVE BEEN SUBSEQUENTLY DESTROY ED AS PER THE REGULAR PROCEDURE FOLLOWED. THE WRITE OFF FOR OBSOL ESCE OF SUCH IDENTIFIED ITEMS IS ALLOW ABLE DEDUCTION AS PER THE CASE LAWS RELIED BY THE LD. AR. IN FACT NO PROVISIONS IS CREATED IN BOOKS OF ACCOUNTS BUT ONLY THE NOMENCLATURE OF PROVISIONS FOR OBSOLES CE IS USED. IN THE BALANCE SHEET ALSO NO SUCH PROVISION IS APPEARING E ITHER IN THE LIABILITIES SIDE OR AS REDUCTION FROM ASSET SIDE NO T THE LD. D/R COULD POINT OUT ANY SUCH PROVISION IN THE BALANCE SHEET. THEREFORE THE DISALLOWANCE OF RS. 3,64,71,703/- CONFIRMED BY THE LD. CIT(A) IS DELETED. FOLLOWING THE ORDERS OF THE TRIBUNALS IN CASE OF TH E ASSESSEE, THE CLAIM OF THE INVENTORY WRITTEN OFF OF RS. 8,28,35,757/- I S ALLOWED AND HENCE THE ADDITION MADE BY THE AO IS DELETED. THIS GROUND IS THEREFORE ALLOWED. 4.1 THE OBSERVATIONS MADE BY THE TRIBUNAL IN THE EA RLIER YEAR WHERE APPEAL WAS PREFERRED BUT THIS QUESTION WAS NOT ADMI TTED AND TODAY AN ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 10 APPLICATION WAS ALSO MOVED FOR AMENDING OR ADDING Q UESTION OF LAW WHICH HAS BEEN REJECTED BY US. 4.2 IN THAT VIEW OF THE MATTER, THE VIEW TAKEN BY T HE TRIBUNAL IS REQUIRED TO BE ACCEPTED IN FAVOUR OF THE ASSESSEE. 11. IN THE INSTANT CASE, WE FIND THAT THE ASSESSIN G OFFICER, FOLLOWING THE REASONING ADOPTED IN THE EARLIER YEARS, HAS DIS ALLOWED THE CLAIM OF THE INVENTORY WRITTEN OFF AMOUNTING TO RS 4,20,57,3 62. IT IS NOTED THAT THE COORDINATE BENCHES IN THE PAST HAVE CONSISTENTL Y ALLOWED THE CLAIM OF THE INVENTORY WRITTEN OFF IN FAVOUR OF THE ASSES SEE. IN THIS REGARD, WE REFER TO THE LATEST DECISION OF THE COORDINATE B ENCH IN IT(TP)A NO.01& 02/JP/2016 DATED 04.07.2017 FOR THE ASSESSME NT YEAR 2011-12 WHEREIN THE RELEVANT FINDINGS READS AS UNDER: 6.4 IN THE YEAR UNDER CONSIDERATION, THE DRP HAS D ELETED THE ADDITION IN PRINCIPLE AND AT THE SAME TIME, THE AO WAS DIREC TED TO EXAMINE THE FACTS AND ALLOW SO MUCH OF THE EXPENDITURE UNDER TH IS HEAD WHICH THE ASSESSEE IS ABLE TO SUBSTANTIATE. THE ASSESSEE THE REAFTER SUBMITTED A LETTER DATED 21.12.2015 WHEREBY IT FURNISHED THE MA TERIAL CODE AND QUANTITY WISE DETAILS OF INVENTORY WRITTEN OFF. TH E AO HAS GIVEN A FINDING THAT THE ASSESSEE HAS SUBMITTED LISTS OF IN VENTORY DESTROYED AND CERTAIN DESTRUCTION CERTIFICATES OF THE INVENTORY. HOWEVER, THE AO WENT AHEAD AND DISALLOWED THE CLAIM OF INVENTORY WRITTEN OFF. FIRSTLY, THE AO HELD THAT THE DEPARTMENT HAS APPEALED AGAINST THE O RDERS OF THE TRIBUNAL PERTAINING TO EARLIER YEARS BEFORE THE HON BLE RAJASTHAN HIGH COURT AND HENCE, THE FACT THAT THE RELIEF BE GRANTE D MERELY ON GROUND OF EARLIER YEARS IS NOT TENABLE. FURTHER, COMING T O THE SPECIFICS FACTS FOR ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 11 THE YEAR UNDER CONSIDERATION, THE REASONS GIVEN BY THE AO ARE THAT THESE DESTRUCTION CERTIFICATES ARE NOT GIVEN BY ANY STATUTORY DEPARTMENT/AUTHORITY AND HAVE BEEN SIGNED BY THE AS SESSEE ITSELF AND ITS OWN AUDITOR. FURTHER, THE AO HELD THAT THE ASS ESSEE HAS FAILED TO SUBSTANTIATE AS TO HOW THE AMOUNT OF INVENTORY WRIT TEN OFF IS NOT AMOUNTING TO DOUBLE BENEFIT FOR INCOME TAX PURPOSES . IN OUR VIEW, THE DIRECTIONS OF THE DRP ARE CLEAR TO THE EFFECT THAT THE ALLOWANCE FOR INVENTORY WRITTEN OFF IS TO BE ALLOWED TO THE ASSES SEE IN PRINCIPLE AND THE AO IS TO VERIFY AND ALLOW TO THE EXTENT THE ASS ESSEE IS ABLE TO SUBSTANTIATE. THEREFORE, THE AO IS REQUIRED TO FOLL OW THE SAID DIRECTIONS OF THE DRP AND CARRY OUT THE NECESSARY EXAMINATION WITHIN THE SCOPE OF THE SAID DIRECTIONS. THE ASSESSEE CLAIMS THAT IT H AS SUBSTANTIATED ITS CLAIM BY FURNISHING THE NECESSARY DETAILS IN TERMS OF MATERIAL CODE, QUANTITY WISE DETAILS AND SAMPLE DESTRUCTION CERTIF ICATES. THE AO ACKNOWLEDGES THE SAME AND REFUSES TO ACCEPT FOR THE SIMPLE REASON THAT THESE DESTRUCTION CERTIFICATES ARE NOT GIVEN B Y ANY STATUTORY DEPARTMENT/AUTHORITY AND HAVE BEEN SIGNED BY THE AS SESSEE ITSELF AND ITS OWN AUDITOR. THE ASSESSEE DEALS IN PERSONAL CAR E PRODUCTS AND THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE I S ENGAGED IN ANY HAZARDOUS OR ANY OTHER SENSITIVE ACTIVITIES WHERE T HE DESTRUCTION OF ITS PRODUCTS WOULD REQUIRE APPROVAL OF AND VERIFICATION OF ANY STATUTORY OR REGULATORY AUTHORITY. FURTHER, THE MATTER RELATING TO DOUBLE DEDUCTION HAS ALREADY BEEN DEALT WITH BY THE COORDINATE BENCH IN AY 2003-04 IN FAVOUR OF THE ASSESSEE. SIMILAR ISSUE RELATING TO I NVENTORY WRITTEN OFF IS INVOLVED IN EARLIER YEARS WHERE THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCHES AND THERE IS NO CHANGE IN THE METHOD OF ACCOUNTING RELATING TO INVENTORY WRITE OF F DURING THE YEAR AS ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 12 COMPARED TO EARLIER YEARS. IN LIGHT OF ABOVE, WE D O NOT SEE ANY JUSTIFICATION IN DISALLOWING THE WRITE OFF OF INVEN TORY AMOUNTING TO RS 5,79,30,029. IN THE RESULT, GROUND OF THE ASSESSE E IS ALLOWED. 12. AS IN AY 2011-12, IN THE INSTANT YEAR, THE AO A PPLYING THE SAME REASONING OF DOUBLE BENEFIT BY WAY OF INVENTORY WRI TE OFF AND DESTRUCTION CERTIFICATES NOT ISSUED BY ANY STATUTOR Y AUTHORITY HAS DENIED THE CLAIM OF THE ASSESSEE. FOLLOWING THE DETAILED F INDING GIVEN IN AY 2011-12 BY THE COORDINATE BENCH, THE SAID REASONING OF THE AO CANNOT BE ACCEPTED. FURTHER, THE MATTER HAS SINCE BEEN DE CIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE RAJASTHAN HIGH COURT FO R THE EARLIER YEARS WHERE THE SIMILAR CLAIM OF INVENTORY WRITE OFF WAS CLAIMED BY THE ASSESSEE. IN LIGHT OF THE SAME, WE DONOT SEE ANY I NFIRMITY IN THE ORDER OF THE LD CIT(A) AND THE SAME IS HEREBY CONFIRMED. IN THE RESULT, THE GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 13. NOW, WE TAKE UP THE ASSESSEE COMPANYS APPEAL. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 44,02,900/-, BEING 10% OF TOTAL TRAVELING & CONVEYANCE EXPENSES INCURRED BY THE ASSESSEE COMPANY. 14. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS CLAIMED TRA VELLING & CONVEYANCE EXPENSES OF RS. 4,40,29,008/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE DETAILS WERE CALLED FOR BY THE AO AND THE ASSESSEE CLAIMED TO HAVE SUBMITTED THE REQUIRED INF ORMATION. THE AO HOWEVER HELD THAT NEITHER THE BILLS & VOUCHERS WERE PRODUCED NOR ANY ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 13 SUBMISSION TO SUPPORT THE NON-PRODUCTION OF THE BIL LS & VOUCHERS WAS GIVEN. FURTHER, THE AO HELD THAT THE ASSESSEE HAS F URNISHED MARGINAL DETAILS OF BILLS/VOUCHERS/DOCUMENTATION IN SUPPORT OF ITS CLAIM BUT FULL & COMPREHENSIVE DETAILS WITH REGARD TO SAME HAVE NOT BEEN SUBMITTED IN ABSENCE OF WHICH IT IS DIFFICULT TO ESTABLISH THE C ORRECTNESS AND VERACITY OF THE CLAIM. SINCE, THE ASSESSEE HAS FAILED TO SUB MIT SUPPORTING EVIDENCE FOR ENTIRE EXPENSES, IT WAS NOT POSSIBLE T O MAKE SPECIFIC DISALLOWANCE. ACCORDINGLY, THE AO DISALLOWED 10% OF TOTAL EXPENDITURE OF RS. 4,40,29,008/-, I.E. RS.44,02,900/-. 15. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLO WANCE BY HOLDING THAT ASSESSEE HAS FAILED TO PROVIDE SUPPORTING DOCU MENTS TO PROVE THAT SUCH EXPENDITURE ARE INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE AO HAS NOTED IN THE ASS ESSMENT ORDER ITSELF THAT NEITHER BILLS AND VOUCHERS WERE PRODUCED NOR A NY SUBMISSION TO SUPPORT THE NON-PRODUCTION OF THE BILLS AND VOUCHER S WERE GIVEN. THE ASSESSEE COMPANY HAS FAILED TO DISCHARGE THE ONUS T O GET THE EXPENSES VERIFIED BY PROVIDING PROPER DETAILS, COPY OF LEDGE R AND BILLS/ VOUCHERS ETC. TO REVENUE. HENCE, THE ENTIRE EXPENSES REMAINE D UNVERIFIED. 16. DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT THE ASSESSEE VIDE LETTER DT.18.11.2015 PRODUCED HEAD WI SE AND MONTH WISE DETAILS OF THE EXPENSES ALONG WITH SAMPLE VOUCHERS. THEREAFTER, AO VIDE LETTER DT.09.02.2016 REQUIRED THE ASSESSEE TO FURNISH COMPLETE VOUCHERS OF EXPENSES OF ANY TWO MONTHS OF THE PREVI OUS YEAR RELEVANT TO AY UNDER CONSIDERATION. IN RESPONSE TO SAME, ASS ESSEE VIDE LETTER DT.10.02.2016 PRODUCED BILLS AND VOUCHERS FOR MORE THAN TWO MONTHS. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 14 IT WAS FURTHER POINTED OUT THAT SIMILAR DISALLOWANC E MADE BY AO IN AY 2006-07 TO 2010-11 HAS BEEN DELETED BY HONBLE ITAT /DRP. 17. IT WAS FURTHER SUBMITTED THAT TRAVELLING AND C ONVEYANCE EXPENSES ARE REGULAR EXPENDITURE INCURRED ON DAY TO DAY WORKING OF THE ASSESSEE. THE TURNOVER AND THE AMOUNT OF EXPENDITUR E UNDER THIS HEAD IN VARIOUS YEARS IS AS UNDER:- FROM THE ABOVE TABLE, IT IS EVIDENT THAT THE AMOUNT OF EXPENDITURE ON TRAVELLING AND CONVEYANCE EXPENSES HAS DECREASED SI NCE AY 2006-07 AND CONTINUOUSLY ON DOWNWARD TREND. THEREFORE, CONS IDERING THE FACT THAT EXPENDITURE IN TERMS OF VOLUME AS WELL AS PERC ENTAGE OF THE TURNOVER HAS DECLINED, NO DISALLOWANCE IS WARRANTED . 18. THE LD. AR FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED. THE SYSTEM OF INTERNAL C ONTROL IS SUCH THAT NO EXPENSES ARE BOOKED WITHOUT APPROPRIATE APPROVAL AND EVIDENCE OF EXPENSES. THERE IS NO ADVERSE REMARK OF THE AUDITOR ON THESE EXPENSES. AY TRAVELLING & CONVEYANCE EXPENSES (RS. IN CRORES) TURNOVER (RS. IN CRORES) EXPENDITURE AS % OF TURNOVER 2003-04 7.95 432.80 1.84 2004-05 7.37 424.33 1.74 2006-07 9.94 412.14 2.41 2007 - 08 5.69 525.45 1.08 2008-09 4.16 598.49 0.70 2009-10 3.44 650.28 0.54 2010-11 2.51 793.94 0.31 2011-12 3.71 1029.65 0.36 2012-13 4.40 1202.33 0.37 ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 15 THE AO HAS NOT FOUND ANY EXPENSES WHICH ARE NOT FOR THE PURPOSE OF BUSINESS OR WHICH ARE WITHOUT PROPER AUTHORITY. IN COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE VIDE LETTER DT.18.11.2015 PRO DUCED HEAD WISE AND MONTH WISE DETAILS OF EXPENSES ALONG WITH SAMPL E VOUCHERS. FURTHER, VIDE LETTER DT.10.02.2016, IT PRODUCED BIL LS AND VOUCHERS FOR MORE THAN TWO MONTHS AS REQUIRED BY AO BUT AO INCOR RECTLY HELD THAT BILLS & VOUCHERS WERE NOT PRODUCED FOR VERIFICATION . THE AO ON THE ONE SIDE HAS ACCEPTED THAT ASSESSEE HAS FURNISHED MARGI NAL DETAILS OF BILLS/VOUCHERS/DOCUMENTATION BUT ON THE OTHER SIDE HAS HELD THAT IT HAS NOT PRODUCED BILLS & VOUCHERS WHICH IS CONTRADICTOR Y IN ITSELF. THE LD. CIT(A) HAS ALSO INCORRECTLY HELD THAT ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO GET THE EXPENSES VERIFIED BY PROVIDING PROPER DETAILS, COPY OF LEDGER AND BILLS/ VOUCHERS IGNORING THE DETAILS AND SAMPLE INVOICES PRODUCED BY ASSESSEE. HENCE, ADHOC DISALLOWANCE MAD E BY AO AND CONFIRMED BY LD. CIT(A) IS BAD IN LAW. 19. THE LD. AR FURTHER SUBMITTED THAT IN PAST, NO D ISALLOWANCE OUT OF THESE EXPENSES WERE MADE. FOR THE FIRST TIME, DISAL LOWANCE WAS MADE IN AY 2006-07 WHICH WAS DELETED BY THE ITAT IN ITA NO.1378/JP/2010 DT.28.02.2014. AGAIN, DRP IN AY 2007-08, AY 2009-10 & AY 2010-11 DELETED SUCH ADHOC DISALLOWANCE MADE BY THE AO. THE ISSUE HAS ALSO BEEN DECIDED IN ASSESSEES FAVOUR BY ITAT IN ITA NO .37 & 192/JP/14 DT.18.12.2015 FOR AY 2008-09 AND IT(TP)A NO.1/JP/16 DT. 04.07.2017 FOR AY 2011-12. THE SYSTEM OF MAINTENANCE OF THE BO OKS OF ACCOUNTS AND BILLS AND VOUCHERS REMAINS THE SAME AS IN EARLI ER YEARS. THEREFORE FOLLOWING THE PRINCIPLES OF CONSISTENCY AND IN THE ABSENCE OF ANY SPECIFIC MATERIAL, THE ADHOC DISALLOWANCE MADE IS UNCALLED F OR. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 16 20. THE LD. AR FURTHER SUBMITTED THAT AGAINST THE O RDER OF ITAT FOR AY 2006-07 & 2008-09 DELETING THE DISALLOWANCE, THE DE PARTMENT HAS FILED AN APPEAL BEFORE THE HONBLE RAJASTHAN HIGH COURT B UT THE APPEAL OF THE REVENUE IS DISMISSED BY THE HONBLE HIGH COURT VIDE ITS ORDER DT. 23.05.2017 IN DBITA NO.134/2014 FOR AY 2006-07 AND IN DBITA NO.125/2016 FOR AY 2008-09. 21. THE LD. DR HAS VEHEMENTLY ARGUED THE MATTER AND TAKEN US THROUGH THE FINDINGS OF THE LOWER AUTHORITIES WHICH WE HAVE NOTED ABOVE. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE INCURRENCE OF TRAVE LLING EXPENDITURE FOR THE PURPOSES OF BUSINESS IS A FACTUAL FINDING AND P AST YEAR FINDINGS NEED NOT NECESSARILY BE APPLICABLE. HOWEVER IN THE INST ANT CASE, INSPITE OF ASSESSEE COMPANY SUBMITTING BILLS AND VOUCHERS FOR TWO MONTHS, THE AO CHOOSE TO IGNORE THE SAME. HE COULD HAVE QUESTIO NED THE SAMPLE SIZE SO SUBMITTED BY THE ASSESSEE OR COULD HAVE ASK ED FOR MORE SPECIFIC DETAILS. THE AO HOWEVER APPLY ADHOC DISALLOWANCE O F 10% OF TRAVELLING EXPENSES AS WAS DONE IN EARLIER YEARS. THEREFORE, IN ABSENCE OF A SPECIFIC FINDING BY THE AO, CONSISTENT WITH THE POS ITION TAKEN BY THE COORDINATE BENCHES IN EARLIER YEARS, THE ADHOC DISA LLOWANCE IS HEREBY DIRECTED TO BE DELETED AS THERE IS NO BASIS FOR ADH OC DISALLOWANCE IN THE EYES OF LAW, A POSITION WHICH HAS BEEN AFFIRMED BY THE HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE WHERE I N DB APPEAL NO. 134/2014 DATED 23.05.2017, IT HAS HELD AS UNDER: ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 17 5. IN SO FAR AS ISSUE NO. (III) WITH REGARD TO TRA VELLING EXPENSES IS CONCERNED, COUNSEL FOR THE APPELLANT HAS CONTENDED THAT THE EXPENSES WHICH WERE MADE OUT OF WHICH THE SUBSTANTIAL AMOUNT WAS ALLOWED, HOWEVER, RS. 50,00,000/- WAS DISALLOWED BY THE ASSE SSING OFFICER WAS REQUIRED TO BE UPHELD IN VIEW OF THE FACT THAT THE SAME WAS NOT ALLOWABLE IN VIEW OF THE CIRCULAR OF CBDT. HOWEVER, THE TRIBUNAL IN PARA 5 & 5.1 HAS SPECIFICALLY OBSERVED AS UNDER:- 5. THE THIRD GROUND OF APPEAL IS AGAINST DISALLOWA NCE OF RS. 50 LACS OUT OF TRAVELLING AND CONVEYANCE EXPENSES. WE NOTED THAT AO MADE LUMPSUM DISALLOWANCE OUT OF EXPENSES OF RS.9,9 4,33,712/- ON THE GROUND THAT ASSESSEE HAS NOT FILED SUPPORTIN G EVIDENCE TO JUSTIFY THE CLAIM WHICH IS APPROVED BY THE DRP. THE LD. AR CONTENDED THAT THE AO HAS WRONGLY STATED THAT ASSES SEE HAS NOT FILED SUPPORTING EVIDENCE TO JUSTIFY THE CLAIM AND FAILED TO EXPLAIN THE NATURE AND PURPOSE OF EXPENSES AND THEREFORE IT LACKS VERIFICATION. THE SYSTEM OF INTERNAL CONTROL IS SUC H THAT NO EXPENSES ARE BOOKED WITHOUT APPROPRIATE APPROVAL AN D EVIDENCE OF EXPENSES. TO PRODUCE THE VOLUMINOUS FILES OF VOUCHE RS SERVES NO PURPOSE. THERE IS NO ADVERSE COMMENT FROM THE AUDIT ORS ON THE EXPENSES INCURRED UNDER THIS HEAD. THE AO HAS NOT R EQUIRED ASSESSEE TO PRODUCE VOUCHERS FOR ANY SPECIFIC EXPEN DITURE. IN THE PAST, NO DISALLOWANCE OUT OF THESE EXPENSES WERE MA DE BY AO. IN A.Y. 07-08, THE DRP HAS ALSO DELETED SUCH ADHOC DIS ALLOWANCE. IT IS FURTHER CONTENDED THAT ON TRAVELING AND CONVEYAN CE EXPENSES, FRINGE BENEFIT TAX HAS BEEN PAID BY THE ASSESSEE AN D ACCEPTED BY THE DEPARTMENT. THE CBDT IN CIRCULAR NO. 8/2005 DAT ED 29.8.2005 IN REPLY TO QUESTION NO. 35 & 36 HAS CLARIFIED THAT IF ANY ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 18 EXPENDITURE IS NOT ALLOWED U/S 37, THEN THE SAME CA NNOT BE CONSIDERED FOR FRINGE BENEFIT TAX. CONVERSELY IF AN Y EXPENDITURE IS CONSIDERED FOR FRINGE BENEFIT TAX, IT CANNOT BE DIS ALLOWED U/S 37. FOR THIS PROPOSITION, RELIANCE IS PLACED ON THE DEC ISION OF JAIPUR ITAT IN CASE OF ACIT VS. NATURAL SLATE AND STAND ST ONE PVT. LTD. IN ITA NO. 1090/JP/10 DT. 04.02.2011. ON THE OTHER HAN D, THE LD. DR SUPPORTED THE ORDER OF THE AO. 5.1 AFTER CONSIDERING THE RIVAL SUBMISSION, WE FOUN D THAT AO AT PAGE 2 OF ITS ORDER HAS STATED THAT ASSESSEE HAS PR ODUCED ENTIRE MODULE, BILL AND VOUCHERS OF EXPENSES FOR VERIFICAT ION AS DESIRED. HOWEVER, IN MAKING DISALLOWANCE OUT OF THE ABOVE EX PENSES AFTER SUBMISSION OF MONTH WISE DETAILS OF THE EXPENSES BY THE ASSESSEE, AO HAS NOT REQUIRED ASSESSEE TO FURNISH THE DETAILS OF ANY SPECIFIC EXPENSES. WE ALSO NOTE THAT ON THESE EXPENSES, FBT IS PAID AND THAT SUCH ADHOC DISALLOWANCE IS NOT MADE IN THE PAS T AND IN A.Y. 07-08, THE DRP HAS DIRECTED THE AO NOT TO MAKE SUCH ADHOCK DISALLOWANCE. IN THESE FACTS AND CIRCUMSTANCES, WE DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS. 50 LACS MADE BY HIM. 5.1 COUNSEL FOR THE APPELLANT HAS CONTENDED THAT TH E EXPENSES WHICH WERE PAID AS FRIGHT BENEFIT TAX (FBT) AND THE DISPUTE WAS REFERRED TO THE DISPUTE RESOLUTION PENAL (DRP) WHER E THE DISPUTED FOR THE ASSESSMENT YEAR 2007-08. 5.2 THEREFORE, WE ACCEPT THE OBSERVATIONS MADE BY T HE TRIBUNAL IN PARA 5.1 AND IN THAT VIEW OF THE MATTER THE ISSUE I S ANSWERED IN FAVOUR OF THE ASSESSEE. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 19 23. IN THE RESULT, GROUND OF APPEAL NO. 1 OF THE A SSESSEES APPEAL IS HEREBY ALLOWED. 24. IN GROUND NO. 2, THE ASSESSEE COMPANY HAS CHALL ENGED CONFIRMING THE DISALLOWANCE OF RS. 1,95,03,707/- OU T OF OTHER EXPENSES. 25. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPANY CLAIMED OTHER EXPEN SES OF RS.19,50,37,075/-. THE AO HELD THAT ASSESSEE COMPAN Y ATTENDED ON 11.02.2016 BUT NEITHER THE BILLS & VOUCHERS WERE PR ODUCED NOR ANY SUBMISSION TO SUPPORT THE NON-PRODUCTION OF THE BIL LS & VOUCHERS WAS GIVEN. FURTHER, ASSESSEE HAS FURNISHED MARGINAL DET AILS OF BILLS/ VOUCHERS/ DOCUMENTATION IN SUPPORT OF ITS CLAIM BUT FULL & COMPREHENSIVE DETAILS WITH REGARD TO SAME HAVE NOT BEEN SUBMITTED IN ABSENCE OF WHICH IT IS DIFFICULT TO ESTABLISH THE C ORRECTNESS AND VERACITY OF THE CLAIM. SINCE, THE ASSESSEE HAS FAILED TO SUB MIT SUPPORTING EVIDENCE FOR ENTIRE EXPENSES, IT IS NOT POSSIBLE TO MAKE SPECIFIC DISALLOWANCE. ACCORDINGLY, HE DISALLOWED 10% OF TOT AL EXPENDITURE OF RS.19,50,37,075 /-, I.E. RS.1,95,03,707/-. 26. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLO WANCE BY HOLDING THAT ASSESSEE HAS FAILED TO PROVIDE SUPPORTING DOCU MENTS TO PROVE THAT SUCH EXPENDITURE ARE INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE AO HAS NOTED IN THE ASS ESSMENT ORDER THAT SINCE ASSESSEE HAS FURNISHED MARGINAL DETAILS OF BI LLS/ VOUCHERS/ DOCUMENTATION IN SUPPORT OF ITS CLAIM BUT FULL & CO MPREHENSIVE DETAILS ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 20 WITH REGARD TO SAME HAVE NOT BEEN SUBMITTED IN ABSE NCE OF WHICH IT IS DIFFICULT TO ESTABLISH THE CORRECTNESS AND VERACITY OF THE CLAIM. THUS, THE DISALLOWANCE OF 10% OF THE EXPENSES IS REASONABLE T O COVER THE DISCREPANCIES MENTIONED BY THE AO. 27. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE BREAK-UP OF OTHER EXPENSES AS SUBMITTED TO THE AO U NDER VARIOUS HEADS IS AS FOLLOW:- PARTICULARS AMOUNT (IN RS.) OFFICE EXPENSES RECRUITMENT EXPENSES TRAINING EXPENSES RELOCATION EXPENSES OTHERS PROFESSIONAL SERVICES OTHERS CONTRACTUAL SERVICES OTHERS 8,53,27,938 19,02,998 42,07,231 1,25,58,014 1,12,98,795 41,90,009 7,55,52,090 TOTAL 19,50,37,075 28. THE LD. AR FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE DULY AUDITED. THE SYSTEM OF INTERNAL C ONTROL IS SUCH THAT NO EXPENSES ARE BOOKED WITHOUT APPROPRIATE APPROVAL AND EVIDENCE OF EXPENSES. THERE IS NO ADVERSE REMARK OF THE AUDITOR ON THE EXPENSES INCURRED UNDER THIS HEAD. THE AO HAS NOT FOUND ANY EXPENSES WHICH ARE NOT FOR THE PURPOSE OF BUSINESS OR WHICH ARE WI THOUT PROPER AUTHORITY. IN COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSEE VIDE LETTER DT. 09.10.2015 PRODUCED NATURE WISE DETAILS OF THE EXPE NSES ALONG WITH SAMPLE INVOICES. THEREAFTER, VIDE LETTER DT.10.02.2 016, THE ASSESSEE ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 21 PRODUCED BILLS AND VOUCHERS IN CD FORM. THE AO ON T HE ONE SIDE HAS ACCEPTED THAT ASSESSEE HAS FURNISHED MARGINAL DETAI LS OF BILLS/VOUCHERS/DOCUMENTATION BUT ON THE OTHER SIDE HAS HELD THAT IT HAS NOT PRODUCED BILLS & VOUCHERS WHICH IS CONTRADICTOR Y IN ITSELF. THE LD. CIT(A) HAS INCORRECTLY HELD THAT ASSESSEE HAS FAILE D TO PROVIDE SUPPORTING DOCUMENTS TO PROVE THAT SUCH EXPENDITURE ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION IGNORING THE DETAILS AND SAMPLE INVOICES PRODUCED B Y ASSESSEE. HENCE, ADHOC DISALLOWANCE MADE BY AO AND CONFIRMED BY LD. CIT(A) IS BAD IN LAW. 29. THE LD. AR FURTHER SUBMITTED THAT IN AY 2003-04 , SIMILAR DISALLOWANCE MADE BY THE AO WAS DELETED BY THE HON BLE ITAT IN ITA NO. 188 & 265/JP/07 VIDE ORDER DT.09.08.2010. AGAIN DISALLOWANCE WAS MADE IN AY 2006-07 WHICH WAS DELETED BY HONBLE ITA T IN ITA NO.1378/JP/2010 DT.28.02.2014. AGAIN, HONBLE DRP I N AY 2007-08, AY 2009-10 & AY 2010-11 DELETED SUCH DISALLOWANCE. THE ISSUE HAS ALSO BEEN DECIDED IN ASSESSEES FAVOUR BY HONBLE ITAT I N ITA NO.37 & 192/JP/14 DT.18.12.2015 FOR AY 2008-09 AND IT(TP)A NO.1/JP/16 DT.04.07.2017 FOR AY 2011-12. THE SYSTEM OF THE MAI NTENANCE OF THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS REMAINS TH E SAME AS IN EARLIER YEARS. THEREFORE FOLLOWING THE PRINCIPLES OF CONSIS TENCY AND IN THE ABSENCE OF ANY SPECIFIC MATERIAL, THE ADHOC DISALLO WANCE MADE IS UNCALLED FOR. THE ISSUE HAS NOW BEEN DECIDED BY HON BLE RAJASTHAN HIGH COURT IN FAVOUR OF ASSESSEE VIDE ITS ORDER DT. 23.05.2017 IN DBITA NO.134/2014 FOR AY 2006-07. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 22 30. THE LD. DR IS HEARD WHO HAS RELIED ON THE LOWER AUTHORITIES. 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT SIMILAR TO ADHOC DISALLOWANCE IN RESPECT OF TRAVELLING EXPENSES, THE ADHOC DISALLOWA NCE HAS BEEN MADE IN RESPECT OF OTHER EXPENSES. THEREFORE, OUR FINDI NGS AND DIRECTIONS CONTAINED IN RESPECT OF GROUND NO. 1 OF THE ASSESSE ES APPEAL WHICH WE HAVE DIRECTED THE DELETION OF ADHOC TRAVELLING EXPE NSES SHALL APPLY WITH EQUALLY IN THE PRESENT CASE. ACCORDINGLY, WE DIREC TED THE DELETION OF ADHOC DISALLOWANCE OF EXPENSES UNDER THE HEAD OTHE R EXPENSES IN ABSENCE OF A SPECIFIC FINDING THAT THE EXPENSES ARE EITHER BOGUS OR NOT INCURRED FOR THE PURPOSES OF THE ASSESSEES BUSINES S. IN THE RESULT, THE GROUND OF APPEAL NO. 2 IS HEREBY ALLOWED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED IN LIGHT OF ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 26/11/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/11/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S GILLETTE INDIA LTD., BHIWADI, AL WAR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-2, ALWAR. ITA NO. 388 & 634/JP/2018 M/S GILLETTE INDIA LTD. VS. ACIT 23 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. ITA NO. 388 & 634/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR