The Income Tax Appellate Tribunal (ITAT), Delhi bench, while granting relief to Havells India, deleted the disallowance of sales incentives payable to dealers and distributors under the Shahenshah Scheme.
The assessee, Havells India Ltd, had paid sales incentives to dealers and distributors under the Shahenshah Scheme. Accordingly, Rs. 58,43,713/- was written back and credited to Excess Provisions of bad debts/sales incentives written back. The assessee pointed out that the provision made for the scheme is not a contingent liability but rather a contractual liability that is legally enforceable by the dealers and distributors.
During the assessment proceedings, the Assessing Officer (AO) determined that the provision made by the assessee was not based on any scientific method but was in the nature of a contingent liability. Therefore, the AO disallowed the payment made under the Shahenshah Scheme.
Aggrieved by the order, the assessee filed an appeal before the CIT(A) who confirmed the disallowance. Thus, the assessee filed a second appeal before the tribunal.
During the proceedings, Rajat Jain, Counsel for the assessee, argued that the provision made in respect of the “Shahenshah Scheme” is on a scientific basis. He further submitted that a Co-ordinate Bench of the Tribunal had previously deleted similar additions made by the AO in A.Y. 2007-08 and 2006-07.
Rajesh Kumar, Counsel for Revenue, supported the order of the lower authorities.
The Tribunal, while considering the appeal, observed that the Co-ordinate Bench of the Tribunal in earlier years had decided the issue in favor of the assessee by holding that the provision made by the assessee in respect of the “Shahenshah Scheme” was on a scientific basis.
After reviewing the facts and records, the two-member bench of Dr. B. R. R. Kumar (Accountant member) and Saktijit Dey (Vice-President) granted relief to Havells India and deleted the disallowance of sales incentives payable to dealers and distributors under the Shahenshah Scheme. Therefore, the bench allowed the appeal of the assessee.
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