IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G , NEW DELHI BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA Nos. 6005 & 6006/Del/2013 Assessment Years: 2007-08 & 2008-09 Synthes Medical Pvt. Ltd., C/o- Vs. DCIT, Circle-7(1), New Delhi Juris Consultant, 207, Essel House, 10 Asaf Ali Road, New Delhi PAN : AAACM3591K (Appellant) (Respondent) And ITA No. 5807/Del/2013 Assessment Year: 2008-09 DCIT, Circle-7(1), Room No. Vs. Synthes Medical Pvt. Ltd., 207- 238A, 2nd Floor, C.R. Building, Essel House, 10 Asaf Ali Road, I.P. Estate, New Delhi New Delhi PAN : AAACM3591K (Appellant) (Respondent) Assessee by S/sh. Gautam Jain & Piyush Kamal, Advocates Department by Sh. N.K. Bansal, Sr.DR Date of hearing 23.02.2017 Date of pronouncement 31.03.2017 ORDER PER O.P. KANT, A.M.: These three appeals (two by assessee and one by Revenue) are directed against two separate orders of Ld. Commissioner of Income-tax (Appeals)-X, New Delhi, {in short CIT(A) } dated 21/08/2013 relating to assessment years 2007-08 and 2008-09 2 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 respectively. Since issues involved in appeals are common, therefore, all three appeals were heard together and disposed of by this consolidated order. ITA No. 6005/Del/2013 for AY: 2007-08 2. First we take up appeal of assessee in ITA No. 6005/Del/2013. On earlier date of hearing, assessee was directed to file concise grounds of appeal. concise grounds filed by assessee on 20/03/2017 are reproduced as under: i. That learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding disallowance of sum of Rs.50,33,418/- by restricting claim of deduction in respect of loaner and demo sets at Rs.40,28,706/- instead of claim of Rs.93,97,124/- by appellant company by holding that such assets are capital assets eligible for depreciation u/s 32(1) of Act. ii. That in any case learned Commissioner of Income Tax (Appeals) has failed to appreciate that expenditure claimed was eligible revenue expenditure incurred wholly and exclusively for purpose of business and as such eligible for deduction u/s 37(1) of Act. iii. That learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining disallowance of sum of Rs.11,49,037/- out of expenditure incurred of Rs.22,98,075/- under head advertisement and promotional expenses incurred by appellant company. iv. That learned Commissioner of Income Tax (Appeals) has further erred in not deleting disallowance of sum of Rs.2,08,711/- representing expenditure incurred under head selling commission by treating it as prior period expenses and instead thereof, directing that on verification if factual mistake is detected, learned Assessing Officer is directed to delete this addition. v. That learned Commissioner of Income Tax (Appeals) has also erred in not deleting disallowance of sum of Rs.7,07,209/- represents provision for doubtful debts and instead thereof directing that learned Assessing Officer is directed to verify this contention of A.R. of appellant and if amount has 3 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 already been added back by appellant, there is no justification for sustain this addition. vi. It is, therefore, prayed that, disallowance sustained by learned Commissioner of Income Tax (Appeals) and disputed in this appeal may kindly be deleted and appeal of appellant company be allowed. 3. facts in brief of case are that assessee company, subsidiary of Synthes Gmbh, Switzerland, was engaged in marketing medical orthopaedic implants, related services and tools throughout India through network of dealers and sales team. For year under consideration assessee filed return of income on 31/10/2007 declaring total income of Rs.10,14,38,903/-. case was selected for scrutiny and notice under section 143(2) of Income-tax Act, 1961 (in short Act ) was issued and complied with. After making certain additions/disallowances total income was assessed at Rs.10,99,91,720/- under section 143(3) of Act on 21/12/2010. On appeal, Ld. CIT-A allowed part relief to assessee. Aggrieved, assessee in appeal before Tribunal raising grounds as reproduced above. 4. grounds No. 1 and 2 relates to disallowance of Rs.50,33,418/- wherein Assessing Officer has treated loaner and demo sets as capital asset against claim of assessee as same were part of inventory . Assessing Officer in impugned assessment order has noted that assessee purchases equipments/instruments either for sale or use by doctors or hospitals on returnable basis. During course of assessment proceeding, assessee contended that equipments/instruments were needed for surgical fixation/correction and regeneration of human skeleton and it was necessary to provide such equipments to doctors/hospitals so as to facilitate sale of products, namely, surgical 4 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 implants. It was contended that after every use, equipments were sterilized and then given to next customers and estimated useful life of such equipments/instruments was 36 months and assessee has consistently amortized cost accordingly. Assessing Officer, however, was not convinced with above explanation and held that since assessee had itself accepted that instruments/equipments were lasting more than year and, therefore, there is no doubt that such equipments/instruments used by assessee for its business interest were not consumed within year. He, therefore, held that such equipment/instruments are capital assets of assessee company and, therefore, should be treated under head plant and machinery for purpose of depreciation. He, accordingly, held that since assessee claimed amortization of Rs.93,97,124/- same would translate into assets of Rs.2,81,91,372/-and, therefore, after allowing depreciation at rate of 15% on aforesaid sum, which was computed at Rs.42,28,706/-, he made disallowance of Rs.50,33,418/- and added same to income of assessee. Ld. CIT-A confirmed aforesaid disallowance and held that instruments in reference are capital in nature and claim of assessee based on principle of deferred revenue expenditure was not correct claim. He also held that principle of consistency cannot be applied as each year is separate year and effects have to be examined accordingly. 4.1 Before us, learned counsel of assessee contended that claim of assessee is maintainable on principle of consistency and in support he referred to judgment of apex court in case of CIT Vs. Excel industries Ltd., 358 ITR 295. It was submitted that since amortization of loaner sets had consistently been accepted as revenue expenditure over period of 13 years from assessment year 1994-95 to 5 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 2006-07, even in assessment framed under section 143 (3) of Act, denial of deduction in year under consideration was not tenable. It was submitted that finding that since assessee derived enduring benefits therefore, expenditure is capital in nature is contrary to judgment of Apex Court in case of Empire Jute Company Limited Vs. CIT, 124 ITR 1. It was submitted that implants were surgically fixed in human body to treat various bone fractures/corrections/regeneration with help of specialized instruments and power tools and since these instruments are regularly used by surgeons in operation theatre, there is regular wear and tear to these instruments and based on past trend/experience and professional advice, useful life of these instruments was assessed to 36 months. It was further submitted that assessee had disclosed said loaner sets under inventory consistently and said stand of assessee has been accepted throughout in past. It was also contended that claim of assessee is in accordance with Accounting Standard-2 (AS-2) mandated by Indian Chartered Accountant Institute (ICAI) and as such amortization should be accepted in arriving at value of stock of loaner sets. Alternatively, it was contended that expenditure was revenue in nature as it was case where assessee adopted to amortize revenue expenditure in accordance with judgment in Taparia Tools Ltd. Vs. JCIT 372 ITR 605(SC) and CIT Vs. Citi Financial Consumer Ltd., 335 ITR 29 (Del). It was further submitted that computation of disallowance by Assessing Officer is not correct and in this regard it was stated that Revenue has not allowed depreciation on estimated WDV of instant year. Furthermore, it was also submitted that even figures adopted by Assessing Officer for computing value of loaner sets at Rs.28,19,137/- was 6 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 based on assumption and correct figure was of Rs.4,18,66,126/- and on basis, adopted by Assessing Officer, depreciation would be of Rs.62,79,919/- and thus disallowance at best could be of Rs.31,17,205/- and not at Rs.50,33,418/- computed by Assessing Officer. 4.2 On other hand, Ld. Senior DR relied on order of lower authorities and submitted that claim of amortization was not in accordance with law. 4.3 We have considered rival submission and perused relevant material on record. We find that assessee company was engaged in trading of medical implants, surgical instruments etc in field of orthopaedic. assessee in course of trading operations, purchased equipments/instruments for fixing implants in human body and out of those few items were given as loaner sets to various hospitals/doctors on returnable basis. issue therefore, is whether equipments/instruments given as loaner sets are capital assets or part of inventory as claimed by assessee, more particularly having regard to fact that this claim of assessee has been accepted since assessment year 1994-95. Chart of claim made by assessee in various years is reproduced as under: AY Opening Purchase A+B Closing Diminution Disallo Assessment u/s Stock (B) Stock in value wance (A) (D) amortized if any 1994-95 - 60,05,907 60,05,907 55,05,415 5,00,492 143(1) 1995-96 55,05,415 - 55,05,415 35,03,446 20,01,969 143(1) 1996-97 35,03,446 6,74,430 41,77,876 21,42,237 20,35,639 143(1) 1997-98 21,42,237 13,62,096 35,04,332 15,68,865 19,35,467 143(1) 1998-99 15,68,865 31,90,278 47,59,143 36,52,622 11,06,521 143(1) 1999-00 36,52,622 19,29,118 55,81,740 34,23,120 21,58,620 Nil 143(1) 2000-01 34,23,120 9,58,008 43,81,129 22,73,265 21,07,864 143(1) 2001-02 22,73,265 21,99,857 44,73,122 25,07,361 19,65,761 143(1) 2002-03 25,07,361 53,65,247 78,72,608 57,85,431 20,87,177 143(1) 2003-04 57,85,431 52,22,341 1,10,07,771 76,67,855 33,39,916 143(3) and 7 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 143(3)/147 2004-05 76,67,855 71,02,372 1,47,70,227 95,93,546 51,76,681 143(1) 2005-06 95,93,546 88,86,794 1,84,80,340 1,18,92,073 65,88,267 143(1) 2006-07 1,18,92,073 72,84,329 1,91,76,401 1,16,55,123 75,21,278 143(1) 4.3.1 Ld. CIT-A has not accepted claim by observing that principle of res judicata does not apply to income tax proceedings. We do agree with said principle, however, Hon ble Apex Court in case of CIT Vs. Excel Industries Ltd. (supra) has upheld principle of consistency. Hon ble Apex Court in said case followed judgment of Radha Soami Satsang Vs. CIT 193 ITR 321 (SC) and observed as under: 29. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow reconsideration of issue for subsequent assessment year if same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of law of case, or new versions which they present as to what should be proper apprehension by court of legal result either of construction of documents or weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, same principle, namely, that of setting to rest rights of litigants, applies to case where point, fundamental to decision, taken or assumed by plaintiff and traversable by defendant, has not been traversed. In that case also defendant is bound by judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 31. It appears from record that in several assessment years, Revenue accepted order of Tribunal in favour of assessee and did not pursue matter any further but in respect of some assessment years matter was taken up in appeal before Bombay High Court but without any success. That being so, Revenue cannot be allowed to flip-flop on issue and it ought let matter rest rather than spend tax payers' money in pursuing litigation for sake of it. 8 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 4.3.2 In instant case, we also find that there is no change in facts or position of law whereby loaner sets are declared as inventory and accepted as inventory by Department. We do not find any justifiable basis to adopt contrary stand in instant year. According to Revenue, since assessee has accepted that useful life of loaner set is 36 months, therefore, they are capital assets. above conclusion to our mind is contrary to judgment of Hon ble Apex Court in case of Empire Jute Company Limited Vs. CIT (supra) wherein it has been held that expenditure even if incurred for obtaining advantage of enduring benefit, may nonetheless, be on revenue account and tests of enduring benefit may breakdown. It was held that if advantage consists merely in facilitating, assessee s trading operation or enabling management and conduct of assessee s business to be carried on more efficiently and more profitably while leaving fixed capital untouched, expenditure would be on revenue account, even though advantage may endure for indefinite future. In case of assessee, we find that admittedly loaner sets are made available to doctors for purpose of encouraging sale of implants and therefore, advantage to assessee is to facilitate trading operation of implants. loaner or demo sets are not instruments of earning income so as to qualify as capital asset but those are for encouraging use of assessee s products in doctor community, which in turn would recommend for sale of products of assessee. loaner sets have been found to have average life of 36 months. In such circumstances, merely because assessee has amortized expenditure, it does not warrant conclusion that such expenditure is capital expenditure. assessee has consistently disclosed said loaner sets as inventory and valued same in 9 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 accordance with Accounting Standard-2 of ICAI, which prescribes assessee to value inventory at cost or net realizable value, whichever is lower. 4.3.3 Moreover, finding of Ld. CIT-A that claim of assessee is based on principle of deferred revenue expenditure, is not correct. It is case of valuation of inventory and method of valuation has been consistently accepted by Revenue. Moreover even otherwise expenditure on purchase of loaner sets is not capital expenditure and therefore eligible for deduction as revenue expenditure, which at option of assessee can be amortized over period of years as held in judgment of Hon ble Apex Court in case of Taparia Tools Ltd Vs. JCIT (supra), as under: Thus, first thing which is to be noticed is that though entire expenditure was incurred in that year, it was assessee who wanted spread over. Court was conscious of principle that normally revenue expenditure is to be allowed in same year in which it is incurred, but at instance of assessee, who wanted spreading over, Court agreed to allow assessee that benefit when it was found that there was continuing benefit to business of company over entire period. 18. What follows from above is that normally ordinary rule is to be applied, namely, revenue expenditure incurred in particular year is to be allowed in that year. Thus, if assessee claims that expenditure in that year, IT Department cannot deny same. However, in those cases where assessee himself wants to spread expenditure over period of ensuing years, it can be allowed only if principle of 'Matching Concept' is satisfied, which upto now has been restricted to cases of debentures. 19. In instant case, as noticed above, assessee did not want spread over of this expenditure over period of five years as in return filed by it, it had claimed entire interest paid upfront as deductible expenditure in same year. In such situation, when this course of action was permissible in law to assessee as it was in consonance with provisions of Act which permit assessee to claim expenditure in year in which it was incurred, merely because different treatment was given in books of account cannot be factor which would deprive assessee from claiming entire expenditure as deduction. It has been held repeatedly by this Court that entries in books of account are not determinative or conclusive and matter is to be examined on touchstone of provisions contained in Act [See - Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC); Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172/93 Taxman 502 10 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 (SC); Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC) and United Commercial Bank v. CIT [1999] 240 ITR 355/106 Taxman 601 (SC). 20. At most, inference can be drawn that by showing this expenditure in spread over manner in books of account, assessee had initially intended to make such option. However, it abandoned same before reaching crucial stage, inasmuch as, in income tax return filed by assessee, it chose to claim entire expenditure in year in which it was spent/paid by invoking provisions of Section 36(1)(iii) of Act. Once return in that manner was filed, AO was bound to carry out assessment by applying provisions of that Act and not to go beyond said return. There is no estoppel against Statute and Act enables and entitles assessee to claim entire expenditure in manner it is claimed. 4.3.4 In aforesaid judgment, there Lordships have held that normally revenue expenditure is to be allowed in year in which it is incurred but at instance of assessee, spreading out of expenditure is permissible. 4.3.5 In such circumstances, we are of considered opinion that amount of Rs.50,33,418/- treating loaner sets expenditure as capital expenditure was not in accordance with law and therefore, directed to be deleted. Thus, grounds No. 1 and 2 of appeal are accordingly allowed. 5. ground No. 3 relates to disallowance of Rs.11,49,037/- out of expenditure of Rs.28,72,572/- under head advertisement and promotional expenses incurred by assessee company. Assessing Officer disallowed sum of Rs.22,98,075/- and allowed 1/5th of expenditure, amounting to Rs.5,75,118/-n out of total expenditure of Rs.28,72,592/- by following decision in case of Madras Industrial Investment Corporation Limited Vs. CIT 225 ITR 802. Ld. CIT-A accepted claim of expenditure incurred on advertisement of Rs. 42,000/- but as regard expenditure incurred or sales promotion of Rs.22,03,897/-, he disallowed 50% of claim for 11 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 want of proper documentation and adequate evidence regarding use of said items for business purpose. 5.1 Before us, learned counsel submitted that ad-hoc disallowance of revenue expenditure is not in accordance with law. He relied on judgment in case of CIT Vs. Salora International Ltd. reported in 308 ITR 199 (Del) and CIT Vs. Spice Distribution Ltd. reported in 374 ITR 30 (Del) to submit that expenditure incurred on sales promotion is revenue expenditure. It was contended that there is no concept of deferred revenue expenditure under Act as held in case of CIT Vs. Citi Financial Consumer Fin. Limited, 330 ITR 29. 5.2 On contrary, Ld. Senior DR submitted that assessee has not furnished details of expenditure incurred and failed to establish nexus of expenditure incurred with business of assessee and therefore, in such circumstances Ld. CIT-A was justified in restricting claim of expenditure to extent of 50%. 5.3 Having considered rival submissions and perused relevant material on record, we are of opinion that no basis whatsoever has been stated by authorities to restrict expenditure to 50% of claim or 1/5th of claim. reliance placed by Assessing Officer on judgment of Madras Industrial Investment Corporation Limited Vs. CIT (supra) is misconceived, misplaced and contrary to judgment of Hon ble Apex Court in case of Taparia Tools Limited Vs. JCIT (supra), wherein it is laid down that there is no concept of deferred revenue expenditure and is only at instance of assessee, revenue expenditure can be spread or under principle of matching concept and not otherwise. Ld. CIT-A has observed that in respect of expenditure of key chains amounting to Rs.96,546/- to distributors and amounting to Rs.3,23,560/- to Doctors, assessee did not 12 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 establish that same was incurred wholly and exclusively for purpose of business. We observed that assessee vide reply dated 12/08/2013 had submitted before Ld. CIT-A that such expenditure was incurred for business of company amongst various doctors and health workers who attended seminars. It was also stated that turnover of assessee company has increased from Rs 31.86 crores to Rs. 42.04 crores. We find that neither Assessing Officer nor Ld. CIT-A has disputed genuineness of expenditure. In such circumstances, once genuineness of expenditure is not in dispute, commercial expediency cannot be rejected on ground of suspicion. No material was led by revenue to allege that expenditure incurred in course of business is not eligible expenditure. We accept contention of Ld. counsel that it is not possible to get receipt of keychains either from doctors or distributors distributed for purpose of development of business of assessee . entire action of authorities below is based on suspicion and therefore found untenable. Accordingly, disallowance made on this account is deleted and ground No. 3 of appeal is allowed. 6. ground No. 4 relates to disallowance of Rs.2,08,711/- representing expenditure under head selling commission by treating it as prior period expenses. We find that Ld. CIT-A in respect of aforesaid disallowance has observed as under: 6.3 After going through observations of A.O. and submissions of A.R. of appellant, A.O. is directed to verify whether contention of A.R. of appellant on this issue is justified. It appears that A.R. has stated it to be mistake apparent from record. On verification, if factual mistake is detected, A.O. is directed to delete this addition. Accordingly, this ground is treated as partly allowed subject to verification. 13 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 6.1 Since aforesaid issue in dispute has already been allowed by Ld. CIT-A subject to verification by Assessing Officer, we are not inclined to interfere with finding of Ld. CIT-A and ground of appeal is therefore rejected. 7. ground No. 5 relates to disallowance of Rs.7,07,209/- representing provision for doubtful debts. During course of assessment proceeding, it was contended that entire provision had been added back by assessee company in computation of income. On issue in dispute, Ld. CIT-A observed as under: 7.3 After going through observations of A.O. and submissions of A.R. of appellant, it appears that appellant has on its own already added back this amount of Rs. 7,07,209/- in total addition of Rs.29,45,009/-. A.O. is directed to verify this contention of A.R. of appellant. If amount has already been added back by appellant, there is no justification for sustaining this addition. This ground is treated as partly allowed subject to verification. 7.1 Since aforesaid issue in dispute has also been allowed by Ld. CIT-A, subject to verification by AO that amount was already added back in computation, we are not inclined to interfere in finding of Ld. CIT-A on issue in dispute and accordingly, ground of appeal is therefore rejected. ITA Nos. 6006/Del/2013 & 5807/Del/2013 for AY: 2008-09 8. Now we take up appeal in ITA No. 6006/Del/2013 and 5807/Del/2013 for assessment year 2008-09. concise grounds raised by assessee are reproduced as under: i. That learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding disallowance of sum of Rs. 1,93,04,806/- by restricting claim of deduction in respect of loaner and demo sets at Rs. 34,06,736/- instead of claim of Rs. 14 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 2,27,11,536/- by appellant company by holding that such assets are capital assets eligible for depreciation u/s 32(1) of Act. ii. That in any case learned Commissioner of Income Tax (Appeals) has failed to appreciate that expenditure claimed was eligible revenue expenditure incurred wholly and exclusively for purpose of business and as such eligible for deduction u/s 37(1) of Act. iii. That learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining disallowance of sum of Rs. 25,60,981/- out of expenditure incurred of Rs. 51,21,962/- under head advertisement and promotional expenses incurred by appellant company. iv. That learned Commissioner of Income Tax (Appeals) has further erred in not deleting disallowance of sum of Rs. 26,45,655/- representing expenditure incurred under head selling commission by treating it as prior period expenses and instead thereof, directing that on verification if factual mistake is detected, learned Assessing Officer is directed to delete this addition. v. That learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding disallowance of Rs. 15,88,440/- representing expenditure incurred for holding sales conference by appellant company. vi. That learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining disallowance of Rs. 17,83,914/- representing expenditure incurred on payment made by appellant company to overseas education foundation for participation of selected Indian doctors for advance training course held outside India by invoking section 40(a)(i) of Act. vii. That learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in sustaining disallowance of Rs.13,31,716/- representing expenses on training of doctors in India 15 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 viii. That learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding disallowance of sum of Rs.12,03,128/- representing professional fees paid by appellant company to M/s. S. R. Batliboi & Co. in year under consideration by appellant company by invoking provisions contained in section 40(a)(ia) of Act. ix. It is therefore, prayed that, disallowances sustained by learned Commissioner of Income Tax (Appeals) and disputed in this appeal may kindly be deleted and appeal of appellant company be allowed. 8. grounds raised by Revenue for assessment year 2008-09 are as under: i. On facts and circumstances of case, learned CIT(A) erred in law and merits of case in restricting disallowance to 50% instead of 4/5th of Rs.5121962/- total expenses claimed by assessee on account of advertisement and publicity. ii. On facts and circumstances of case, learned CIT(A) erred in law and merits of case in deleting addition of Rs.4006070/- on account of recruitment and training expenditure. iii. appellant craves to amend modify, alter, add or forego any ground(s) of appeal at any time before or during hearing of this appeal. 9. grounds No. 1 and 2 of appeal of assessee are identical to grounds No. 1 and 2 raised in appeal for assessment year 2007-08. We have already held while disposing off appeal for assessment year 2007-08 that denial of claim of deduction of loaner sets holding same as capital expenditure was not in accordance with law, therefore, following aforesaid finding, we also delete disallowance in instant year and accordingly, allow grounds No. 1 and 2 of appeal. 10. ground No. 3 of appeal of assessee and ground No. 1 of appeal of Revenue relate to disallowance of advertisement expenses which is also identical to ground No. 3 raised in appeal for 16 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 assessment year 2007-08. Thus, for reasons stated while disposing of ground No. 3 for assessment year 2007-08, we hold that claim of assessee is in accordance with law. Accordingly, disallowance made by Assessing Officer and sustained by Ld. CIT-A is deleted. Thus, ground no. 3 of assessee s appeal is allowed and ground no. 1 of Revenue s appeal is dismissed. 11. ground No. 4 relates to disallowance of sum of Rs.26,45,655/- representing expenditure incurred under head selling commission by treating it as prior period expenses. finding of Ld. CIT-A on issue in dispute is extracted as under: 6.3 After going through observations of A.O. and submissions of A.R. of appellant, as already decided by undersigned in my earlier decision in A.Y. 2007-08 in appellant s own case, A.O. is directed to verify whether contentions of A.R. of appellant on this issue is justified. It appears that A.R. has stated it to be mistake apparent from record. On verification, if factual mistake is detected, A.O. is directed to delete this addition. Accordingly, this ground is treated as partly allowed subject to verification. 11.1 Before us, learned counsel for assessee contended that Ld. CIT-A has mechanically applied conclusion for assessment year 2007-08 to instant year. It was contended that liability for expenditure on account of selling commission crystallized in instant year and therefore, it was allowable in instant year. 11.2 Having regard to above and contention not disputed by Ld. Senior DR, we find that Ld. CIT-A has not correctly appreciated factual metrics for instant year. We therefore, consider it appropriate to restore issue to file of Assessing Officer for considering afresh, who shall decide issue after granting due opportunity of hearing to assessee. ground no. 4 of assessee s appeal is accordingly allowed for statistical purpose. 17 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 12. ground No. 5 relates to disallowance of sum of Rs.15,88,440/- representing expenditure incurred for holding sales conference by assessee company. Assessing Officer observed that assessee debited sum of Rs.15,88,440/- to company called, make my trip and stated that this sum was advanced to make my trip . As assessee failed to furnish any explanation for allowability of said claim, Assessing Officer denied claim of expenditure. Before the, Ld. CIT-A, assessee contended that such expenditure pertain to travel expenses and assessee was hosting training program at place called Phuket . assessee further submitted details of payment to establish genuineness of expenditure and contended that expenditure was wholly and exclusively for purpose of business. Ld. CIT-A held that relevant details had not been produced before Assessing Officer, therefore, Assessing Officer was fully justified in making disallowance as assessee failed to establish that expenditure was incurred wholly and exclusively for purpose of business. 12.1 Before us, learned counsel of assessee submitted that complete evidences in support of claim were furnished before authorities and therefore, expenditure in question was eligible for claiming as business expenditure and authorities below have proceeded on surmises, conjecture and suspicion in denying claim of expenditure. 12.2 Ld. senior DR supported finding of Ld. CIT-A and Assessing Officer and contended that denial of claim of assessee was in accordance with law. 12.3 We have considered rival submissions and perused relevant material on record. We find that Assessing Officer stated 18 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 that evidences in support of expenditure were not furnished, whereas Ld. CIT-A has accepted that evidences were furnished before him, still he confirmed action of Assessing Officer. In facts of case, in our opinion, authorities below have not examined evidence supporting claim that staff members of assessee have attended training programs conducted by assessee. In such circumstances, we feel it appropriate to restore issue to file of Assessing Officer for examination of claim of assessee viz-a-viz evidences tendered and then decide issue in accordance with law after granting due opportunity of hearing to assessee. Accordingly, ground no. 5 of appeal is allowed for statistical purpose. 13. ground No. 6 relates to disallowance of Rs.17,83,914/- representing expenditure incurred on payment made by assessee company to overseas education foundation for participation of selected Indian doctors for advance training course outside India by invoking section 40(a)(ia) of Act. 13.1 Ld. counsel contended that expenditure was incurred for providing training to doctors and it was not in any way in nature of fee for technical services. In support of contention, counsel relied on decision of Mumbai bench of Tribunal in case of Holcim Services South Asia Ltd. Vs. DCIT 157 ITD 892. 13.2 On contrary, Ld. Senior DR relied on finding of lower authorities. 13.3 We have heard rival submissions and perused relevant material on record. We find that on issue in dispute, Ld. CIT-A has observed as under: 19 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 8.3 After going through facts of case, observations of A.O. and submissions of A.R. of appellant, it is observed that services for which payment was made was provided to highlight trained doctors and professionals who were certainly imparted technical training and, therefore, services could only be considered as technical services. Though A.R. of appellant has argued that this was only training and could no be construed as fee for technical services, since nature of services were of technical nature having been imparted to specialized and technical people, including doctors and other specialized staff, I am inclined to agree with findings of assessing officer that provisions of section 195 were attracted in present case and since no TDS had been deducted by appellant, this disallowance u/s 40(a)(i) was fully justified. 13.3.1 From aforesaid, it is apparent that Ld. CIT-A has held expenditure incurred by assessee was in nature of fee for technical services and there for, assessee was obliged to deduct TDS under section 195 Act and due to non-deduction of TDS, expenditure was liable for disallowance. We observed that payment was made to Overseas Education Foundation (OEF) for providing training to doctors. OEF is medically guided non-profit organization education body led by international group of surgeons specialized in treatment of trauma and disorders of musculoskeletal system. doctors attended training in independent capacity, though expenditure on such training was incurred by assessee on account of commercial expediency, which aspect has not been disputed in this appeal. payment was not paid for rendering any managerial, technical or consultancy services. In such circumstances, expenditure incurred towards payment to overseas education foundation, cannot be held as fee for technical services provided to assessee. Tribunal in case of Holcim Services South Asia Ltd Vs. DCIT (supra) has held as under: 20 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 5. We have heard rival contentions and also perused relevant findings given in impugned order. It is undisputed fact that assessee has made payment to HGSL which is non-resident company based at Switzerland. payment has been made for training conducted by HGSL to its delegates outside India. It is admitted fact here that neither services have been rendered in India nor such services have been utilized in India. Out of total payment of Rs. 65,49,217/-, assessee had not deducted TDS on payment aggregating to Rs. 33,93,493/- (on balance amount TDS has been deducted), on ground that, such payment relate to services rendered outside India. revenue's case is that, in view of Explanation brought in statute by Finance Act, 2010 which got President's assent in May, 2010 has been brought in statute with retrospective effect form 1st June, 1976 and such Explanation is clarificatory in nature which now provides that, income of non-resident shall be deemed to accrue in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included to total income of non-resident, whether or not non-resident has resident (sic) or place of business or business connection in India or non- resident has rendered services in India. Though, such amendment has been brought in statute with retrospective effect but at time of making payment there was no such provision under Act and in fact, law of land as laid down by Hon'ble Supreme Court was that, if services has not been rendered in India and such services are not utilized in India then there is no liability for deducting TDS. amendment has been brought specifically to negate decision of Hon'ble Supreme Court. assessee who has to make payment cannot visualize or apprehend that in future retrospective amendment would be brought whereby it would require withholding of tax. Even if purported amendment has been brought with intention to clarify provision but there was no such judicial interpretation that payments made to non-residents for rendering of services in India is taxable in India in absence of any business connection in India or PE in India and in absence of any clear- cut law, assessee cannot be held to be liable to deduct TDS. It is trite legal maxim. "lex non cogit ad impossiblia" which means that, law cannot possibly compel person to do something which is impossible to perform. Thus, we hold that, at time of making payment, assessee could not have visualize to deduct TDS when there was no provision under Act and in fact, there was already prevailing law laid down by Hon'ble Supreme Court that in such case, no TDS was to be deducted, then obvious conclusion is that on such payment no disallowance under section 40(a)(i) can be made. If view and contention raised by revenue is to be accepted that such law fixing liability on assessee is to be reckoned from retrospective date, then it will cause not only great hardship and injustice but also prejudice to assessee. Accordingly, we hold that, disallowance under section 40(a)(i) on account of any retrospective amendment is wholly vitiated and cannot be sustained. Accordingly, ground raised by assessee is allowed. 21 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 13.3.2 Therefore, respectfully following aforesaid precedent, we delete disallowance and allow ground no. 6 of appeal raised by assessee. 14. ground No. 7 relates to disallowance of Rs.13,31,716/- representing expenses on training of doctors in India. From perusal of order of assessment, we find that sum of Rs.19,35,311/- was incurred towards booking of 13 rooms and banquet charges in Le Meridian , Bangalore. Further, amount of Rs.18,17,305/- has been paid to Hotel Ambassador and bills are in different names of various doctors. Also amount of Rs.6,56,126/- was made to Habitat word . Assessing Officer held that it was difficult to verify whether expenditure was on account of business or personal in nature. He, therefore, disallowed 25% of above expenditure aggregating to Rs.8,52,186/-. Apart from above, he noted that amount of Rs.4,79,530/- was paid to Hotel presidency on account of expenses claimed by one GV Anmegutak, however, no proper bills were submitted in support of its claim though letter dated 23/09/2007 alongwith copy of receipt was filed. Ld. CIT-A confirmed above disallowance. 14.1 We have heard rival submissions and perused relevant material on record. Regarding disallowance of Rs.8,52,186/- Ld. Counsel contended that expenses incurred were towards doctors who were highly claimed faculty and were invited from abroad in interest of business of assessee company. We find that Assessing Officer has made disallowance on ad-hoc basis at rate of 25% of total expenses of Rs 34,08,154/-. We also find that assessee has claimed of reimbursing expenses incurred by doctors on their stay in hotels etc, while attending conference seminars organized by assessee or other organizers. However, we 22 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 find that assessee has not linked all expenses with any particular conference or training course for doctors or any specific event related to business of assessee. In such circumstances, we feel it appropriate to restore issue to file of Assessing Officer directing assessee to produce all necessary evidence in support of its contentions of incurring expenses for purpose of business of assessee company. With regard to disallowance of Rs.4,79,530/- Ld. CIT-A observed that assessee made general observation and submissions that expenses were towards hotels stay and other expenses for foreign faculty, and Ld. AR of assessee failed to justify name of person against whom bill was raised. Before us, Ld. counsel submitted that assessee has already filed copy of receipts etc. and if required further documentary evidence in support of contention of incurring expenses for business purpose may be filed. In such circumstances, we restore issue also to file of Assessing Officer with direction to assessee to produce necessary evidence in support of its claim. ground no. 7 of appeal is accordingly allowed for statistical purpose. 15. ground No. 8 relates to disallowance of sum of Rs.12,03,128/- representing professional fees paid by assessee company to M/s SR Batliboi & Company by invoking provisions contained in section 40(a)(ia) of Act. 15.1 Before us, Ld. counsel of assessee prayed that issue may kindly be restored to file of Assessing Officer for adjudication afresh. 15.2 Ld. Senior DR did not oppose aforesaid prayer. Therefore, we restore issue to file of Assessing Officer for fresh adjudication. Needless to mention, Assessing Officer shall provide 23 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 sufficient opportunity of hearing to assessee. ground no. 8 of appeal is accordingly allowed for statistical purposes. 16. In ground No. 2, Revenue has raised issue of disallowance of Rs.40,06,070/- on account of recruitment and training expenditure. 16.1 We have heard rival submission and perused relevant material on record. We find that Ld. CIT-A has deleted aforesaid disallowance by holding as under: 4.3 After going through observations of A.O., submissions of A.R. of appellant and various judicial pronouncements, this ground is being finalized after making following observations: (a) A.O. has made this disallowance on training expenses by treating it as deferred revenue expenditure and stating that expenditure should be allowed over period of 5 years. A.R., has, however, argued that I past, similar expenses has been allowed as revenue expenditure and there was no justification for treating this amount as deferred revenue expenditure over 5 years. A.R. also relied upon various judicial pronouncements to argue that since no asset was being created in this case, there was no reason for treating this as capital expense. (b) It is pertinent to note that if amount is treated as deferred revenue expenditure, then whole accounting computations had to be altered over next 4 years to allow claim of expenditure in several years. This will create complications both for department and appellant and more importantly it will also disturb consistent system of accounting on this issue as strongly argued by A.R. of appellant. assessing officer has also not disputed this consistent method being followed by appellant in past. Considering documents of A.R. of appellant as well as reliance placed by various judicial pronouncements, such expenses on training should be allowed as revenue expense and assessing officer has not justified as to why there is reason for disturbing consistent methodology on this issue. Since no unique training programme or asset creation has been pointed out by A.R. during relevant assessment year which will justify treatment of these expenses as deferred revenue expenditure, after considering various judicial pronouncements on this issue, as well as principle of consistency, I do not find any reason to uphold disallowance made by assessing officer. Accordingly, A.O. is directed to delete this addition and treat same as revenue expenditure pertaining to relevant assessment year. This ground is, therefore, treated as allowed. 24 ITA Nos. 6005 & 6006/Del/2013 & ITA No. 5807/Del/2013 16.2 Ld. CIT-A has clearly held that no asset was created by incurring expenditure on recruitment and training and, therefore, there was no reason for treating this expenditure as capital expenditure. finding of Assessing Officer has not been found by Ld. CIT-A in accordance with accounting principles. He also found disallowance made by Assessing Officer against principle of consistency. In view of above, in our opinion, order of Ld. CIT-A on issue in dispute is well reasoned and we find no justification to interfere with aforesaid finding of Ld. CIT-A, and accordingly ground no. 2 of appeal of Revenue is dismissed. 17. In result, both appeals for assessment years 2007-08 and 2008-09 filed by assessee are partly allowed for statistical purposes and appeal filed by Revenue is dismissed. decision is pronounced in open court on 31st March, 2017. Sd/- Sd/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31st March, 2017. RK/-(D.T.D) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Synthes Medical Pvt. Ltd. v. DCIT, Circle-7(1), New Delhi