Unilateral claim based on internally generated documents without any independent evidence cannot be allowed as business expenditure

Brief of the case:

• The ITAT Delhi in the case of DCIT vs. M/s Leroy Somer & Controls held that the internally generated documents by company without confirmation of the same by the other party are not sufficient to make a claim of discount. Therefore, unilateral claims without any independent evidence cannot be allowed as business expenditure.

Facts of the case:

• The assessee company is engaged in the business of manufacturing of electronics goods claimed exemption u/s 80IB. It filed return of income declaring an income of Rs.63,77,436/- which was later on picked up for the scrutiny. The AO made several additions to the returned income including disallowing Rs. additional discount claimed to have been paid to M/s Sudhir Gensets Ltd. amounting to Rs. 46 lacs, the same was confirmed by CIT(A).
• CIT(A) upheld the disallowance by holding that the assessee has not been able to furnish any evidence or explain as to how and why expenses in question were helpful in promoting its business and what benefit had the business of the company acquired therefrom.
• Aggrieved assessee is in appeal before ITAT.

Contention of the Assessee:

• It was submitted that customer(M/s Sudhir Gensets) was not clearing its dues fully because it was claiming to set off the same against the cost incurred by the customer in indirect marketing of assessee’s products which has ultimately benefitted assessee.
• Considering such a claim of the customer, the company finally decide to settle and the Head (F&A) who was asked to coordinate the negotiation between the Directors and marketing heads. Against the claim of Rs.49.09 lacs, it was submitted the amount of Rs.46 lacs was negotiated.
• The offering of additional discount was necessary keeping in view the demands of commercial expediency, based upon ordinary principles of commercial trading, so as to settle dispute in the interest of exigencies of the business.
• It was also submitted that the immediate benefit to the assessee was settlement of account, and the indirect benefit derived by the assessee was to have harmonious business relationship.
• Therefore, the expenditure was incurred wholly and exclusively for the purpose of business keeping in view the exigencies of business and the exigencies of business it was submitted do not need the existence of a contract. 
  

Contention of the Revenue: