Case Law Details
ACIT Vs Amway India Enterprises Pvt. Ltd (ITAT Delhi)
ITAT Delhi held that the amount paid by the appellant company to ABOs is payments which is directly related to the business activity and incurred wholly and exclusively for the purpose of business. Accordingly, the same is allowable as business expenditure.
Facts- The appellant is selling goods directly to customers through independent distributors known as Amway Business Owners (ABOs). The ABOs are entitled to commission as per their entitlement. Earlier no Service Tax was being charged and paid by the ABOs but later on, the ABOs started receiving quarries from the Service Tax Department on the ground that they are taxable under the category of Business Auxiliary Services. However, the issue of liability of the Service Tax was not clear.
The appellant decided to lend money to the ABOs for the amount to be paid as Service Tax by them till the issue of taxation with the Department get settled.
The said amount was not claimed in the P&L account as an expense at that time as the issue of applicability of Service Tax was not final and therefore, the appellant company had shown these amounts as loans to the ABOS in its balance sheet.
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