M/s Ludhiana Commidities Trading Services Ltd, Ludhiana V. Assistant Commissioner of Income Tax, Ludhiana

ITA 1216/CHANDI/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5159 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER& MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1216/CHD/2016 ASSESSMENT YEAR: 2012-13 M/S LUDHIANA COMMODITIES TRADING VS. THE ACIT, SERVICES LTD., 1 ST FLOOR, LUDHIANA STOCK CIRCLE 7, EXCHANGE, FEROZE GANDHI MARKET, LUDHIANA LUDHIANA -141001 PAN NO. AAACL9140M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL, ADV. RESPONDENT BY : SMT. CHANDERKANTA, ADDL. CIT DATE OF HEARING : 21.03.2018 DATE OF PRONOUNCEMENT : 21.03.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S), [HEREINAFTER REFERRED TO AS CIT(A)]-4, LUDHIANA DATED 13.09.2016 . 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPE AL:- 1. (A) THE LD. CIT(A) HAS ERRED IN LAW IN SUSTAININ G AN ADDITION OF RS. 2,36,262/- UNDER SECTION 37 OF THE ACT OUT OF THE TOTAL DISALLOWANCE OF RS. 2,58,227/- ON ACCOUNT OF FESTIVAL EXPENSES MADE BY THE LD. ASSESSING OFFICER, ON THE CONTENTION THAT T HE ITA 1216-C-2016- LUDHIANA COMMODITIES TRADING SERVICES LTD. 2 SAID EXPENDITURE IS NOT FOR THE BUSINESS OF THE APPELLANT. (B) THAT IN THIS CONNECTION, THE LD. CIT(A) HAS NOT CONSIDERED THE EXPLANATION GIVEN BY THE APPELLANT THAT THE SAID EXPENSES ARE ON ACCOUNT OF DISTRIBUTION OF GIFTS ON THE OCCASION OF DIWALI AND CELEBRATION OF NEW YEAR EVE AND SUCH EXPENSES HAVE BEEN INCURRED FOR THE BUSINESS OF THE APPELLANT. 3. THE SOLE ISSUE RAISED IN THIS APPEAL IS RELATING TO DISALLOWANCE OF EXPENDITURE OF RS. 2,36,262/- INCURRED BY THE ASSES SEE ON ACCOUNT OF NEW YEAR CELEBRATIONS AND ALSO ON DISTRIBUTION OF GIFTS ON DIWALI OCCASION. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, HAS SU BMITTED THAT THE ASSESSEE HAS INCURRED MEAGRE SUM OF RS. 2,58,227/-, ON DISTR IBUTION OF GIFTS ON DIWALI OCCASION AND ON THE EVE OF NEW YEAR CELEBRAT IONS, ON THE CLIENTS AND EMPLOYEES OF THE ASSESSEE ORGANIZATION. HE HAS FURT HER SUBMITTED THAT THE LOWER AUTHORITIES HAVE ALLOWED A SUM OF RS. 21,965/ - ON DISTRIBUTION OF SWEETS TO THE EMPLOYEES, HOWEVER, THE REMAINING EXP ENDITURE HAS BEEN DISALLOWED. 4. THE LD. COUNSELFOR THE ASSESSEE HAS FURTHER SU BMITTED THAT SUCH NATURE OF EXPENSES ARE NOT ROUTINE EXPENSES BUT ARE SELDOM INCURRED ON SPECIAL OCCASIONS SO AS TO ENTERTAIN THE CLIENTS AN D KEEP THE EMPLOYEES REJUVENATED. HE HAS FURTHER EXPLAINED THAT EVEN TH E INCURRING OF EXPENDITURE ON DIWALI OR NEW YEAR CELEBRATIONS IS P ART OF CUSTOMSOF OUR COUNTRY WHICH PRACTICE IS ALSO FOLLOWED BY OTHER OR GANIZATIONS. ITA 1216-C-2016- LUDHIANA COMMODITIES TRADING SERVICES LTD. 3 5. THE LD. DR, ON THE OTHER HAND, HAS RELIED UPON T HE FINDINGS OF THE LOWER AUTHORITIES AND HAS SUBMITTED THAT SAID THE E XPENDITURE IS NOT DIRECTLY RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, THE ASSESSEE HAS NOT CLAIMED ANY EXAGGERATED EXPENDITURE BUT A M EAGRE SUM OF RS. 2.58 LACS,WHICH THE ASSESSEE HAS EXPLAINED THAT ITHAS BE EN INCURRED ON NEW YEARCELEBRATIONS AND DIWALI GIFTS TO THE CLIENTS AS WELL AS EMPLOYEES. THE SAID EXPENDITURE, AS STATED, IS NOT A ROUTINE ACTIV ITY BUT IS INCURRED OCCASIONALLY AS PER THE CUSTOMS PREVALENT IN THE CO UNTRY. IN OUR VIEW, THE SAID EXPENDITURE CAN RIGHTLY BE SAID TO BE INCURRED FOR THE BUSINESS ACTIVITY OF THE ASSESSEE. IN VIEW OF THIS, THE APPEAL OF TH E ASSESSEE IS HEREBY ALLOWED. THE ADDITION MADE BY THE LOWER AUTHORITIES ON THIS ISSUE IS HEREBY ORDERED TO BE DELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :21.03.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR