M/s. Hi- Tech Gears Ltd., Gurgaon V. Addl. CIT, New Delhi

ITA 1351/DEL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7861 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Keywords: Business expenditure; Additional evidence
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1351 /DEL/2012 ASSESSMENT YEAR : 2008-09 M/S HI TECH GEARS LTD., ADDL. CIT, 344/3, OSHU HOUSE, RANGE-12, LADO SARAI, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACH AAACH AAACH AAACH- -- -0156 0156 0156 0156- -- -K KK K APPELLANT BY : NONE. RESPONDENT BY : SMT. ANUSHA KHURANA, SR. DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A)-XV, NEW DELHI DATED 1.2.2012 FOR ASSESSMENT YEA R 2008-09. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF THE LAW, THE LD CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF ` .3,95,916/- OUT OF SALES PROMOTION EXPENSES. 2. THE ASSESSEE ALSO CRAVES LEAVE TO RAISE ANY OTHER GROUND W ITH THE PERMISSION OF THE BENCH. 2. THE BRIEF FACTS OF THE CASE ARE THAT FOR THE ASSESSMEN T YEAR 2008-09, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ITA NO1351/DEL/2012 2 ASSESSMENT WAS COMPLETED AT ` .12,07,47,240/- AGAINST THE RETURNED INCOME OF ` .11,93,73,790/-. ONE OF THE ADDITIONS MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF DISALLOWANCE OF SALES P ROMOTION EXPENSES AMOUNTING TO ` .4,62,788/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED UNDER THE HEAD SALES PROMOTION EXPENSES THE ASSESSEE HAD INCURRED, AN EXPENDI TURE OF ` .66,872/- ON ACCOUNT OF EXPENSES ON PEN DRIVES DISTRIBU TED DURING THE MEETING OF CONFEDERATION OF INDIAN INDUSTRY AND FUR THER A SUM OF ` .3,95,916/- WAS SPENT ON HOSTING COCKTAIL-CUM-DINNER P ARTY. THE ASSESSING OFFICER FURTHER NOTED THAT COCKTAIL-CUM-DINNE R EXPENSES WERE INCURRED BY MR. DEEP KAPURIA AND MRS. VEENA KAP URIA (DIRECTORS OF THE COMPANY) ON ACCOUNT OF MR. DEEP KAPURIA BEIN G ELECTED AS DEPUTY CHAIRMAN OF CII NORTHERN REGION. THE ASSESSING OFFICER CONCLUDED THAT THESE WERE THE PERSONAL EXPENSES OF THE DIRECTORS AND CANNOT BE ATTRIBUTED TO THE SALES PROMOTION EXPENSES AS CLAIMED BY THE ASSESSEE AND ADDED BACK THE AMOUNT OF ` .4,62,788/- TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED AN APPEAL B EFORE LD CIT(A) AND SUBMITTED THE FOLLOWING:- A) THAT THE COMPANY IS A CORPORATE MEMBER OF VARIOUS TR ADE ASSOCIATIONS SUCH AS CII ACMA FOR PROPER REPRESENTATION O F THE INTEREST OF INDUSTRY BEFORE THE GOVT. AND FOR DEVELOP MENT OF ITS BUSINESS AND PLEADED THAT BOTH AMOUNTS WERE SPENT FO R THE PURPOSE OF BUSINESS OF THE COMPANY. IN RESPECT OF AM OUNT SPENT ON PEN DRIVES THE ASSESSEE SUBMITTED THAT THE COMPANY DISTRIBUTED 200 PEN DRIVES CONTAINING ITS PROF ILE AND OTHER IMPORTANT DETAILS TO MAKE IT MANUFACTURING ABI LITY KNOWN AND AVAILABLE TO AUTOMOBILES INDUSTRIES. IN SUPPO RT OF ITS CONTENTION THE ASSESSEE ENCLOSED A CERTIFICATE FROM C II FOR HOLDING OF AUTO EXHIBITION 2008 DURING THE MONTH OF JANUARY, ITA NO1351/DEL/2012 3 2008. THE COPY OF BILL OF PEN DRIVE WAS ALSO FILED A S ADDITIONAL EVIDENCE UNDER RULE 46A. B) AS REGARDS OTHER EXPENDITURE OF ` .3,95,916/- THE ASSESSEE STATED THAT IT RELATES TO A HOTEL BILL OF A PARTY HOS TED IN CONNECTION WITH CII & AUTO EXHIBITION THROUGH THE A GEIES OF CII. A COPY OF HOTEL BILL, INVITATION FROM CMD OF A PPELLANT COMPANY WHO WAS THEN DEPUTY CHAIRMAN OF CII, NORTHE RN REGION, AND SOME NEWSPAPERS CUTTINGS WERE ENCLOSED. THE ASSESSEE CLAIMED THAT THE ABOVE EXPENSES WERE STRICTLY INCURRED IN CONNECTION WITH BUSINESS DEVELOPMENT OF T HE COMPANY AND THEREFORE ARE ALLOWABLE EXPENSES. 3. THE LD CIT(A) AFTER GOING THROUGH THE DOCUMENTS F ILED BY THE ASSESSEE FOUND THAT APPELLANT PARTICIPATED IN AUTO EXH IBITION IN JANUARY, 2008 AND DISTRIBUTED PEN DRIVES CONTAINING I TS PROFILE AND OTHER DETAILS AND THUS HE ALLOWED THE EXPENDITURE OF ` .66,872/- AS BUSINESS EXPENDITURE ALLOWABLE U/S 37 (1) OF THE ACT. HOWEVER, WITH REGARD TO EXPENDITURE ON HOTEL BILL OF ` .3,95,916/- THE LD CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER KEEPING IN V IEW THE FACT THAT THE SAID EXPENDITURE INCURRED ON COCKTAIL AND D INNER WAS BY PERSONAL INVITATION OF THE DIRECTOR OF THE APPELLANT COMPANY AND THE SAID EXPENDITURE WAS ON THE OCCASION OF ONE OF THE DIR ECTORS OF THE APPELLANT COMPANY BEING ELECTED AS DEPUTY CHAIRMAN O F CII, NORTHERN REGION. THE LD CIT(A) HELD THAT THIS EXPENDITURE WAS NOT ALLOWABLE U/S 37(1) OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEA L BEFORE THIS TRIBUNAL. 4. NO ONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD DR MAINTAINED AND ARGUED THAT THE EXPENSES WERE CLEARLY OF PERSONAL ITA NO1351/DEL/2012 4 NATURE AND HAD NOTHING TO DO WITH THE BUSINESS INTEREST OF THE COMPANY AND THEREFORE SHE PLEADED THAT ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION AND LD CIT(A) HAD RIGHTLY CONFIRM ED THE ADDITION OF ` .3,95,916/-. 5. WE HAVE HEARD THE LD DR AND HAS GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT EXPENDIT URE ON COCKTAIL AND DINNER WERE CLEARLY IN THE NATURE OF PERSONAL EX PENSES. AS PER PAPER CUTTING FORMING PART OF PAPER BOOK AT PAGE 9, 10 & 11, IT IS CLEAR THAT SHRI DEEP KAPURIA, ONE OF THE DIRECTORS OF THE COMPANY WAS ELECTED AS NEW CHIEF OF CII, NORTHERN REGION AND COC KTAIL AND DINNER WAS HOSTED ON 11.4.2007 WHICH COIN-INCIDED WITH THE N EWS OF APPOINTMENT OF A DIRECTOR AS NEW DEPUTY CHAIRMAN OF CII. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THIS EXPENDITUR E WAS INCURRED BY THE DIRECTOR IN HIS PERSONAL CAPACITY AND THEREFORE W E DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISM ISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15TH D AY OF JUNE, 2012. SD/- SD/- (R.P. TOLANI) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 15.6.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. ITA NO1351/DEL/2012 5 TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 22.5.2012 DATE OF DICTATION 11.6.2012 DATE OF TYPING 11.6.2012 DATE OF ORDER SIGNED BY 15.6.2012 BOTH THE MEMBERS & 25.6.2012 PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 25.6.2012 & SENT TO THE BENCH CONCERNED.