The ITO, Ward-11(3), Ahmedabad V. M/s. S. Enterprise, Ahmedabad

ITA 137/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80254 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Gift
• Section: 37

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.137/AHD/2011 [ASSTT.YEAR : 2007-2008] ITO, WARD-11(3) AHMEDABAD. /VS. M/S.S. ENTERPRISE 48-A, ARVIND ESTATE L.B.S. MARG, BAPUNAGAR AHMEDABAD. PAN : ABEFS 0615 E ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI B.L. YADAV, SR.DR 4& 1 2 )/ ASSESSEE BY : NONE 5 1 &(*/ DATE OF HEARING : 1 ST JULY, 2014 678 1 &(*/ DATE OF PRONOUNCEMENT : 08/08/2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSTT.YEAR 2007-2008 IS DIRECTED AGAINST TH E ORDER OF THE CIT(A). 2. NONE APPEARED ON BEHALF OF THE ASSESSEE RESPONDE NT AT THE TIME OF HEARING OF THE APPEAL BEFORE THE TRIBUNAL IN SPITE OF SERVICE OF NOTICE THROUGH THE INCOME TAX DEPARTMENT. ON FEW EARLIER OCCASIONS, THE ASSESSEE HAS NOT APPEARED ON THE DATE OF HEARING BE FORE THE TRIBUNAL, ITA NO.137/AHD/2011 -2- ACCORDINGLY, THE APPEAL OF THE REVENUE IS BEING ADJ UDICATED EX PARTE QUA THE ASSESSEE-RESPONDENT ON MERITS AFTER HEARING THE LEARNED DR. 3. THE GROUND NO.1 OF THE REVENUE IS AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN REST RICTING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF SALES PROMOT ION EXPENSES TO THE EXTENT OF RS.93,295/- OUT OF THE TOTAL DISALLOW ANCE OF RS.8,01,066/- WITHOUT PROPERLY APPRECIATING THE FAC TS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 4. THE LEARNED DR SUBMITTED THAT THE CIT(A) HAS MIS DIRECTED HIMSELF BY GIVING DIRECTIONS TO THE AO TO VERIFY THE EXPENS ES CLAIMED UNDER THE HEAD SALES PROMOTION EXPENSES AND IN CASE FBT TAX ON THESE EXPENSES HAVE BEEN PAID BY THE ASSESSEE, THIS SHOULD NOT BE DISALLOWED AGAIN BY THE AO. HE SUBMITTED THAT THE PAYMENT OR NON-PAYMENT O F FBT TAX IS NOT RELEVANT FOR THE PURPOSE OF THE ALLOWANCE OF EXPENS ES UNDER THE HEAD SALES PROMOTION EXPENSES. HE REFERRED TO THE REL EVANT PORTIONS OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVE NUE. 5. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT TH E CIT(A) HAS IDENTIFIED NINE ITEMS OF EXPENSES UNDER THE HEAD SALES PROMOT ION EXPENSES TOTALING TO RS.93,295/- WHICH WERE CLEARLY OF DISALLOWABLE I N NATURE AND AGAINST WHICH THE ASSESSEE HAS NOT PREFERRED ANY APPEAL BEF ORE US. WITH REGARD TO THE BALANCE EXPENSES UNDER THE HEAD SALES PROMOTIO N EXPENSES DISALLOWED BY THE AO, WE FIND THAT THEY ARE MOSTLY IN THE NATURE OF GIVING PERSONAL BENEFITS TO DOCTORS, RESEARCHERS ETC. ON A CCOUNT OF GIFT ITEMS AND ALSO SPONSORING FOR PLEASANT FOREIGN TRIPS TO DIFFE RENT COUNTRIES ETC. ALTHOUGH, THEY WERE INCURRED IN CASH BY THE ASSESSE E, THE ASSESSEE COULD ITA NO.137/AHD/2011 -3- NOT PROVE THAT THEY WERE WHOLLY AND EXCLUSIVE FOR I TS BUSINESS PURPOSE. MOREOVER, SOME OF THESE EXPENSES ARE HIT BY PROVISI ONS OF EXPLANATION TO SECTION 37 OF THE ACT. WE ARE OF THE VIEW THAT THE PAYMENT OF FBT TAX IS NOT RELEVANT TO THE ISSUE OF ALLOWABILTY OF CERTAIN EXPENSES CLAIMED BY THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE ARE OF THE VIEW THAT ALLOWING SOME BENEFIT FOR PART OF THE EXPENSES INCU RRED UNDER THE HEAD SALES PROMOTION EXPENSES FOR THE BUSINESS PURPOSE , IT SHALL MEET THE ENDS OF JUSTICE, IF THE DISALLOWANCE IS DIRECTED TO BE M ADE AT RS.5,00,000 (RUPEES FIVE LAKHS ONLY) AS AGAINST RS.93,295/- SUS TAINED BY THE CIT(A) ON ACCOUNT OF UNPROVED EXPENSES CLAIMED BY THE ASSE SSEE, OF WHICH BUSINESS PURPOSE IS NOT ESTABLISHED AND AS PER THE PROVISIONS OF EXPLANATION TO SECTION 37 OF THE ACT, AND ACCORDINGLY, THE GRO UND NO.1 OF THE REVENUE IS PARTLY ALLOWED. 6. THE GROUND NO.2 OF THE APPEAL OF THE REVENUE IS AS UNDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN REST RICTING THE ADDITION OF SALES PROMOTION EXPENSES TO THE EXTENT OF RS.2,90,544/- OUT OF THE TOTAL DISALLOWANCE OF RS.3,24,233/- WITH OUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 7. THE LEARNED DR RELIED ON THE ORDER OF THE AO. W E HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR AND PERUSED THE ORDER S OF THE AO AND THE CIT(A). WE FIND THAT AS PER THE GROUND OF THE APPE AL OF THE REVENUE, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.2,90,5 44/- OUT OF THE TOTAL DISALLOWANCE OF RS.3,24,233/- MADE BY THE AO. THE CIT(A) HAS PASSED A WELL REASONED ORDER ON THIS ISSUE, AND HE HAS ALLOW ED A VERY SMALL RELIEF OUT OF THE DISALLOWANCE MADE BY THE AO. WE HOLD TH AT NO INTERFERENCE IN ITA NO.137/AHD/2011 -4- THE ORDER OF THE CIT(A) ON THIS ISSUE IS CALLED FOR , AND ACCORDINGLY, THE GROUND NO.2 OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD