M/s. AAA Portfolios Pvt.Ltd., New Delhi V. DCIT, New Delhi

ITA 2581/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7511 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: R M MEHTA
• Keywords: Gift; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO. 2581/DEL/2014 ASSESSMENT YEAR : 2007-08 AAA PORTFOLIOS PVT. LTD. 202, 1 ST FLOOR, OKHLA INDL. ESTATE, PHASE-III, NEW DELHI -110020 VS. DCIT, CIRCLE-1(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.M. MEHTA, CA DEPARTMENT BY : SHRI S.K. JAIN, SR. DR DATE OF HEARING : 02.08.2016 DATE OF PRONOUNCEMENT : 02.08.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) ON 27.3.2014 IN RELATION TO THE ASSESSME NT YEAR 2007-08. 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGA INST THE CONFIRMATION OF DISALLOWANCE OF RS.9,66,984 OUT OF BUSINESS PROMOTI ON EXPENSES. ITA NO. 2581/DEL/2014 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND FINANCING. A DEDUCTION FOR A SUM OF RS. 19,33,967/- WAS CLAIMED BY THE ASSESSEE TOWARDS BUSINESS PROMOTION EXPENSES. IN THE ABSENCE OF ANY DETAILS OF SUCH EXPENDITURE HAVING BEEN FILED BY THE ASSESSEE, THE A.O. DISALL OWED THE ENTIRE EXPENDITURE. THE ASSESSEE FURNISHED SUCH DETAILS B EFORE THE LD. CIT(A), WHO OBTAINED A REMAND REPORT FROM THE A.O. CONSIDER ING THE ENTIRETY OF FACTS AND CIRCUMSTANCES BEFORE HIM, THE LD. CIT(A) REDUCED THE ADDITION TO 50% OF TOTAL EXPENSES TO THE TUNE OF RS. 9,66,98 4/- THE ASSESSEE IS AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSE E INCURRED BUSINESS PROMOTION EXPENSES FOR ENTERTAINMENT TO C.F.OS., BR OKERS, ANALYSTS AND PURCHASED GIFT ITEMS FOR CLIENTS ETC., AS HAS BEEN RECORDED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. HE ADMITTED THAT SUC H TYPE OF EXPENSES WERE : `CERTAINLY A REQUIREMENT FOR AN INTERFACE BE TWEEN THE APPELLANT COMPANY AND ITS OFFICERS AND MEMBERS OF STAFF WITH SHARE-BROKING ITA NO. 2581/DEL/2014 3 COMMUNITY, FINANCE PROFESSIONALS, BUSINESS ANALYSTS ETC.. DESPITE THAT HE SUSTAINED THE ADDITION AT 50% OF EXPENSES BY OBS ERVING THAT : `COSTLY GIFTS ETC. WERE OFFERED TO SUCH PERSONS THAT MIGHT NOT COMMENSURATE WITH THE BUSINESS TURNOVER/BUSINESS RECEIPTS OF THE APPE LLANT IN REAL SENSE OF THE TERM. IT CAN BE SEEN FROM THE REASONING GIVEN BY THE LD. CIT(A) THAT THOUGH HE ACCEPTED THE GENUINENESS OF THE EXPE NDITURE, BUT STEPPED INTO THE SHOES OF THE ASSESSEE TO JUDGE THAT INCURR ING OF SUCH EXPENDITURE WAS NOT COMMENSURATE WITH THE BUSINESS TURNOVER. W E ARE UNABLE TO APPRECIATE THIS REASONING BECAUSE IT IS FOR THE ASS ESSEE TO DECIDE THAT WHAT AMOUNT OF EXPENDITURE SHOULD BE INCURRED BY HI M FOR HIS BUSINESS PURPOSE. THE AUTHORITIES UNDER THE ACT CAN EXAMINE GENUINENESS OF THE EXPENDITURE BUT CANT DICTATE THE WAY AND THE EXTEN T OF INCURRING THE EXPENSES. IT IS OBSERVED THAT AS AGAINST THE CURRE NT YEARS BUSINESS PROMOTION EXPENDITURE OF RS. 19.33 LAC ON TOTAL INC OME OF RS. 3.01 CRORE, THE ASSESSEE INCURRED SUCH EXPENDITURE AT RS . 74.81 LAC ON TOTAL INCOME OF RS. 6.55 CRORE IN THE IMMEDIATELY PRECEDI NG YEAR. THE ASSESSMENT FOR SUCH YEAR WAS COMPLETED U/S 143(3) W ITHOUT MAKING ANY DISALLOWANCE. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT ITA NO. 2581/DEL/2014 4 THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION TO THIS LEVEL. WE ORDER FOR THE DELETION OF ENTIRE ADDITION. 5. IN VIEW OF OUR DECISION IN DELETING THE ADDI TION, THE SECOND GROUND OF THE ASSESSEE ABOUT THE DETERMINATION OF `BOOK PR OFIT BY ADDING THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES UPHELD IN THE FIRST APPEAL, GETS CONSEQUENTLY ALLOWED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.201 6. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 02 ND AUGUST, 2016. SELF BY THE AM. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. *