M/s. Talbros Engineering Limited, New Delhi V. ACIT, Faridabad

ITA 5646/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6988 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.5646/DEL/2014 ASSESSMENT YEAR: 2010-11 M/S. TALBROS ENGINEERING LTD., PLOT NO.74-75, SECTOR-6, FARIDABAD. V. ACIT, CIRCLE-1, FARIDABAD. TAN/PAN: AABCT 0247L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SOMIL AGARWAL, SHRI LAKSHAY GOYAL, ADV. & SHRI DEEPESH GARG, ADV. RESPONDENT BY: SHRI AMIT JAIN, SR.D.R. DATE OF HEARING: 24 07 2018 DATE OF PRONOUNCEMENT: 31 07 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 09.09.2014, PASSED BY CIT (APPEALS)-II, FARIDABAD FOR THE QUANTUM OF ASSESSME NT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2010-11. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING TW O ISSUES:- (I) ADHOC DISALLOWANCE OF RS.2,06,254/- BEING 10% O F SALE PROMOTION EXPENSES AND; (II) DISALLOWANCE OF RS.7,75,861/- BEING EXHIBITION EXPENSES INCURRED ON THE GROUND THAT THESE DID NOT PERTAIN TO IMPUGNED ASSESSMENT YEAR. I.T.A. NO.5646/DEL/2014 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOB ILE PARTS. LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO THE EXPENSES CLAIMED UNDER THE HEAD SALES PROMOTION, NOTED THAT ASSESS EE HAD CLAIMED EXPENDITURE ON ACCOUNT OF PURCHASE OF FOLLO WING DIAMOND AND GOLD JEWELLERY:- RS.6,066/- RING RS.22,170/- GOLD CHAIN RS.3,51,167/- GOLD CHAIN/DIAMOND PANDAL RS.3,06,622/- GOLD CHAIN/DIAMOND PANDAL RS.6,616/- GOLD CHAIN RS.1,18,700/- GOLD CHAIN/DIAMOND PANDAL RS.12,273/- GOLD CUM DIAMOND RING RS.11,716/- GOLD CHAIN RS.2,16,181/- GOLD CHAIN/DIAMOND PANDAL RS.10,11,032/- GOLD CUM DIAMOND RING RS.20,62,543/- 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE HAS MERELY STATED THAT THESE EXPENSES WERE INCURRED FOR BUSINESS PROMOTION TO VARIOUS CUSTOMERS. HOWEVER, THE ASSESS ING OFFICER DISALLOWED 10% OF THE SAID EXPENDITURE ON T HE GROUND THAT NO DOCUMENTARY EVIDENCE HAS BEEN FILED. THESE EXPENSES CANNOT BE SAID TO HAVE BEEN INCURRED SOLELY FOR THE BUSINESS PURPOSE. 4. THIS HAS BEEN CONFIRMED BY THE LD. CIT (A) ALSO WHEREIN HE HAS FOLLOWED THE APPELLATE ORDER FOR THE EARLIER YEARS I.T.A. NO.5646/DEL/2014 3 WHEREIN THE LD. CIT (A) HAD UPHELD 20% OF DISALLOWA NCE UNDER THE SAME HEAD. SINCE ASSESSING OFFICER HAD DISALLOW ED @ 10%, HE CONFIRMED THE SAME. 5. BEFORE US, LEARNED COUNSEL MR. SOMIL AGARWAL SUB MITTED THAT THE ASSESSEE HAS GIVEN ALL THE DETAILS REGARDI NG THE PURCHASE OF JEWELLERY WHICH WAS PURELY FOR SALES PRO MOTION BEFORE GIVING TO THE VARIOUS CUSTOMERS AND THESE DE TAILS ARE APPEARING IN THE PAPER BOOK FROM PAGES 69 AND HE HA S ALSO GIVEN A COMPARATIVE CHART OF SALES PROMOTION DISTRI BUTED TO THE CUSTOMERS IN VARIOUS YEARS, WHICH HAS BEEN GIVE N AT PAGE 70 OF THE PAPER BOOK. THUS, LOOKING TO THE PAST HIS TORY AND THE FACT THAT ALL THESE EXPENDITURE ARE FULLY VERIF IABLE, NO ADHOC DISALLOWANCE SHOULD HAVE BEEN MADE. 6. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED UP ON THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT T HE ISSUE IS THAT ASSESSEE COULD NOT SUBSTANTIATE THE INCURRING OF SUCH EXPENDITURE FOR THE PURPOSE OF BUSINESS. HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS VERY REASONABLE WHICH SHOULD NOT BE TINKERED WITH. 7. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER AND MATERIAL REFERRED TO BEFORE US, WE FIND THAT THOUGH ASSESSEE HAS GIVEN THE LIST OF THE ITEM DISTRIBUTED TO VARIOUS CUSTOMERS, HOWEVER, NOWHERE IT IS BORNE OUT FROM THE RECORDS AS TO WHETHER DISTRIBUTION OF GOLD AND DIAMOND RING AND CHAINS WERE PART OF THE SALES PROMOTION AC TIVITIES. NEITHER ANY PAMPHLET OF ANY SCHEME OF SALES PROMOTI ON HAS I.T.A. NO.5646/DEL/2014 4 BEEN FILED NOR HAS ANY BUSINESS PURPOSE BEEN SHOWN SPECIFICALLY WHEN THE ITEMS DISTRIBUTED ARE MORE OF A PERSONALIZED IN NATURE. IN ABSENCE OF ANY PROPER EV IDENCE TO DEMONSTRATE THAT THESE ITEMS WERE ACTUALLY USED FOR BUSINESS PURPOSE, WE HOLD THAT ASSESSING OFFICER WAS FAR MOR E REASONABLE IN DISALLOWING ONLY 10% OF THE SAID EXPE NDITURE. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE ON THIS SCORE IS DISMISSED. 8. THE NEXT ISSUE RAISED BY THE ASSESSEE IS DISALLO WANCE OF EXHIBITION EXPENSES PAID TO M/S. MESSEE FRANKFURT T RADE FAIRS INDIA (P) LTD. FOR THE PURPOSE OF EXHIBITION. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE PAYMENT OF RS.5,75,861/- HAVE BEEN MADE DURING THE YEAR FOR BO OKING A SPACE FOR EXHIBITION TO BE HELD NEXT YEAR AND SUCH AN AMOUNT PAID FOR PARTICIPATION IN EXHIBITION WAS NON REFUND ABLE EVEN IF THE ASSESSEE CANCELS IT ON AT LATER STAGE. HOWEVER, THE ASSESSING OFFICER HELD THAT SINCE EXPENSE DOES NOT PERTAIN TO YEAR UNDER CONSIDERATION, THEREFORE, SAME CANNOT BE ALLOWED U/S.37. 9. LD. CIT (A) TOO HAS CONFIRMED THE SAID ADDITION ON THE GROUND THAT THESE EXHIBITION WAS SUPPOSED TO BE HEL D ON 14.09.2010 TO 19.09.2010 RELEVANT ASSESSMENT YEAR 2 011-12, SINCE, THE BILL FOR EXHIBITION HAS BEEN RAISED ON 0 5.02.2010 FOR THE ASSESSMENT YEAR 2010-11, THEREFORE, AMOUNT PAID BY THE ASSESSEE WAS NOT INCURRED IN RELATION TO THE BUSINE SS SINCE ASSESSEE HAD NOT PARTICIPATED IN THE EXHIBITION IN THIS YEAR. I.T.A. NO.5646/DEL/2014 5 10. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT FINDINGS AND THE MATERIAL PLACED ON RECORD , WE FIND THAT ASSESSEE HAD MADE A PAYMENT OF SUM OF RS.5,75, 860/- FOR PARTICIPATION IN EXHIBITION TO M/S. MESSEE FRAN FURT TRADE FAIRS INDIA (P) LTD. FOR A STALL IN THE INTERNATION AL TRADE FAIR FOR THE AUTOMOBILE INDUSTRY. THE PAYMENT MADE BY THE AS SESSEE IS NOT IN DISPUTE WHICH IS EVIDENT FROM THE LETTER WRITTEN BY M/S. MESSEE FRANFURT TRADE FAIRS (P) LTD., THE COPY OF WHICH IS APPEARING AT PAGE 2 OF THE PAPER BOOK AND ALSO T HE COPY OF INVOICE AND RECEIPT WHICH ARE APPEARING AT PAGES 73 AND 74 OF THE PAPER BOOK. WHEN THE PAYMENT OF PARTICIPATION F OR EXHIBITION PURPOSE HAS BEEN MADE IN THIS YEAR THEN OSTENSIBLY SUCH A PAYMENT IS REVENUE IN NATURE INCURRED FOR TH E PURPOSE OF BUSINESS, THEN THE SAME HAS TO BE ALLOWED IN THE YEAR IN WHICH IT HAS BEEN INCURRED, BECAUSE FOR PARTICIPATI NG IN THE EXHIBITION IT WAS ESSENTIAL THAT PAYMENT HAS TO BE MADE IN ADVANCE EVEN IF SUCH AN EXHIBITION OF INTERNATIONAL TRADE FAIR WAS TO BE HELD IN THE NEXT ASSESSMENT YEAR. HENCE, THE EXPENDITURE INCURRED CANNOT BE DISALLOWED ON THIS G ROUND. ACCORDINGLY, WE AGREE WITH THE CONTENTION OF THE LE ARNED COUNSEL THAT THE EXHIBITION EXPENSES PAID BY THE AS SESSEE IN THIS YEAR HAS TO BE ALLOWED AS BUSINESS EXPENDITURE AND THUS, THE GROUND RAISED BY THE ASSESSEE ON THIS SCORE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. I.T.A. NO.5646/DEL/2014 6 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST JULY, 2018 PKK: