ACIT, New Delhi V. M/s. BMG Enterprises Ltd., New Delhi

ITA 6440/DEL/2013

• Counselvise Citation: 644020114 RSA 2013
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: R K KAPOOR; PRAEEP DINODIA
• Keywords: Gift; Business expenditure; Rule of consistency
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO. 6440/DEL/2013 ASSESSMENT YEAR : 2010-11 ACIT, CIRCLE 3(1), VS. BMG ENTERPRISES LTD., NEW DELHI 1 ST FLOOR, DCM BUILDING, 16, BARAKHAMBA ROAD, NEW DELHI GIR / PAN:AAACB4657R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. S. NEGI, SR. DR RESPONDENT BY : SHRI PRAEEP DINODIA AND SHRI R. K. KAPOOR, CA DATE OF HEARING : 04.11.2015 DATE OF PRONOUNCEMENT : 04.12.2015 ORDER PER KULDIP SINGH, JM: THE APPELLANT, ACIT, CIRCLE 3(1), NEW DELHI (HEREI NAFTER REFERRED AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 24.09.2013 PASSED BY LD. CIT(A) VI, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUND THAT: LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF R S.17,14,534/- ON ACCOUNT OF DISALLOWANCE OF GIFT EXPENSES WHEN THE A .O. HAD GIVEN A SPECIFIC FINDING THAT THE GIFTS UNDER CONSIDERATION WERE PURELY OF PERSONAL USE AND THE BENEFIT DERIVED FROM THESE EXP ENSES TO THE BUSINESS OF THE ASSESSEE COULD NOT BE PROVED. ITA NO.6440/DEL/2013 2 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF RETURN OF INCOME FILED BY THE ASSESSEE QUA THE ASSE SSMENT YEAR 2010-2011, THE CASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENTLY , NOTICES U/S 143(2) AND 142(1) WERE ISSUED TO THE ASSESSEE AND IN RESPONSE THERETO, SHRI V K GUPTA, VICE PRESIDENT (FINANCE) / AR APPEARED FROM TIME TO TIME AND FILED NECESSARY DETAILS. THE ASSESSEE IS A PUBLIC LIMITE D COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING CONSULTANCY AND TECHNICAL SER VICES IN THE FIELD OF AVIATION AND AERONAUTICS TO VARIOUS MANUFACTURERS S TATION IN DIFFERENT COUNTRIES. THE ASSESSEE COMPANY SHOWN TO HAVE INCU RRED RS.17,14,534/- TOWARDS DISTRIBUTION OF GIFTS. IN RESPONSE TO THE QUERY, AS TO WHY THE ADDITION OF THIS AMOUNT SHOULD NOT BE MADE, THE ASSESSEE PLA CED ON RECORD THE STATEMENT OF GIFT PURCHASED INCLUDING COPIES OF VOU CHERS AND ON THE BILLS, THE NAMES OF DONEE HAVE ALSO BEEN RECORDED. FINDING TH E DETAILS FILED BY THE ASSESSEE NOT SATISFACTORY, THE A.O. MADE ADDITION O F RS.17,14,534/-. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CI(A) WHO HA S ALLOWED THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE T HE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 3. LD. D.R. ASSAILING THE IMPUGNED ORDER, CONTENDED INTER ALIA THAT SINCE THERE IS NO ELEMENT OF BUSINESS EXPENDITURE IN THE GIFTS, CLAIMED TO HAVE BEEN PURCHASED BY THE ASSESSEE COMPANY, THE LD. CIT(A) H AS ERRED IN DELETING THE ADDITION; THAT THE GIFTS CLAIMED TO HAVE BEEN GIVEN BY THE ASSESSEE COMPANY ARE APPARENTLY PERSONAL IN NATURE AND AS SUCH, THE AMOUNT HAS BEEN RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE BY THE A.O. AND RELIED UPON THE ORDER PASSED BY A.O. 4. HOWEVER, ON THE OTHER HAND, LD. A.R. RELIED UPON THE ORDER PASSED BY LD. CIT(A) AND CONTENDED THAT HE HAS GIVEN COMPLETE LIST OF GIFTS ALONG WITH ITA NO.6440/DEL/2013 3 BILLS AND VOUCHES AND THE GIFTS GIVEN TO THE PERSON S WITH WHOM ASSESSEE HAS BUSINESS TRANSACTIONS AND THE ASSESSEE HAS EARNED R S.7 CRORES. 5. WE HAVE HEARD AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, GONE THROUGH MATERIAL PLACED ON RECORD IN THE LIGHT OF F ACTS AND CIRCUMSTANCES OF THE CASE AND ORDERS OF TAX AUTHORITIES BELOW. 6. THE SOLE QUESTION ARISES FOR DETERMINATION IN TH IS CASE IS, AS TO WHETHER THE GIFTS PROVIDED BY THE ASSESSEE DURING T HE YEAR UNDER ASSESSMENT ARE TO BE KEPT IN THE CATEGORY OF PERSONAL EXPENSES OR IN THE CATEGORY OF BUSINESS EXPENDITURE . 7. UNDISPUTEDLY, DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE COMPANY HAS BROUGHT ON RECORD THE FACT THAT DURING THE YEAR OF ASSESSMENT, THE TOTAL AMOUNT SPENT ON GIFTS WORKED OUT TO RS.17,14,534/- AS AGAINST RS.12,16,165/- IN THE PREVIOUS YEAR AND ALSO PLACED ON RECORD THE STATEMENT OF GIFTS PURCHASED INCLUDING COPIES OF VOUCHERS AND BILLS ON WHICH THE NAMES OF DONEES HAS BEEN RECORDED. 8. A.O. DECLINED THE CLAIM OF ASSESSEE COMPANY AND MADE ADDITION OF RS.17,14,534/- SPENT FOR PURCHASE AND DISTRIBUTION OF GIFTS BY MAKING FOLLOWING OBSERVATIONS: 3.2 THE REPLY AND THE DETAILS FILED BY THE ASSESS EE COMPANY HAS BEEN DULY CONSIDERED. A PERUSAL OF THE LIST OF GIFT ITEMS PURCHASED REVEALED THAT ITEMS OF GIFT FOR EXAMPLE SHAWALS, SI LVER ARTICLES, CARPETS ETC. ARE OF PERSONAL IN NATURE. FURTHER THE ASSESSE E FAILED TO JUSTIFY THE NEXUS OF SUCH GIFTS OF PERSONAL NATURE FOR BUSINESS PURPOSES. THE OCCASION THEREOF AND ALSO TO PROVE AS TO HOW THE DI STRIBUTION OF GIFTS HAS RENDERED ANY BENEFITS FOR THE BUSINESS OF THE A SSESSEE. IN VIEW OF THE ABOVE RS.17, 14,534/-SPENT TOWARDS PURCHASE AND DISTRIBUTION OF GIFTS IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. (ADDITION.- RS. 17,14,534/-) ITA NO.6440/DEL/2013 4 9. HOWEVER, LD. CIT(A) BY DELETING THE ADDITION OF RS.176,14,534/- MADE BY THE A.O., SET ASIDE THE ASSESSMENT ORDER ON TWO GROUNDS; ONE: THAT THE NECESSITY OF AMOUNT OF EXPENDITURE TO BE INCURR ED FOR BUSINESS PURPOSE, ARE TO BE DECIDED BY THE BUSINESSMAN WHICH COULD NO T BE SEEN WITH SUSPICION AND RELIED UPON THE CASE CITED AS S. A. BUILDERS LTD. VS CIT 288 ITR 01 (S.C.) AND CIT VS DALMIA CEMENT PVT. LTD. 254 ITR 3 77(DEL.) AND SASSON J. DAVID & CO. PVT. LTD. VS CIT 118 ITR 261 (S.C.); TWO: THAT THE APPELLANT IS A DEEMED PUBLIC LIMITED COMPANY U /S 43A OF THE COMPANIES ACT, 1956 AND A JURISTIC PERSON UNDER THE GENERAL LAW AND AS SUCH, THERE CAN BE NO EXPENSES OF PERSONAL NATURE. 10. THE RATIO OF JUDGEMENT SASSON J. DAVID & CO. PV T. LTD. VS CIT (SUPRA) IS ORDINARILY, IT IS FOR THE ASSESSEE TO DECIDE WHETHE R ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF HIS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PROMOTION OF BUSINESS AND TO EARN P ROFIT, ASSESSEE CAN CLAIM DEDUCTION U/S 10(XV) OF THE ACT EVEN THOUGH THERE W AS NO COMPULSION/NECESSITY TO INCUR SUCH EXPENDITURE . 11. APPLYING THE LAW LAID DOWN BY HONBLE APEX COUR T IN THE JUDGEMENTS CITED AS S. A. BUILDERS LTD. VS CIT 288 ITR 01 (S.C.) AND CI T VS DALMIA CEMENT PVT. LTD. 254 ITR 377(DEL.) AND SASSO N J. DAVID & CO. PVT. LTD. VS CIT 118 ITR 261 (S.C.) , WE ARE OF THE CONSIDERED VIEW INTER ALIA THAT THE A.O. HAS MADE ADDITION OF RS. 17,14,534/- BY DISALLOWING THE EXPENDITURE MADE BY THE ASSESSEE COMPANY IN RESPECT OF GIFTS ON THE BASIS OF HIS CONJECTURES AN SURMISES AND HAS LOST SIGHT OF T HE OBJECTIVITY REQUIRED IN THIS CASE; THAT THE A.O. HAS ALSO LOST SIGHT OF THE FACT THAT WHEN CLAIM OF ASSESSEE FOR DEDUCTION OF EXPENSES IN RESPECT OF TH E GIFTS TO THE TUNE OF ITA NO.6440/DEL/2013 5 RS.12,16,165/- IN THE PREVIOUS YEAR HAS BEEN ACCEPT ED BY THE REVENUE FROM WHOM ASSESSEE HAS EARNED BUSINESS OF RS.7,00,00,000 /- THE RULE OF CONSISTENCY IS REQUIRED TO BE FOLLOWED; THAT WHEN T HE ASSESSEE HAS BROUGHT ON RECORD THE ENTIRE EVIDENCE AS TO THE PURCHASE OF GIFTS, NAMES OF PERSONS TO WHOM SUCH GIFTS HAVE BEEN GIVEN ALONG WITH VOUCHERS BEARING NAME OF THE DONEE, THE DISALLOWANCE WAS NOT REQUIRED TO BE MADE BY THE A.O.; THAT EVEN OTHERWISE, ASSESSEE COMPANY BEING A JURISTIC PERSON UNDER THE INCOME TAX ACT, 1961, CANNOT INCUR ANY EXPENSES OF PERSONAL NA TURE AND ALL THE EXPENSES ARE TO BE INCURRED FOR THE BUSINESS PURPOSE ONLY; T HAT CIT(A) HAS RIGHTLY OBSERVED THAT THE AMOUNT OF RS.17,14,534/- HAS BEEN INCURRED BY THE ASSESSEE COMPANY TO MAINTAIN ITS PERSONAL CONTACTS AND GOODWILL WITH THE CLIENTS NECESSARILY TO ADVANCE THE BUSINESS INTERES T IN THE SUBSEQUENT ASSESSMENT YEAR; THAT A.O. HAS MERELY DISALLOWED TH E EXPENSES ON THE GROUND OF SUSPICION; THAT EVEN OTHERWISE THE A.O. H AS NOT DISPUTED THE VOUCHERS BEARING NAME OF DONE AND LIST OF PERSONS T O WHOM THE GIFTS HAVE BEEN GIVEN AND OTHER RECORDS FURNISHED BY THE ASSES SEE DURING ASSESSMENT PROCEEDINGS AND IN THESE CIRCUMSTANCES, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION VIDE IMPUGNED ORDER. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FINDI NG NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER, WE HEREBY DISMISS THE PRESENT APPEAL FILED BY THE REVENUE. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH DEC., 2015. SD./- SD./- ( J. S. REDDY) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 04.12. 2015/ SP ITA NO.6440/DEL/2013 6 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. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 30/11, 1,1/12 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 4/12/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 4/12 SR. PS/PS 7 FILE SENT TO BENCH CLERK 7/12 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER