EPE Process Filters & Accumulators Pvt.Ltd., Hyd, Secunderabad V. DCIT, Circle-2(2), Hyderabad, Hyderabad

ITA 975/HYD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4548 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: C SURESH
• Keywords: Gift; Business expenditure; Additional evidence; Commercial expediency
• Section: 143(3); 37(1); 37

Judgement Text

ITA NO 975 OF 2016EPE PROCESS FILTERS. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.975/HYD/2016 (ASSESSMENT YEAR: 2009-10) M/S. EPE PROCESS FILTERS & ACCUMULATORS PVT LTD HYDERABAD PAN:AAACE4496M VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI C. SURESH FOR REVENUE : SHRI PHANI RAJU, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE ORDER OF THE CIT (A)-5, HYDERABAD, DATED 29.03. 2016. 2. BRIEF FACTS OF THE FACTS ARE THAT THE ASSESSEE C OMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OF FILTERS A ND ACCUMULATORS, FILED ITS RETURN OF INCOME FOR THE A. Y 2009-10 ON 29.09.2009 ADMITTING INCOME OF RS.2,74,93,921/-. DU RING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A SSESSEE WAS REQUIRED TO PRODUCE ITS BOOKS OF ACCOUNT. THE ASSES SEE PRODUCED THE SAME AND AFTER PERUSAL AND VERIFICATION OF THE SAME, THE AO FOUND THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS .5,50,000/- TOWARDS PURCHASE OF 150 SEASONAL TICKETS OF IPL CRI CKET MATCHES DATE OF HEARING : 05.02.2019 DATE OF PRONOUNCEMENT: 15.02.2019 ITA NO 975 OF 2016EPE PROCESS FILTERS. PAGE 2 OF 4 HELD AT HYDERABAD. WHEN THE DETAILS WERE CALLED FOR , THE ASSESSEE FILED A LETTER STATING THAT THE SAID TICKETS WERE D ISTRIBUTED AMONGST ITS LONG STANDING CUSTOMERS AND BUSINESS ASSOCIATES AND THEREFORE, THE SAID DISTRIBUTION SERVED THE PURPOSE OF PROMOTION OF BUSINESS RELATIONS AND GOODWILL AMONG THE CUSTOMER BASE OF THE COMPANY AND ALSO IN ENCOURAGEMENT OF SPORTS, WHICH IS A PART OF THE COMPANYS CORPORATE SOCIAL RESPONSIBILITY. THER EFORE, THE ASSESSEE SUBMITTED THAT THE EXPENDITURE SATISFIES A LL THE CONDITIONS STIPULATED U/S 37(1) OF THE I.T. ACT AND SHOULD BE ALLOWED AS SUCH. 3. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ASSESSEES CONTENTIONS AND HELD THAT THE ASSESSEE F AILED TO PRODUCE ANY COGENT EVIDENCE THAT THE TICKETS WERE D ISTRIBUTED AMONGST ITS BUSINESS RELATED PERSONS. HOLDING THAT IT IS NECESSARY FOR THE ASSESSEE TO SUPPORT HIS CLAIM FOR DEDUCTION U/S 37(1) OF THE ACT, FOR THE FAILURE OF THE ASSESSEE TO FURNISH ANY DETAILS, THE AO DISALLOWED THE SAME AND BROUGHT IT TO TAX. AGGRI EVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF THE AO HOLDING IT TO BE APPLICATION OF INCOME AND N OT BUSINESS EXPENDITURE. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUND S OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX, APPEALS-5 FAILED TO NOTE THAT THE EXPENDITURE OF RS . 5,50,000 INCURRED BY THE APPELLANT COMPANY HAS BEEN INCURRED AS A MATTER OF COMMERCIAL EXPEDIENCY, TO PRESERVE AND PROMOTE GOOD BUSINESS RELATIONS AND GOODWILL AMONG LONG STANDING BUSINESS CUSTOMERS AND ASSOCIATES AND THUS, HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE APPELLANT COMPANY. ITA NO 975 OF 2016EPE PROCESS FILTERS. PAGE 3 OF 4 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS- V FAILED TO NOTE THAT DURING THE ASSESSMENT PROCEEDINGS, THE LEARNED ASSESSING OFFICER, CIRCLE 2(2), HYDERABAD NEITHER CALLED FOR NOR AFFORDED AN OPPORTUNITY TO THE APPELLANT COMPANY TO ADDUCE EVIDENCE IN SUPPORT OF THE CLAIM OF EXPENDITURE OF THE SUM OF RS. 5,50,000 IN RESPECT OF THE IPL CRICKET MATCHES. GIVEN THIS FACT, THE LEARNED COMMISSIONER OF INCOME TAX, APPEALS-V ERRED IN NOT HOLDING THAT THE ASSESSING OFFICER IS IN ERROR IN STATING THAT THE APPELLANT COMPANY HAD NOT ADDUCED THE REQUISITE EVIDENCE. 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS- V FAILED TO NOTE THAT THE EXPENDITURE OF RS. 5,50,0 00 SATISFIES ALL THE CONDITIONS OF ALLOWABILITY STIPUL ATED U/S 37(1) AND HENCE, THE EXPENDITURE IS ALLOWABLE. 4. WHILE THE LEARNED COUNSEL FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEES SUBMISSIONS IN SUPPORT OF ITS CLAIM U/S 37 OF THE ACT ARE THAT IT HAS PURCHAS ED THE IPL CRICKET MATCH TICKETS TO DISTRIBUTE THEM AMONGST IT S LONG STANDING CUSTOMERS TO GARNER THEIR GOODWILL AND IMPROVE ITS BUSINESS RELATIONS AND THEREFORE, IT IS ITS BUSINESS EXPENDI TURE. ACCORDING TO US, THIS IS A PLAUSIBLE AND ACCEPTABLE SUBMISSIO N. THIS IS AKIN TO DISTRIBUTION OF GIFTS OR ARTICLES ON SPECIAL OCC ASIONS TO THE CUSTOMERS AND SUCH EXPENDITURE HAS BEEN HELD TO BE BUSINESS EXPENDITURE. FURTHER, IN REPLY TO REVENUES CONTENT ION THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE IN SUPP ORT OF ITS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HA S FILED A LIST OF THE CUSTOMERS AMONGST WHOM THE IPL CRICKET MATCH TI CKETS HAVE ITA NO 975 OF 2016EPE PROCESS FILTERS. PAGE 4 OF 4 BEEN DISTRIBUTED. THE LEARNED DR OPPOSED THE ADMISS ION OF THIS EVIDENCE AT THIS STAGE AND SUBMITTED THAT, IF THE T RIBUNAL WERE TO CONSIDER THE SAME, THEN THE SAID EVIDENCE SHOULD BE REMANDED TO THE FILE OF THE AO. THIS LIST WAS ADMITTEDLY NOT P RODUCED BEFORE ANY OF THE AUTHORITIES BELOW. THEREFORE, WE TREAT I T AS ADDITIONAL EVIDENCE AND ADMIT THE SAME AND REMAND THE ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THESE PARTIES WERE THE CUS TOMERS OF THE ASSESSEE AND WHETHER THEY WERE GIVEN THE ALLEGED IP L SEASONAL TICKETS. 6. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH FEBRUARY, 2019. VINODAN/SPS COPY TO: 1 M/S.SEKHAR & SURESH, C.AS, 133/4 RASHTRAPATHI ROA D, SECUNDERABAD 500003 2 DY. CIT, CIRCLE 2(2) SIGNATURE TOWERS, KONDAPUR, HYDERABAD 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER