Case Law Details
YG Capital Ltd. Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that expenditure towards sales promotion expenses allowed as deduction under section 37(1) of the Income Tax Act since bills along with other evidences related to the same is duly produced. Accordingly, appeal allowed.
Facts- AO disallowed sales promotion expenses amounting to Rs. 4,81,477/- as the appellant neither filed any bills in support of the same nor the appellant could establish that these were incurred for the business of the appellant.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that the assessee had acquired a new unit and the expenditure was incurred for which bills related to sales promotion expenditure were filed before the Ld. CIT(A) and the same was allowable as the business expenditure u/s 37(1) of the Act. The Ld. CIT(A) did not allow the expenditure as no details of the unit acquired nor other details were filed. Since the details of the unit acquired have been filed before us, the expenditure relates to 10.01.2010 while the unit was acquired on 14.08.2009 and the bills have been filed, hence the expenditure claimed at Rs. 4,81,477/- is allowed as a deduction u/s 37(1) of the Act being in the nature of sales promotion expenses.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal filed by the assessee pertaining to the AY 2010-11 is against the order of the Commissioner of Income Tax (Appeals)-12, Pune [hereinafter referred to as ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (in short, the ‘Act’) dated 28.12.2021 arising out of the assessment order framed u/s 143(3) of the Act.
1.1. The Registry has informed that the appeal filed by the assessee is barred by limitation of time by 860 days. An affidavit has been filed by the assessee for condoning the delay stating as follows:
“I. Sandeep Jhaveri. director of the applicant, do solemnly affirm on oath that whatever is stated in the below paras is true to the best of my information and that I have not suppressed any material fact.
1. The aforesaid appeal was originally tiled within the period of limitation before the Hon’ble Pune 1TAT against the order of the CIT(A). Pune. However, the Pune ITAT dismissed the appeal owing to the fact that since the assessment order is passed by the jurisdictional AO, DCIT, Circle-7, Kolkata, the present appeal is not maintainable and has to be filed before the Hon’ble Kolkata ITAT. A copy of the order of the Hon’ble Pune ITAT is annexed hereto and marked as “Annexure-A”. The said order of the Pune ITAT was received on 03-05-2024 and the present appeal is being filed online around 09-05-2024 after signing and scanning all relevant documents. The delay caused in filing the aforesaid appeal is around 860 days.
2. It is because of the aforesaid reason that the appeal is find beyond limitation. I therefore request this Hon’ble court to kindly condone the delay of around 860 days caused in filing the aforesaid appeal.
1.2. Considering the condonation application and the reasons stated therein, we are satisfied that the assessee was prevented by sufficient and reasonable cause from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication on merits.
2. The assessee is in appeal before this Tribunal raising the following grounds of appeal:
“1. The Ld. C1T(A) erred in law and in the facts of the case in upholding the finding of the AO that satisfaction is recorded u/s 14A before making disallowance.
2. The Ld. CIT(A) erred in law and in the facts of the case in restricting the disallowance made by the AO at Rs. 86,224/- u/s 14A of the Act.
3. The Ld. CIT(A) erred in law and in the facts of the case in confirming the disallowance made by the AO of Rs. 4,81,477/- being sales promotion expenses.”
2.1. Ground nos. 1 & 2 are regarding the disallowance u/s 14A of the Act of Rs. 86,224/-. The ld. AR for the assessee informed that the exempt income was Rs. 1,50,000/- and the Ld. CIT(A) erred in confirming the disallowance. His attention was drawn to the fact that Ld. AO had applied Rule 8D of the Income Tax Rules, 1962 and no suo moto disallowance was made by the assessee, therefore there was no question of allowing any further relief from what had been upheld by the Ld. CIT(A). Subsequently, the ld. DR did not press these grounds of appeal. Hence, both these grounds of appeal are dismissed.
2.2. Ground no. 3 is related to disallowance of Rs. 4,81,477/- by the Ld. AO being sales promotion expenses. The findings of Ld. CIT(A) are as under:
“3.2 I have considered the submission of the appellant as well as facts of the case. It is seen that the AO has disallowed these expenses as the appellant neither filed any bills in support of the same nor the appellant could establish that these were incurred for the business of the appellant. Before me, the appellant filed copies of bills and contended that the appellant has acquired an Aurangabad based manufacturing unit and after starting manufacturing activities, the appellant organized a meeting with its customers, suppliers and bankers at Hotel J W Marriot and these expenses in respect of such meeting are wholly and exclusively for business. However, the appellant neither filed any details of the unit acquired nor filed any details or supporting evidence, which could substantiate that these expenses were incurred for organising the meeting with its customers, suppliers and bankers and therefore, for business purpose, as claimed by the appellant. In absence of the same, it can not be said that these expenses were incurred by the appellant wholly and exclusively for the business of the appellant. Therefore, I find no reason to interfere with the order of the AO in respect of this addition. The addition made by the AO is upheld. This ground may be treated as dismissed.”
2.3. Our attention was drawn to paras 3.1 and 3.2 of the appeal order by the Ld. AR whereby the addition was confirmed as the assessee did not file details of the unit acquired nor the details of supporting evidence were filed. The ld. AR drew our attention to page 11 of the paper book filed which is a balance sheet as at 31.03.2010 and at page 14 there is a schedule of fixed assets which shows additions to Plant & Machinery, Furniture and Fixture etc. while in the opening balance, only office building at Kolkata was being shown. It was stated that earlier the assessee was carrying on the investment business and during the year under consideration the new unit was acquired, which is also evident from the details of addition to fixed assets and plant & machinery in the balance sheet and the assessee thereafter carried on the business of paper cores and fibres in the unit acquired at Aurangabad. No sales were made in the earlier year and only income from commission and other income was shown while manufacturing was carried on after acquisition of the new unit and sales of Rs. 1,10,29,189 have been shown during the year. The assessee was earlier named as M/s. Wellworth Industries Ltd., Aurangabad and the name had been changed to M/s. Y.G. Capital Ltd. The net profit during the year at Rs. 2,24,91,633/- was much more than what was made in the earlier year. When asked to furnish the details of the unit acquired, the assessee filed a copy of the agreement executed at Aurangabad on 14.08.2009 between M/s. Wellworth Industries Ltd. (earlier Wellworth Securities Ltd.) and Mr. Suketu R. Jhaveri R/o Mumbai, proprietor of Jhaveri Fibres & Cores, a proprietary concern, for acquisition of the said business as a running business along with assets and liabilities for a total lumpsum consideration of Rs. 1,43,62,000/-. The details of payment of the same are mentioned at pages 2 & 3 of the agreement. Further, a perusal of the Schedule of Assets of the assessee and the schedule shown in the balance sheet of the unit acquired as on 14.08.2009 shows that the figures of plant & machinery, furniture, fixtures, computer and printer etc. shown have been incorporated for working of depreciation u/s 32 of the Act which have been added to the opening balance. Therefore, it is established that the assessee had acquired a new unit and the expenditure was incurred for which bills related to sales promotion expenditure were filed before the Ld. CIT(A) and the same was allowable as the business expenditure u/s 37(1) of the Act. The Ld. CIT(A) did not allow the expenditure as no details of the unit acquired nor other details were filed. Since the details of the unit acquired have been filed before us, the expenditure relates to 10.01.2010 while the unit was acquired on 14.08.2009 and the bills have been filed, hence the expenditure claimed at Rs. 4,81,477/- is allowed as a deduction u/s 37(1) of the Act being in the nature of sales promotion expenses. Hence, Ground no. 3 of the appeal is allowed.
3. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on 1st January, 2025.
Author Bio
