Case Law Details
DCIT Vs Glaze Trading India Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that details of business promotion expenditure duly produced and it is also demonstrated that company being FMCG distribution/advertisement expenses for substantial part of expenditure. Accordingly, disallowance u/s 37 of the Income Tax Act unjustified.
Facts- The assessee is a company engaged in the business of trading FMCG (Fast Moving Consumer Goods) and home appliances, Organic Khad which is based on the chain of agents/ distributors engaged in sales almost all over India. Assessee filed return of income which was selected for scrutiny and AO had made certain disallowances.
Disallowance was of business promotion expenses. AO considered the expenditures were not wholly and exclusively for the purpose of business and that disallowance of expenses under this head has also been made in the previous years also. Accordingly, the disallowance of 25% of business promotion expenses of Rs. 6,75,63,728/- for the year under consideration at Rs. 1,68,90,932/- was made. CIT(A) deleted the disallowance.
Conclusion- Held that the CIT(A) has extensively dealt with the issue on the basis of the nature of the business of the assessee. The whole model of the business of the assessee is dependent upon the agents or distributors who are given incentives and there is business expediency with promotion of the business of the assessee due to these expenditures as in A.Y. 2013-14 so in the present assessment year also, as the assessee had brought on record the effect of business promotion expenses in the increase of the turnover and net profit.
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