Axiscades Aerospace & Technologies Private Limited Vs DCIT (ITAT Bangalore)
Selling & Marketing Expenditure Cannot Be Disallowed Merely Due to Ledger Nomenclature Error; ITAT Deletes Addition and Remands Balance Claim for Verification
The Bangalore ITAT held that business development and marketing expenses incurred through a holding company cannot be disallowed merely because of an accounting nomenclature error in the ledger, where the assessee is able to substantiate the expenditure through supporting debit notes and other documentary evidence. The Tribunal observed that a clerical description in the ledger cannot override the substance of a genuine business transaction.
The assessee, engaged in the defence and offset business, had claimed selling and marketing expenses allocated by its holding company, Axiscades Engineering Technologies Pvt. Ltd., on a cost-to-cost basis without any mark-up. The Assessing Officer disallowed part of the expenditure for want of adequate documentary evidence, and the CIT(A) sustained a disallowance of ₹1,58,05,355, comprising ₹37,48,685 and ₹1,20,56,670. Before the Tribunal, the assessee produced an additional debit note relating to the first amount and explained that the second amount, though shown in the ledger as payable to “TDS – Contractors”, actually represented payment to the holding company, the incorrect narration having arisen due to limitations of the accounting software.
The Tribunal admitted the additional evidence relating to the expenditure of ₹37,48,685, holding that the assessee had shown sufficient cause for its earlier non-production, and restored that issue to the Assessing Officer for de novo adjudication after verification of the additional documents. As regards the balance amount of ₹1,20,56,670, the Tribunal found that the ledger entry stood duly corroborated by the debit note issued by the holding company and accepted the assessee’s explanation that the discrepancy arose only because of the nomenclature used in the accounting software. Holding that the expenditure had been satisfactorily established, the Tribunal deleted the addition to that extent. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed the present appeal against the impugned order dated 09.01.2026, passed under section 250 of the Income Tax Act, 1961 (“the Act”), by the learned Commissioner of Income Tax (Appeals), National
Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2017-18.
