2012 (7) TMI 101 - AT - Income Tax

Expenditure incurred on sponsorship & other expenses of Polo tournament - dis-allowance - assessee contended it to be advertising and corporate image building expenditure - Held that - Majority of the clients of the assessee were sister concerns under the same family management, therefore, there was no business benefits to the assessee by making such expenditure on advertisement. Further promoting the brand SONA is also not of any help to the assessee as most of the clients are from the same group. aforesaid are personal expenses. Dis-allowance upheld Legal & professional charges - Held that - Assessee has completely failed to establish or to produce any evidence which can prove the fact that this expenditure was incurred wholly and exclusively for the business purpose of the assessee company. Assessee had also failed to contradict the fact that these expenses were personal in nature - Dis-allowance upheld Traveling expenses incurred on travel of company s President for business meetings - dis-allowance on ground that assessee has failed to establish the purpose of such meetings with the prospective clients - Held that - No details of the prospective clients have been filed. Also, assessee was not having any business connection in those countries. Dis-allowance upheld. Expenditure incurred on training of employees - revenue or capital expenditure - Held that - Same is revenue in nature - addition made is deleted.

Issues Involved:
1. Disallowance of expenses for Polo tournament sponsorship.
2. Rejection of additional evidence under Rule 46A.
3. Disallowance of commission paid to M/S Eden Park.
4. Disallowance of legal and professional charges paid to an advocate.
5. Disallowance of travel expenses.
6. Disallowance of travel expenses for training treated as capital expenditure.

Detailed Analysis:

1. Disallowance of Expenses for Polo Tournament Sponsorship:
The assessee claimed Rs.3,53,206 for sponsoring a Polo tournament as advertising and corporate image-building expenses. The CIT (A) disallowed these expenses, noting that the assessee failed to produce the required evidence during the assessment proceedings. The CIT (A) also held that the business did not need advertising as it had a limited and committed clientele from sister concerns. The Tribunal upheld this view, emphasizing that the assessee failed to meet the requirements of Rule 46A for admitting additional evidence and that the expenses were personal rather than business-related.

2. Rejection of Additional Evidence Under Rule 46A:
The Tribunal found that the assessee did not meet any exceptions under Rule 46A for admitting additional evidence. The Assessing Officer had provided sufficient opportunities to the assessee to furnish evidence, which the assessee failed to do. Therefore, the CIT (A)'s decision to reject the additional evidence was upheld.

3. Disallowance of Commission Paid to M/S Eden Park:
The assessee did not press this issue due to the smallness of the amount involved (Rs.39,328). Consequently, the Tribunal dismissed this ground.

4. Disallowance of Legal and Professional Charges Paid to an Advocate:
The assessee claimed Rs.3,00,000 paid to a criminal lawyer in Mumbai as legal and professional charges. The CIT (A) disallowed this expense, noting that the assessee had no business operations or legal cases in Mumbai and failed to provide evidence of services rendered for business purposes. The Tribunal upheld this view, finding no fault in the CIT (A)'s order.

5. Disallowance of Travel Expenses:
The assessee claimed Rs.8,94,512 as travel expenses for business meetings with prospective clients. The CIT (A) disallowed these expenses, stating that the assessee failed to identify the clients or provide evidence of business purpose. The Tribunal agreed, noting that the travel appeared to be personal rather than business-related.

6. Disallowance of Travel Expenses for Training Treated as Capital Expenditure:
The assessee claimed Rs.3,72,738 for training expenses under a franchise agreement with Sixt Germany. The Assessing Officer treated these expenses as capital expenditure, providing enduring benefits. The Tribunal, however, found that training expenses are revenue in nature and should be allowed in the year incurred. Consequently, the Tribunal set aside the CIT (A)'s order on this issue and directed the expenses to be allowed as revenue expenditure.

Conclusion:
The Tribunal partly allowed the appeal, upholding the disallowance of expenses related to the Polo tournament sponsorship, legal and professional charges, and travel expenses, while allowing the training expenses as revenue expenditure.

← Previous Next →