2019 (2) TMI 1200 - AT - Income Tax

Deduction u/s 37 - allowable business expenditure - assessee purchased the IPL cricket match tickets to distribute them amongst its long standing customers to garner their goodwill and improve its business relations - HELD THAT - According to us, assessee s submissions in support of its claim u/s 37 is a plausible and acceptable submission. This is akin to distribution of gifts or articles on special occasions to the customers and such expenditure has been held to be business expenditure. Further, in reply to Revenue s contention that the assessee has failed to produce any evidence in support of its contention, the learned Counsel for the assessee has filed a list of the customers amongst whom the IPL Cricket match tickets have been distributed. DR opposed the admission of this evidence at this stage and submitted that, if the Tribunal were to consider the same, then the said evidence should be remanded to the file of the AO. This list was admittedly not produced before any of the authorities below. Therefore, we treat it as additional evidence and admit the same and remand the issue to the file of the AO to verify whether these parties were the customers of the assessee and whether they were given the alleged IPL seasonal tickets. Assessee s appeal is treated as allowed for statistical purposes.

Summary

Issues:
1. Allowability of expenditure under section 37(1) of the Income Tax Act for purchase of IPL cricket match tickets.

Detailed Analysis:
The judgment revolves around the appeal filed by the assessee for the assessment year 2009-10 against the order of the CIT (A)-5, Hyderabad. The primary issue in question was the allowability of an expenditure of ?5,50,000 incurred by the assessee for the purchase of 150 seasonal tickets of IPL cricket matches held at Hyderabad. The assessee claimed that the distribution of these tickets among its long-standing customers and business associates served the purpose of promoting business relations, goodwill, and corporate social responsibility. However, the Assessing Officer (AO) disallowed the expenditure as the assessee failed to produce sufficient evidence to support the claim (para 2).

The AO's decision was upheld by the CIT (A), who considered the expenditure as application of income rather than a legitimate business expense. The assessee, aggrieved by this decision, raised multiple grounds of appeal before the Appellate Tribunal. The grounds of appeal highlighted that the expenditure was incurred for commercial expediency, to preserve and promote good business relations, and was wholly and exclusively for the business purposes of the company (para 3).

During the proceedings, the assessee reiterated its stance that the expenditure on IPL cricket match tickets was a valid business expense aimed at enhancing goodwill and business relations. The Tribunal found the assessee's submissions plausible and acceptable, akin to distributing gifts or articles to customers on special occasions, which is considered a business expenditure. The Tribunal also considered additional evidence presented by the assessee, a list of customers who received the IPL tickets, which was not produced before any lower authorities. The Tribunal admitted this evidence and remanded the issue to the AO for verification (para 5).

Ultimately, the Tribunal allowed the assessee's appeal for statistical purposes, indicating a favorable decision on the allowability of the expenditure under section 37(1) of the Income Tax Act. The judgment was pronounced in the Open Court on 15th February 2019, concluding the legal proceedings on this matter (para 6).