1979 (9) TMI 98 - AT - Income Tax

Summary

Issues:
- Disallowance of advertisement and publicity expenses by ITO
- Appeal by Revenue against AAC's order restricting the disallowance
- Interpretation of expenses under the IT Act
- Change in system of expenses between assessee and Principals

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi-E involves the disallowance of advertisement and publicity expenses by the Income Tax Officer (ITO) in the case of the respondent assessee. The ITO disallowed Rs. 25,000 out of the total claim of Rs. 59,120 on the grounds that the expenses were related to newspaper advertisements covering the entire country and were not solely for the business of the assessee. The Assessing Officer of the case had called upon the assessee to explain the genuineness of these expenses, which led to the disallowance. The assessee, a registered firm, had claimed the expenses for the accounting period relevant to the assessment year under appeal, citing a change in the system of expenses relating to advertisement and publicity between the assessee and its Principals.

The Appellate Assistant Commissioner (AAC) restricted the disallowance made by the ITO to Rs. 420, noting that there had been a change in the selling agreement between the assessee and its Principals, resulting in the expenses previously borne by the Principals now being the responsibility of the assessee. The AAC found that the expenses were fully vouched and expended as per the agreement between the parties. The Revenue, aggrieved by this decision, brought the matter before the Tribunal.

During the proceedings, the Revenue contended that the expenses incurred were not solely for the business of the assessee, as they covered the entire country through newspaper advertisements. On the other hand, the counsel for the assessee argued that the change in the system of expenses had been implemented as of a specific date, and the expenses claimed for the assessment year accounted for the entire year. The counsel further argued that the expenses were not controverted to be unrelated to the business of the assessee and were not exclusively expended for that purpose. Ultimately, the Tribunal upheld the order of the AAC, stating that the Revenue failed to make a case justifying interference with the AAC's decision, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal found that the expenses in question were related to the business of the assessee and were not shown to be an allowable expenditure under the provisions of the Income Tax Act. Considering all aspects of the case and the arguments presented by both parties, the Tribunal upheld the AAC's decision, resulting in the dismissal of the Revenue's appeal.