2004 (5) TMI 278 - AT - Income Tax

Summary

Issues:
1. Disallowance of expenditure on gift articles under r. 6B(1) of the IT Rules.
2. Disallowance of expenditure on a seminar conducted by an association.

Issue 1: Disallowance of expenditure on gift articles under r. 6B(1) of the IT Rules:
The assessee contested the disallowance of Rs. 11,503 for gift articles by the CIT(A) for the assessment year 1986-87. The AO disallowed the amount as the expenditure lacked a direct nexus with the business. The CIT(A) upheld the disallowance, stating that the presentation articles were considered as advertisement and thus subject to disallowance under r. 6B. The assessee relied on the judgment of the Bombay High Court in a similar case but was not successful. However, referencing a previous Tribunal decision, the ITAT allowed the claim under s. 37(1) of the Act, considering the genuineness of the purchase, customary practice, and reasonableness of the expenditure. Consequently, the ground was allowed.

Issue 2: Disallowance of expenditure on a seminar conducted by an association:
The second issue pertained to the disallowance of Rs. 37,232 for a seminar conducted by an association for the assessment year 1986-87. The CIT(A) confirmed the disallowance, citing a previous Tribunal decision against the assessee. Following the precedent set by the Tribunal, the ITAT rejected the claim based on the earlier decision, thereby upholding the disallowance.

In summary, the ITAT partially allowed the appeals of the assessee, allowing the claim for gift articles under s. 37(1) of the Act but rejecting the claim for seminar expenditure based on prior Tribunal decisions.