2018 (2) TMI 261 - AT - Income Tax

Disallowance of Advertisement Expenses incurred - Held that - Expenditure should be allowed as the assessee has discharged the burden of proof that lay on it. It is not a case of the Assessing Officer that he had evidence to prove that the expenditure was not incurred for the purpose of business. The amount of ₹ 80,000/- was paid to the Hotel for holding a dealers conference. The conclusion drawn by the revenue authorities on facts were based on conjectures. This expenditure has to be allowed. Travelling Expenses allowability - Held that - Though the assessee has produced evidences of having undertaken purchase of spices in Kerala during that period, the entire expenditure cannot be allowed, as what was paid for was for a package tour. Hence 50% of this expenditure may be disallowed. Attending a dealers conference, which was organized in Novatel Hotel at Hyderabad. The assessee has produced evidence to prove that there was a dealers conference in Novatel Hotel, Hyderabad. A confirmation from Novatel Hotel was also enclosed as evidence. In view of these evidences, the expenditure is directed to be allowed. Payment made to Vinayak Leisure Tours - Held that - Assessee has produced certain correspondences with parties in Thailand, in support of his contention that they had certain business meetings therein. The assessee had also produced copy of export invoice and bill of lading in support of its claim. Both of these are dt. 14/06/2012 and 07/08/2012, respectively, which is before 26/10/2012. The Assessing Officer and the ld. CIT(A) disallowed this claim on the ground that the expenditure is not for the purpose of business. In my view the assessee has produced cogent evidence of having business meetings in Thailand. There was trade links with Thailand. The assessee produced a certificate of registration as an exporter. Thus, this expenditure has to be allowed. Drawing foreign exchange for travel to Thailand - Held that - In view of my decision in the case of allowability of ₹ 1,38,849/- being travel expense to Thailand, I allow this claim of the assessee as this expense is also incurred for this foreign travel. In the result, this disallowance is hereby deleted. Supervisory expenses claimed - Held that - The claim of the assessee that these three persons were looking after sale of three outlets of M/s. J.K. Lifestores, was disbelieved as they were related parties. The assessee claims that they had rendered services and payments were made to them through account payee cheques in lieu of the services rendered. The Assessing Officer issued notice u/s 133(6) of the Act, to these three persons. This was complied with by these three persons who filed the details sought for. The assessee also filed details of the service rendered by these persons. T.D.S. was deducted on these payments. Income was duly declared by the recipients in their return of income. This disallowance is not called for. Disallowance of sales promotion expenses claimed by the assessee as having been incurred for a dealers conferences at Hotel Hyatt Regency as well as at Hotel Novatel & Resorts, Hyderabad - Held that - Assessing Officer does not have any evidence to contradict the claim of the assessee. Hence, direct that the above expenditure be allowed.

Summary

Issues involved:
- Disallowances of certain expenses claimed by the assessee for Assessment Years 2012-13, 2013-14, and 2014-15.

Analysis:
1. Assessment Year: 2012-13
- The disallowance of Rs. 80,000 out of Rs. 98,000 of Advertisement Expenses was contested by the assessee, claiming it was for organizing a dealers' conference. The evidence provided by the assessee was rejected by the ld. CIT(A), citing lack of clarity in the photographs. However, the Tribunal found that the assessee had proven the expenditure was for a legitimate business purpose. The disallowance was overturned, and the ground was allowed.

2. Assessment Year: 2013-14
- Travelling Expenses Disallowance: The Tribunal upheld 50% disallowance of the amount paid for a package tour to Kerala, while the rest was allowed as legitimate business expenditure.
- Supervision Charges Disallowance: The disallowance of brokerage expenses and supervision charges was challenged by the assessee, providing evidence of services rendered and T.D.S. deductions. The Tribunal found the disallowance unwarranted and directed the Assessing Officer to allow the expenses.
- Sales Promotion Expenses Disallowance: The disallowance for lack of proof of organizing dealers' meets was contested by the assessee, providing bills and correspondence as evidence. The Tribunal found the expenses were incurred for business purposes and directed their allowance.

3. Assessment Year: 2014-15
- Supervisory Charges Disallowance: Similar to the previous year, the disallowance of supervisory charges was challenged and allowed by the Tribunal, citing evidence of business activities.
- Transfer Expenditure Disallowance: The disallowance of expenses for travelling to Dubai and South Africa was overturned by the Tribunal, as the assessee provided sufficient evidence of business dealings in those countries.
- Sales Promotion Expenses Disallowance: The disallowance for sales promotion expenses was challenged with evidence of conducting a dealers' conference, similar to the previous year. The Tribunal allowed the expenses based on the provided evidence.

In all instances, the Tribunal carefully considered the facts, evidence presented, and the business purpose of the expenses to determine the allowability, ultimately ruling in favor of the assessee in most cases.