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TMI Blog2004 (5) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... othes, silver articles, etc., given to the executives of the customers with a view to keep good business relation are subject to disallowance under r. 6B(1) of the IT Rules. 1.2 The learned CIT(A) failed to appreciate that the presentation/gift articles presented by the appellant did not bear the brand name of the company, nor these were meant for advertisements of the product of the company, but these were for keeping good business relations with the business connections and thus, were for the business promotion and hence, the restrictions laid down in r. 6B(1)(a) are not applicable for such presentation articles. 1.3 The learned CIT(A) ought to have deleted the disallowance of Rs. 11,503 made on estimation basis out of the sales promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). He contended that the order of the CIT(A) needed to be upheld. 6. We have considered the rival submissions and have perused the orders of the authorities below. While making the disallowance, the AO noted in para 13 of his order as under: "The assessee has incurred expenditure of Rs. 11,503 on gifts, etc. where the value of each of the gifted items is more than 50 rupees. The assessee claimed that these gifts are not in the nature of advertisement but are to have human and smooth relations. As the assessee has not established direct nexus between the expenditure and the assessee s business, I disallow Rs. 11,503 under this head." 7. The observations made by the CIT(A) in paras 8, 8.1 and 8.2 of his order are reproduced below: "8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. For that year, the AO disallowed, in the course of the assessment, a sum of Rs. 10,905 by applying the provisions of r. 6B of the IT Rules. This expenditure was in respect of articles of presentation or gift incurred by the assessee. The Tribunal has held that these presentation articles did not bear either the name of the company nor its logo and could not be considered as meant for advertisement and, hence, r. 6B would not be attracted. In view of these findings of fact which are arrived at by the Tribunal, if we examine the r. 6B, it becomes clear that r. 6B deals with expenditure on advertisement. Rule 6B(1) provides that the allowance in respect of expenditure on advertisement shall not, inter alia, in respect of articles intended f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 7 of its order dt. 6th April, 1989, it was held by the Tribunal that such expenses were allowable under s. 37(1) if the following conditions were satisfied: (i) the genuineness of the purchase of the articles is proved; (ii) it is customary practice in the commercial trade to give such items by way of gifts to customers and suppliers in order to maintain relations; (iii) the expenditure is reasonable vis-a-vis the volume of the business. 12. In the present case, the claim of the assessee was for an expenditure of only Rs. 11,503 and therefore, considering the facts and circumstances of this case and respectfully following the decision of this Bench of the Tribunal in the case, of PCS Industries Ltd., we allow the assessee s clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. yrs. 1989-90 and 1990-91. The facts of this case are identical and therefore, respectfully following the above decision of this Bench of the Tribunal in the assessee s own case, we reject the ground No. 2. 16. ITA No. 114/Pn/1990 Asst. yr. 1988-89: The ground No. 1 relates to the assessee s claim for expenditure of Rs. 3,135 in respect of presentation of gift articles. We have decided an identical issue for asst. yr. 1986-87 in para 12 above. The facts in respect of the claim of Rs. 3,135 for asst. yr. 1988-89 are identical, and therefore, for the reasons discussed in para 11 and 12 above, we accept the assessee s claim. The ground No. 1 is accordingly allowed. 17. The ground No. 2 relates to refund of excise duty of Rs. 8,36,290. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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