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TMI Blog2017 (11) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... s deduction. With regard to sales promotion expenses representing purchase of small denomination of assorted gold coins, we hold that the explanation given by the assessee is bona fide and reasonable and the same has been given to various parties for maintaining cordial relationship with the concerned sales executives who contributed for substantial increase in turnover of the assessee. We find that the Ld. CIT(A) had categorically mentioned that the turnover of the assessee had increased from 7 crores to 11 crores during the year which fact remain uncontroverted before us. This goes to prove the services rendered by those persons who are at the realm of affairs of improving the sales of the company and this also proves the business expediency and incurrence of such sales promotion expenses. Admittedly, these gold coins which were purchased were given as gifts to customers of the assessee and hence, becomes allowable deduction thereon. Disallowance of bad debts written off - AO had disallowed the same on the ground that mere making of provision for bad and doubtful debt does not amount to writing off of the debt and further the assessee has not produced any evidence from which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales above 50,000/-, details of commission paid, details of sale promotion expenses, details of bad debts, details of carriage outwards and details of loading and unloading charges. The assessee vide its reply letter dated 06.11.2013 furnished the details in respect of purchases, sales and commission paid. From the said details, the Ld. AO observed that the assessee paid commission to the following three parties: (i) Ambootia Organic Plantations Pvt. Ltd. ₹ 6,44,858/- (ii) IDA Organic Pvt. Ltd. ₹ 6,51,860/- (iii) Pankaj Kapoor HUF ₹ 2,98,932/- Total Rs . 15,95,650 /- The assessee stated that this commission payments for sales made by the assessee to various parties introduced by these three commission agents. The assessee also furnished the bill raised by these parties on the assessee clearly mentioning the amount of sales made to each party and the commission percentage thereon as aggrieved by the assessee. The bill of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fecting sales thereon. It was further pointed out that the Ld. AO in order to understand this transaction could have cross verified the same with the concerned customers of the assessee to understand the truth as to whether these commission agents were indeed employed by the assessee for rendering services. All the documents produced before the Ld. AO had been conveniently ignored by him. The Ld. CIT(A) deleted the disallowance by observing as under : 4 . 2 In ground nos . 2 . 2 the appellant has disputed the payment of commission . I find that the commission was paid by account payee cheque, tax was duly deducted, confirmation letter from the commissions agents were filed, summons u / s 131 were issued to the commissions agents to which confirmation of the payment of commission was received, the commission agents also informed the names of parties with regard to the goods sold by them, addresses of the parties were available with the AO since the assessee duly filed the details of sales in response to the notice u / s 142 ( 1 ) which details included the names and addresses of the said parties . It is not the case of the AO that the commission agents h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h subjected to deduction of tax at source is merely a book entry to reduce the taxable profit of the assessee. But we find that the assessee had duly furnished the bill raised by those commission agents on the assessee which clearly contained the list of parties i.e. customers of the assessee, to whom sales were made by the assessee. This clearly proves that these parties were introduced to the assessee by the concerned commission agents. We also find that the assessee had furnished the details of sales above ₹ 50,000/- before the Ld. AO for the whole year which admittedly contained sales made to the various parties mentioned in the commission bill raised by commission agents. We have also cross verified from the details of sales furnished by the assessee before the Ld. AO with the commission bill raised by commission agents wherein the total sales made to these parties also tally. We also find that the said commission agents even though did not respond to the summons issued by the Ld. AO by making their personal appearance, but had furnished the requisite details to the Ld. AO and had also given confirmation that they had indeed included the subject mentioned commission in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No . Cheque No . Drawn on Amount 13.03.2012 472/11-12 000117 Standard Chartered Bank (SCB) 2,50,284/- 13.03.2012 469/11-12 000118 Standard Chartered Bank (SCB) 2,49,590/- 21.03.2012 489/11-12 000149 Standard Chartered Bank (SCB) 2,59,690/- 21.03.2012 487/11-12 000150 Standard Chartered Bank (SCB) 2,51,750/- The Ld. AO disallowed the sales promotion expenses of ₹ 10,30,488/- on the ground that genuineness of the claim and services rendered were not proved and also as to what type of promotion these persons have made to the business of the assessee were not proved. The assessee stated that it had incurred sales promotion expenses of ₹ 10,11,323/- towards purchase of small denomination of gold coins for distribution to the persons who had helped in achieving the business tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,30,488 /-. 10. We have heard the rival submissions and perused the details of sales promotion expenses together with the relevant bills and vouchers enclosed in pages 9 to 18 of the paper book. In support of payments to clubs, it is now well settled that the payments to club is allowable as revenue expenditure by the following decisions: ( i ) CIT vs . Samtel Colors Limited reported in 326 ITR 425 ( Del ) ( ii ) decision of Hon'ble Supreme Court in the case of CIT vs . United Glass Manufacturing Company Ltd . in Civil Appeal No . 30146 / 2008 dated 13 . 09 . 2012 . Respectfully following the aforesaid decisions we hold that the payment of ₹ 19,165/- to clubs towards usage charges is allowable as deduction. With regard to sales promotion expenses of ₹ 10,11,323/- representing purchase of small denomination of assorted gold coins, we hold that the explanation given by the assessee is bona fide and reasonable and the same has been given to various parties for maintaining cordial relationship with the concerned sales executives who contributed for substantial increase in turnover of the assessee. We find that the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the revenue are dismissed. 12. With regard to disallowance of bad debts written off to the tune of ₹ 1,49,011/-, we find that the Ld. AO had disallowed the same on the ground that mere making of provision for bad and doubtful debt does not amount to writing off of the debt and further the assessee has not produced any evidence from which it could be established that he has accounted for the sales in computing the income of the previous year in terms of Section 36(2) of the Act. In response to this, we find that the assessee submitted that the debt of ₹ 14,90,113/- became bad as back in the year 2005-06. From that year onwards, the assessee has been consistently writing off 10% of the balance as bad debt in his books of accounts every year, so that there is no constraint on the net profit of the business of each year. It was also seen that such bad debts has been consistently allowed by the revenue commencing from assessment year 2005-06 to assessment year 2011-12. Hence, there is no reason for the revenue to take a different stand during this year when same facts and circumstances are permeating. The Ld. CIT(A) had appreciated this fact and by placing relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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