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TMI Blog2019 (3) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... y basis and as such, involvement of non-business use in the present case cannot be ruled out at all, as is evident from the nature of gifts noted by the AO in the assessment order. Bills and vouchers of the gifts purchased were mostly found in the name of the assessee and some of the bills, some names were written by hand, which nowhere suggest to place credence on the contention of the assessee that these gifts were given to its customers even. Disallowance have a history in assessee’s favour - We have gone through respective orders of the aforesaid years and we find that in A.Y. 2006-07, such expenses were allowed on the premise that those expenses had been subjected to Fringe Benefit Tax. So is the position with respect to A.Y. 2008-09. For A.Y. 2007-08, no scrutiny assessment was made u/s. 143(3) of the Act. In A.Y. 2008-09, the Tribunal while deciding this issue had disallowed substantial part of such expenditure and rest of the expenditure were remanded to AO for verification. In A.Y. 2010-11, the similar disallowances were deleted by Tribunal. Therefore, from the above series of facts, it is evident that the history of the assessee has not been so glorious as claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer holding as under : 5. I have carefully considered the submission made by the A.R of the appellant and have gone through the assessment order. I have also perused the bills/invoices of the purchase of the above mentioned gift items. Most of the bills are in the name of appellant company except the invoices for the purchase of Mont blank pen which bears no name of the purchaser. As per section 37(1) of the Income Tax Act, any expenditure (not being expenditure of the nature described in section 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head 'profits and gains of business or profession. In this case, the appellant has not brought any material on record to show that the expenses on account of aforesaid gifts were made wholly and exclusively for the purpose of its business. The identity of the recipient of gifts has not been disclosed either during the assessment proceedings or during the appellate proceedings. Further, the business exigencies of the appellant company v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer. Being a consultant, in the field of Aviation and Aeronautics, the assessee requires maintaining personal contacts and goodwill with foreign principals and their representative in India. Whenever the foreign principals and their representatives visit in India for business discussions, they have to be properly looked after and entertained for maintaining good business relations. The foreign principals have to be presented with expensive gifts so that the assessee can get business. Therefore, these business development expenses are essential in the field of the business of the assessee. The nature of expenses incurred by the assessee is directly related to the nature of activities in which the assessee is engaged. Since the expenses have been incurred wholly and exclusively for the business purposes, there was absolutely no justification for the Assessing Officer to make disallowance of such expenses. The bills of these gifts were also submitted by the assessee before the CIT(A) and the Assessing Officer as noted by CIT(A) in Para-5 that most of the bills are in the name of the appellant company. Copies of such bills where the name of the representative of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,51,260/- was upheld because this amount was incurred on expensive gifts such as diamonds, gold bangles and Hon'ble ITAT has held that the nature of items were of very personal nature. However, for the balance amount of ₹ 6,95,578/-, the matter was restored to the file of the Assessing Officer, who has still to decide about the disallowance. Copy of Order of Hon'ble ITAT on this is enclosed at Pages 07 to 11 of these synopsis. 4. Assessment Year 2009-10 No disallowance, remains after Order of CIT(A) - copy enclosed at Pages 12 to 20 of these synopsis. 5. Assessment Year 2010-11 The Assessing Officer has disallowed the amount but the same was allowed by the CIT(A) and the Departmental Appeal in ITAT was dismissed as per the copy of the Order enclosed for your ready reference and records at Pages 01 to 06 of these synopsis. Historically it will be observed that the assessee has been generally incurring these expenses on normal gifts which have always been allowed and only in Assessment Year 2008-09 certain items of gifts which were of gold and diamond were disallowed by the Hon'ble ITAT. Therefore, Assessing Officer's reliance on ITAT Order for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be without any basis and as such, involvement of non-business use in the present case cannot be ruled out at all, as is evident from the nature of gifts noted by the Assessing Officer in the assessment order. Bills and vouchers of the gifts purchased were mostly found in the name of the assessee and some of the bills, some names were written by hand, which nowhere suggest to place credence on the contention of the assessee that these gifts were given to its customers even. 6. The next contention of the assessee is that such disallowances have a history in assessee s favour. He has referred to assessment years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11, when it is stated that such disallowances have been deleted or not made by the Assessing Officer itself. It is also submitted that therefore rule of consistency should be followed by the authorities below. We have gone through respective orders of the aforesaid years and we find that in A.Y. 2006-07, such expenses were allowed on the premise that those expenses had been subjected to Fringe Benefit Tax. So is the position with respect to A.Y. 2008-09. For A.Y. 2007-08, no scrutiny assessment was made u/s. 143(3) of the Act. In ..... 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