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TMI Blog2023 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ief has been granted to the assessee - Thus we allow this ground of appeal preferred by the assessee. Sales promotion expenses - Whether same are wholly and exclusively for business purposes and allowable under Section 37? - HELD THAT:- As relying on Armee Infotech [ 2022 (1) TMI 649 - ITAT AHMEDABAD] we find that the expenses are allowable u/s 37 of the Act, and thus, respectfully relying upon the same, we allow this ground of appeal preferred by the assessee. - I.T.A. No. 2609/Ahd/2017 - - - Dated:- 22-12-2022 - Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Appellant : Shri M. K. Patel, Advocate For the Respondent : Ms. Anam Benish, Sr. D.R. ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal at the instance of the assessee is directed against the order dated 20.10.2017 passed by the Ld. Commissioner of Income Tax (Appeals), Ahmedabad 5 (in short CIT(A) ) arising out of the assessment order dated 27.12.2016 passed by the Learned ACIT, Circle-5(3), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to the Act ) for Assessment Year 2014-15. 2. Ground Nos. 1 to 3 relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9.9.2014 declaring total income at Rs.31,23,870/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed deduction under section 35(1)(ii) at Rs.96,25,000/- on the ground that it has incurred this expenditure towards donation. He observed that donations were given to Herbicure Health Care Bio-herbal Research Foundation ( Herbicure for short). According to the AO a survey under section 133A was conducted by the DDIT(Investigation) Unit-1 2, Kolkatta on 27.1.2015 at Herbicure foundation. During the course of survey, it was found that donors/ beneficiaries in connivance with donee and with active help of certain brokers, entry operators/bogus billers were engaged in arranging these entries of bogus donation. According to the AO after an inquiry, Herbicure was prohibited from receiving donation. On the strength of this report of survey team, the AO has treated this donation as bogus and disallowed the claim of donation made by the assessee. On appeal, the ld.CIT(A) has deleted the disallowance. 4. Before us, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een treated as bogus, and addition is rightly made. 6. We have duly considered rival contentions and gone through the record carefully. The AO is harping upon an information supplied by the survey tem of Calcutta. He has not specifically recorded statement of representatives of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of a general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. In the absence of such circumstances, donation given by the assessee to the donee, on which the assessee no mechanism to check the veracity, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. We allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice, we hereby submit the following details/explanations as required by you: 1. As regards your observation, that Ledger Account of Sales Promotion expenses shows an amount of Rs 35,91,147/- only while expenses of Rs. 47,04,385/- have been claimed, we have to submit as under: Assessee has maintained 3 Ledger accounts of Sales Promotion Expenses as follows: Sales Promotion Expenses (Rent) A/c - Rs. 1,26,220/- Sales Promotion Expenses (NIL TDS) A/c - Rs. 35,91,147/- Sales Promotion Expenses (Cont) A/c - Rs. 9,87,018/- However, it seems that while submitting the. details, ledger account of only Sales Promotion Expenses (NIL TDS) has been submitted. We are hereby submitting herewith the copy of Ledger of all the 3 accounts for your record. Annexure-1 We are submitting herewith copy of bills of expenses booked in Sales Promotion Expenses. Annexure -2 Apart from the above referred bills, assessee also incurred certain expenditure for various visitors (i.e. Customers, suppliers, .consultants etc) who visit its of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase of Gold Coins and Silver Articles is being submitted as Annexure -1 of this letter. We would further, like to draw you attention to the instructions issued by the CBDT vide its letter 13/A/20/68 dated 03/10/1968 wherein the CBDT has said that the expenses incurred on the occasion of Diwali and Mahurat are in the nature of business expenditure. 4. During the year under consideration, assessee firm had organized a meeting for its customers at Golden Glory Hall, Karnavati Club in the month of December 2013: Assessee had invited a number of customers and executives of the supplier companies for a meeting which was followed by dinner. All the invitees to this meeting had been invited over the phone by the Firm's Partners and their employees. The primary objective of this meeting was to be able to communicate and meet the customers one on one, thereby keeping in touch with the customers and develop a personal rapport with them. The suppliers of the firm had also been invited to this meeting wherein they were able to interact with the End Consumers, Traders etc. to understand the business requirements of these customers and also get feedback which would help them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistency desired to be followed as has been held in various below mentioned case laws: (i) DCIT Vs. Sulabh International Social Service Organisation [350ITR 189 (Patna)] (ii) CIT Vs. Ranganathar Co. [316 ITR 252 (Mad)] (iii) Gopal Purohit Vs. Jt. CIT [334 ITR 308 (SC] The appellant has furnished before the AO complete details in respect of the expenditure in question and has also furnished copies of the bills/vouchers. Therefore, it emerges from the records of proceedings that the expenditure in question had been incurred in the normal course of the business of the appellant and the same had been incurred for the purpose of business of the appellant. The expenditure has not been proved to be bogus through some independent inquiry. However, at the same time, it is not open and shut case for appellant because the perusal of the Assessment Order indicates that the appellant had not furnished the names of the persons to whom the gift/presentation articles had been given. In the course of the appellant proceedings, the AR of the appellant submitted that disclosure of name of the parties would adversely affect the business of the appellant and in order to keep the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Supreme Court to follow the proposition of consistency in the finding extracted (supra). The ld.CIT(A) has partially confirmed disallowance of Rs.9.50 lakhs; but there is no justification for such disallowance also. The assessee is a well organized business house, who has achieved turnover of more than Rs.102 crores; meaning thereby, its affairs must have been managed in professional manner, where complete details might have been maintained. The assessee has given no details to whom such gift items were given. It is case of the assessee that in order to maintain secrecy of its line of business, it is not incumbent upon him to disclose personal details of recipients. It has shown bills and vouchers for the purchases. All the details have been maintained scientifically. An estimation of disallowance could only be made, if there are some lapses in the detailed maintained by the assessee. The reasoning given by the AO is altogether different which did not meet approval of the CIT(A). Thereafter, the ld.CIT(A) ought to have not made adhoc disallowance. The ld.CIT(A) was not justified in partially confirming the disallowance. After perusal of the finding of the ld.CIT(A), we d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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