The Income Tax Appellate Tribunal (ITAT) Delhi Bench upheld the enhanced addition relating to advertising and marketing expenses due to failure to substantiate business purpose.
The assessee HPL Additives Ltd filed the appeal against the order passed by Commissioner of Income Tax (Appeals) by enhancing the addition relating to Advertisement & Marketing Expenses from Rs 3,00,000/- to Rs 18,18,624/- Primarily on adhoc basis without appreciating the business exigencies.
During the appeal proceedings, Manish Kumar, counsel for assessee submitted that the disallowance relating to Advertisement & Marketing expenses erred by not appreciating that the expenses incurred through credit card by JMD of the Company during his Foreign Visit on Purchase of Gifts, Dinner etc with Clients are Customary in nature and with a view to Promote Export Business of the assessee company and it has no any personal element.
Maimun Alam, the Counsel for the revenue argued that after conducting detailed enquiry and analysis of the documentary evidences submitted by the assessee rightly enhance the disallowance/addition on account of advertisement and marketing expenses from Rs. 3 lakhs to Rs. 18,18,624/- after allowing due opportunity of hearing to the assessee.
However, the assessee failed to substantiate that the impugned amounts were incurred wholly and exclusively for the purpose of business of assessee and not for personal purpose or non business purpose.
It was observed by the tribunal that the assessee did not furnish any detail or even in the name of Indian clients to whom the gifts, parties, lunches etc. were given. Moreover assessee has not produced supporting bills and vouchers before the authorities.
Further, the credit card expenses incurred on account of advertisement and marketing the tribunal observed that information given by the assessee was vague and did not prove anything regarding the expenses .
Thus, the assessee without identifying the guests purchases of branded apparels and luxury items have been made for giving gifts to customer without identifying the person huge amounts has been incurred on providing gifts and hospitality to foreign customers
Hence, making it clear that these are expenses of personal nature only and as the items purchased were not the items which can be given to an organisation or customer and the same were purchased as per personal choice and consumption.
After reviewing the facts and submissions, the two member bench of the tribunal comprising M.Balaganesh (Accountant Member) and Chandra Mohan Garg (Judicial Member) dismissed the appeal of assessee.
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