Payment of Sponsorship Fee paid to eligible Women for their Lifetime Achievements can’t be treated as Business Expenditure: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has held that the payment of sponsorship fee paid to the eligible women for their lifetime achievements can’t be treated as business expenditure under section 37 of the Income Tax Act, 1961.

The assessee paid a sponsorship fee amounting to Rs.17,30,400/- to eligible women for their lifetime achievements and claimed the same as business expenditure. During the course of assessment proceedings, the Assessing Officer held that the same cannot be treated as business expenditure since the payment does not fulfill the conditions prescribed under section 37 of the Income Tax Act.

The Tribunal bench comprising Accountant member Laxmi Prasad Sahu and Judicial Member S S Godara held that the assessee has failed to pinpoint even a distinct direct nexus between its day-to-day business activity viz-a-viz the impugned alleged sponsorship fee paid to the eligible women for their lifetime achievements.

“This tribunal’s Third Member’s decision in ITA No.2157/MAS/2011, M/s.Hyundai Motors India Ltd. Vs. DCIT, after considering the hon’ble apex court’s landmark decision Sassoon J.David and Company (P) Ltd [118 ITR 26] (SC), holds that any expenditure claim raised u/s.37 of the Act ought to be wholly and exclusively incurred for the purpose of the concerned business only. We, therefore, find no reason to interfere with the impugned disallowance made in both the lower proceedings. The assessee’s corresponding grounds in these instant twin assessment years to this effect stand declined,” the Tribunal said.

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