Taxpayer Fails to Provide Detailed Expenditure of Rs. 35.2 lakhs Claimed as Business Promotion Expenses: ITAT Directs Re-adjudication [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has directed re-adjudication as the taxpayer failed to provide detailed expenditure of Rs. 35.2 lakhs claimed as business promotion expenses.

The assessee was a partnership firm and is engaged in trading and distribution of cardiac stents, biomedical instruments, medical instruments, equipment, and machinery. For the year under consideration, the assessee filed its return of income on 20/09/2013 declaring a loss of Rs. 15,618. A survey action under Section 133A of the Income Tax Act, 1961 was conducted in the case of the assessee on 26/11/2015, wherein various discrepancies relating to the suppression of receipts, expenses disallowable under section 37 of the Income Tax Act, and personal expenses disallowable were found.

During the reassessment proceedings, the assessee was asked to furnish the details in respect of various expenses claimed by it in its return of income. In response thereto, the assessee, inter-alia, submitted that the expenditure of Rs. 35,26,803 is related to sales and promotion expenses incurred for distributing medicines, food, arranging medical camps, and ancillary activities

Accordingly, the AO disallowed the travelling expenses amounting to Rs. 2, 99,000 and added the same to the total income of the assessee. As regards the business promotion expenditure of Rs. 35, 26, 803, the AO held that these expenditures are disallowable in view of the CBDT Circular No. 5 of 2012. Accordingly, the AO disallowed the business promotion expenditure of Rs. 35, 26,803 claimed by the assessee.

The bench considered the submissions of both sides and perused the material available on record. As per the assessee, its primary business was the trading and distribution of cardiac stents, biomedical instruments, medical instruments, equipment, and machinery

Further found that apart from making a general statement and explaining the mode of operation of these medical camps, the assessee has not furnished any item-wise detail of the total expenditure of Rs. 35, 26,803 claimed as business promotion expenditure. From the perusal of the impugned order, we find that such details were also not furnished before the CIT (A). Therefore, the nature of the expenditure incurred by the assessee under the head “business promotion expenditure” is not clear

The two member bench of the tribunal comprising Prashant Maharishi ( Accountant member ) and Sandeep Singh Karhail ( Judicial member ) found that even as regards the claim of allowance of travel expenses of Rs. 2,99,000, apart from claiming that the expenditure was incurred for business trips of the partner of the assessee firm, no details were furnished by the assessee nor any document was furnished to prove the purpose of the visit accordingly, this issue is also restored to the file of the jurisdictional AO for de novo adjudication, and one more opportunity is granted to the assessee, in the interest of justice, to furnish the necessary documents in support of its  claim.

 Further, the assessee was directed to furnish any other information as may be required by the AO for complete adjudication of the aforesaid issues. Accordingly, with the above directions, the impugned order was set aside and the grounds raised by the assessee are allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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