Disallowance of Business Promotion Expenses Incurred for Business Meet with Dealers and Customers without Adverse Findings: ITAT Deletes ₹1.13 Cr Addition [Read Order]

The Income Tax AppellateTribunal (ITAT), Chandigarh Bench, has held that business promotion expenses incurred for organizing a business meet for dealers, agents and customers cannot be disallowed without identifying specific defects.

The assessee, Sharmanji Yarns Pvt. Ltd., a company engaged in manufacturing different kinds of cotton yarn and PC yarn, trading of knitted cloth and other agricultural activities, had claimed ₹1.13 crore under the head “business promotion expenses” in its return of income.

The Assessing Officer disallowed the entire amount, on the basis of a few vouchers, without examining the nature of the expenditure in detail.

In appeal, the assessee submitted that the expenses were incurred for organizing a business meet for dealers, agents and customers. It furnished bill-wise details of expenditure along with supporting documents . It was further submitted that the expenses were supported by invoices from registered dealers, payments were made through banking channels and TDS was duly deducted.

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The Commissioner of Income Tax (Appeals) deleted the disallowance after examining the details and supporting documents furnished by the assessee

The Revenue challenged the deletion before the Tribunal.

The Tribunal, comprising Rajpal Yadav (Vice President) and Manoj Kumar Aggarwal (Accountant Member), noted that the Assessing Officer had not pointed out any specific defect in the claim and had proceeded to disallow the expenditure without proper examination, despite the assessee placing relevant details on record.

The Tribunal upheld the deletion of the addition and dismissed the Revenue’s appeal.

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