Promotional Expenses for Dealer Scheme Recognised as Liquor Business Expenditure: ITAT Deletes ₹16.22 Lakh Addition [Read Order]
The Tribunal observed that the expenses were adequately supported by vouchers, bank statements, TDS certificates, and emails from the parent company. It further noted that the debiting of expenses on an accrual basis in the previous year did not affect their genuineness.
The Nagpur bench of Income Tax Appellate Tribunal (ITAT) has allowed the appeal of the assessee for A.Y. 2014–15, holding that ₹16.22 lakh claimed as promotional expenses under a dealer scheme were genuine business expenditures.
The assessee, Vijaykumar Rooplalji Jaiswal, a senior citizen engaged in the liquor business, filed an appeal against the order of the CIT(A)/National Faceless Appeal Centre, Delhi, for the assessment year 2014–15.
The appeal arose primarily over the disallowance of ₹16,22,425 claimed as promotional expenses under a scheme for dealers. The AO had disallowed the claim, arguing that the expenses might have been reimbursed by the parent company, United Breweries Ltd., and questioning the year in which the expenses were debited.
On appeal, the CIT(A) upheld the disallowance while granting relief on other grounds.
At the Tribunal, the assessee contended that the expenses were genuinely incurred for business promotion purposes. The payments related to business promotion trips for dealers, hotel and travel arrangements, and were supported by detailed vouchers, bank statements, TDS certificates (Form 16A), and email communications from the parent company.
Although the expenses were debited to the Profit & Loss account on 31-03-2014, the Tribunal noted that the scheme was identified in September 2014 based on the turnover of dealers in FY 2013–14.
The assessee correctly disclosed the expenses on an accrual basis, which is permissible under accounting principles, and also reflected them under current liabilities in the balance sheet.
The Tribunal observed that the AO did not dispute the fact that the expenditures were made, but only the timing of the debit in the accounts.
Considering the evidence provided, including the paper book submitted by the assessee, the bench of Pavan Kumar Gadle (Judicial Member) concluded that the expenses were incurred wholly and exclusively for business purposes and were adequately substantiated. Accordingly, the disallowance was directed to be deleted.
In view of the above facts and submissions, the Tribunal allowed the appeal. The disallowance of ₹16,22,425 on account of the dealer promotional expenses was deleted, thereby reducing the taxable income accordingly.
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