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2016 (1) TMI 78 - AT - Income TaxAd hoc disallowance of advertisement and sales promotion expenses - Held that:- It is undisputed fact that percentage of expenses on advertisement and sales promotion with reference to sale of substantial increase compared to preceding year. In immediate preceding year, these expenses were at 10.96% on sale and in current year it increases at 14.11% on sale. The reply submitted by the assessee further shows that in A.Y. 2006-07 and this ratio has increased at 16.05% but no disallowance has been made by the Assessing Officer. Even the assessee’s sale has gone down from ₹ 454 crores in preceding year i.e. 2005-06 to ₹ 412 crores in A.Y. 2006-07. Therefore, there is no correlation between the expenses incurred and sale increased or decreased. The assessee incurred these expenses for penetration of the market and to increase the sale with the help of experts in the line of marketing. It is not necessary that the expert opinion always worked in positive line. The assessee is a multinational company and their share holders are not directly involved in the ordinarily activity of the business of the company. The assessee has submitted all the details of advertisement and sales promotion expenses in CD form and in form of hard copy it was rendering into around 600 pages on for details. Each and every voucher has been maintained by the assessed as there is an audit has been made by the auditor and not qualifying comment had been made by him under this head. The ld Assessing Officer also even not made any addition in A.Y. 2006-07 under this head where the ratio of expenses increased up to 16.05%. In other year also i.e. A.Y. 2007-08 and 2009-10, the ld Assessing Officer has not disallowed any amount from this head on the ground that the assessee had not incurred these expenses wholly and exclusively for the business purposes - Decided in favour of assessee.
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