TMI Blog2012 (8) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... duced from the advances account. The actual amount would be much lower. There was no direct nexus has been established by A.O. between interest bearing fund to interest free advances - as there is no leakage of Revenue thus confirmation of the order of the CIT(A) and dismiss the appeal of revenue - in favour of assessee. - ITA No. 2929/Ahd/2011 - - - Dated:- 22-6-2012 - Shri D.K.Tyagi, and Shri T.R. Meena, JJ. Appellant: Ms. Surbhi Sharma, Sr. D.R Respondent: Shri S.N.Divetia, A.R. ORDER PER : T.R.Meena, Accountant Member This is revenue s appeal arises out of order of CIT(A)-XVI, Ahmedabad, order dated 07.09.2011 for assessment year 2008-09. The grounds of appeal are as under: (1) The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of disallowance of Sales promotion expenses of Rs.6,38,529/-. (2) The Ld. CIT(A) has erred in law and on facts in deleting disallowance of interest of Rs.3,71,632/-. 2. The first ground of appeal is against disallowance of Rs. 6,38,529/- on account of sales promotion expenses. The A.O. observed on page no.2 of the assessment order that the assessee has debited Rs. 17,98,912/- being Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 9.53 78192 10568 13.52 9. Dev Electronics 1 9.53 52337 10568 20.19 10. Gayatri Sales Corp. 2 19.06 34038 21137 62.10 649023 149455 From the above table, it can be seen that as against total sales made by these parties aggregating Rs. 6,49,023/- the assessee has given away gifts amounting to Rs. 1,49,455/- as sales promotion expenses which is approx: 23 %. Further the assessee has also admitted that they have not maintained any criteria for giving the gifts to the parties through whom goods were sold. In so far as the contention of the assessee that, The benefits of which (i.e. distribution of gifts) are available ijn the entire life cycle of our business is not tenable in eyes of law since any expenditure incurred, the benefit from which is agailable in the entire life cycle is in the nature of capital expenditure and not revenue expenditure. Further the assessee has contended that the expenditure is incurred for having long lasting business relationship. This contention of the assessee is also not correct and main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in para- 4 of the assessment order. It is an admitted fact that the appellant had incurred expenditure of Rs.17,98,912/- in procuring gold chains and debited in the books of account as sales promotion expenses. These the gold chains were distributed amongst the dealers. The appellant had filed the details to whom the gold chains were distributed. These chains were distributed to 105 dealers. The details of names of the business concerns, complete mailing addresses of the dealers, weight of gold chain and the value of the chain individually giver were filed before the Assessing Officer. The Assessing Officer had never required any further details because he had allowed the expenditure incurred on gold chains distributed to 65 dealers only on the basis of aforesaid details. Therefore, it is unreasonable to hold that assessee had neither produced any confirmation from the said parties nor any other proof to establish that such expenditure had been incurred in relation to his business. If he was required the confirmations then he ought to have called for the explanation of the appellant and in such an eventuality, the confirmations from concerned persons would have been placed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h that party. Whatever details furnished by the assessee were not complete with justification of the distribution of gold chain. 5. Another side, ld. A.R. Mr. S.N. Divetia contended that it was seventh year of the assessee. The assessee was dealing in sale of electronics items. It was necessary for the assessee to advertise aggressively by providing incentive to the dealers to get more business in future. The assessee submitted all the details and particulars of the recipients of the gold chain at the time of assessment proceeding. He again filed the copy of letter dated 25.11.2010 submitted to the A.O. alongwith full detail of the expenses of gold chain. A copy of Meet Enterprise Bill no.2, dated 17.05.2007 for Rs. 69,000/- of Maverick Management, copy of written submission before the CIT(A), copy of reply dated 08.12.2010 to the A.O. and copy of reply dated 14.12.2010 to the A.O. with details of distribution of gold chain, copy of balance account of Meet Enterprise, copy of balance sheet for A.Y. 2008-09 and claimed that these expenses for business expediency. 6. We have perused the orders of the authorities below and gone through the details of Sales promotion expenses and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount of advance will be much lower and interest receivable will work out to Rs. 5,21,088/- as against Rs. 8,79,747/- calculated by the Assessing Officer. I agree with the contention of the Ld. Counsel that out of the receivable interest of Rs. 5,21,088/- the appellant had already declared interest of Rs.2,68,809/- So, difference comes to Rs. 2,52,279/-. At the same time appellant has interest free fund, i.e. own capital of Rs. 26,31,523/- and if interest is calculated on that as payable @ 12 %, it comes to Rs.2,89,962/- which was higher then difference of interest received and receivable amount of Rs. 2,52,279/-. The Assessing Officer could not established live link between the borrowed funds and the advances given to sister concern and the decision of the Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. (2009) 313 ITR 340 (Bom.) wherein it was clearly held vide para-10 of the decision that if there are funds available both, interest-free and over draft and/or loans are taken, then a presumption would arise that investments would be out of the interest free fund generated or available with the company, if the interest-free funds are sufficient to meet t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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