9911796707
TMI Blog2012 (8) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... llers and a debit entry of Rs. 7,00,087/- towards gold chain being transferred from Meet Marketing was made. Thus, a total sum of Rs.17,98,912/- was made towards Sales promotion expenses. The A.O. asked to furnish the detail of the parties who have received gold chain. The total 105 parties were there who had been distributed gold chain as Sales promotion expenses. It is found that out of 105 parties 14 parties were not in any dealing of business with the assessee. In case of 65 parties, gift valued as a percentage of sales was very high. The A.O. observed in para nos. 4.2 & 4.3 as under:- "4.2 I have carefully considered the issue as discussed above vis-à-vis the explanation furnished by the assessee in his letter dated 14/12/2010 vide Para. 1.1 have also carefully considered the material available on the record. On overall perusal two aspects of the issue of sales promotion expenses comes to the fore i.e. gold chains being distributed to 40 parties although no sales were being made for the assessee by these parties and to other parties out of 65 to whom gold chains being distributed on disproportionate basis. As regards gold chains being distributed by the assessee to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of expenditure is unjustified and unreasonable and excessive, and therefore cannot be allowed fully. 4.3 In view of the overall facts and circumstances discussed above and also in the interest of natural justice and in all fairness, instead of disallowing the entire expenditure, expenditure with respect to the gold chains being distributed to 40 parties who have neither made any sales during the current previous year nor in the subsequent years and / or up to the date of final hearing in the case of assessee are treated as unreasonable and bogus. Assessee has neither produced any confirmation from the said parties nor any other proof to establish that such expenditure has been incurred in relation to his business. Even otherwise this expenditure cannot be allowed as it is not related to sales of the relevant F.Y. as assessee has not made any sales to such parties either in relevant F.Y. in any subsequent F.Y. and therefore not only the claim of the assessee that it is to maintain long term relationship is rejected but also the expenses are held to be not for business purpose and accordingly disallowed. Accordingly sales promotion expenses claimed to the extent of gold chain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted successful 7 years of business and on such occasion, keeping in view the co-operation received from the dealers in the past and expecting continuance of such co-operation/business dealings, it was decided as a matter of business expediency to distribute gold chains to all the dealers on such occasion. Thus, the expenses were incurred purely on foundation of commercial expediency for past / future success of the business apparatus of the appellant. It was difficult to fix particular criteria for such chain distribution. However, the gold chains of different value/weight were given on the basis of past sale/ co-operation/ remittarees by the concerned dealers. I do not agree with the finding of the Assessing Officer that expenditure incurred in giving chains to 40 dealers were unreasonable and bogus. The Assessing Officer had not brought any material on record that the expenditure is bogus. The bills and vouchers were filed. The complete details alongwith addresses of the recipients of gold chains were given then how it can be said that the expenditure is bogus. Considering the facts of the case, I am of the opinion that the expenditure for sales promotion was incurred for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismiss the Revenue's appeal. 7. The second ground of appeal is against disallowance of interest at Rs. 3,71,632/-. The A.O. had observed in paragraph no.5. that the assessee had debited an interest of expenses Rs. 9,91,332/- and advances of Rs. 73,31,224/- to that sister concern M/s. Meet Marketing which is an associate concern of the assessee coverd under the provisions of Section 40A(2)(b) of the IT Act besides Rs. 3,06,053/- to various outside parties. The A.O. noticed that the assessee had paid interest of loan @ 12% on loans taken & 4% on advance and given to M/s. Meet Marketing. Therefore, the A.O. had given reasonable opportunity to the assessee and considered the assessee's reply. The assessee's explanation was not found convenience to the A.O., therefore, he estimated disallowance of interest at Rs. 6,10,938/- after giving credit of interest received on unsecured loans of Rs. 3,71,634/-. He made the addition of Rs. 3,71,634/- in the income of the assessee. 7. The assessee filed first appeal before ld. CIT(A)-XVI, Ahmedabad. In paragraph no. 4 of the CIT(A) deleted the addition by observing as under:- "4.2 I have carefully considered the submission of the Ld. Counsel an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are real brothers and virtually, the business of the sister concern was also run by the proprietor of the appellant concern and thus the charging of lesser interest was on account of commercial expediency and no interest was disallowable in view of the decision of the Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). The Assessing Officer was thus not justified in disallowing the proportionate interest on the ground that interest from sister concern was charged at lesser rate. The disallowance so made is thereby deleted. The fifth ground of appeal is accordingly allowed." 8. Now the Revenue is in appeal before us. Ld. D.R. argued that the assessee had borrowed money @ 12% whereas he charged 4% rate of interest on amount advances to sister concern which lead to divert interest bearing fund to the less interest bearing advances. Therefore, addition should be confirmed, whereas, the ld. A.R. relied upon order of the CIT(A) and claimed that ld. CIT(A) had analyzed the whole issue and had given clear cut finding in favour of the assessee , has to be sustained. 9. We have perused the CIT(A) order and argument of both the side. The assessee had interest free fund in for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
