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2016 (11) TMI 1297

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..... case of Cheminvest vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT]. Accordingly, we are of the opinion that disallowance u/s 14A would not have been made and such disallowance is deleted. - Decided in favour of assessee Addition being the expenditure incurred for business promotion/advertisement - expenditure incurred for sponsoring of special box - Held that:- No commercial concern would employ a software concern for development of software through its exposure from hoardings at a cricket tournament. They would be looking into the skills of the concern to decide whether it would be an appropriate choice for developing software. It is also an admitted position that the Managing Director of the assessee-company was the Vice President of Tami .....

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..... to 5, the grievance raised by the assessee is against sustaining disallowance of ₹ 2,20,841/- u/s 14A of the Act r.w. rule 8D. 4. Ld. AR submitted that the assessee had not earned any exempt income during the previous relevant to the impugned assessment year. Hence, according to him, invocation of sec. 14A was not called for. 5. Per contra, the ld. DR while admitting that assessee had not earned any exempt income, asserted that disallowance u/s 14A could not be linked to earning of exempt income as such. 6. We heard the rival contentions and perused the orders of the authorities below. The Assessing Officer had made a disallowance of ₹ 2,20,841/- by invoking sec. 14A r.w.r 8D(2)(iii). Assessing Officer had given a find .....

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..... oftware development, had filed its return declaring income of ₹ 4,81,080/-. During the course of assessment proceedings, it was noted by the Assessing Officer that assessee had claimed business promotion expenditure of ₹ 14,95,000/-. The details of the expenditure provided by the assessee read as under: 1. Chennai St. Bede s Sports foundation ₹ 45,000 2. Youth Association for classical music ₹ 50,000 3. The Tamilnadu Cricket Association ₹ 4,00,000 4. Sponsorship for special box at MA Chidambaram Stadium, Chennai .....

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..... box could be used by not more than 15 persons during matches held in the stadium. As per the Assessing Officer, only advantage the assessee received was display of its name on the top of the box placed in the stadium. In addition, assessee had paid ₹ 4,00,000/- for sponsoring 14 cricket tournaments conducted by Tamilnadu Cricket Association. Conclusion of the Assessing Officer was that the assessee was having a very limited clientele viz. M/s Infosys, M/s Standard Chartered Bank, The Cancer Institute and M/s Sundaram BNP Paribas. The only other client the assessee was having, as per the Assessing Officer, was based on US. The sponsorship of the special box did not result in any benefit to the assessee and as per the Assessing Officer .....

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..... , as per the ld. AR, several other concerns like banks and insurance companies sponsored special boxes but Revenue could not show whether any disallowances were made in their cases. In any case, as per the ld. AR, the expenditure was incurred in relation to the business of the assessee and the Assessing Officer ought not have sat in the chair of the businessman to decide whether the expenditure was required or not. 12. Per contra, the ld. DR strongly supported the orders of the authorities below. 13. We have considered the rival contentions and perused the orders of the authorities below. Out of the total expenditure of ₹ 14,95,000/- claimed by the assessee under the head business promotion, ₹ 14 lakhs was paid to Tamilnad .....

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..... s and was an air-conditioned one. It is difficult to imagine how 15 persons sitting in an air-conditioned box and watching a cricket match would help the business of the assessee. As per the ld AR, similar disallowances ought to have been made in the case of other concerns who had sponsored similar boxes. In our opinion, this would not help the assessee s case in any manner. Sec. 37 mandates that an expenditure could be allowed only if it was incurred wholly and exclusively for the purpose of business. The assessee has not been able to show the nexus of the business of the assessee with the expenditure incurred for sponsoring of special box. Hence, we are of the view that the CIT(A) had rightly confirmed the disallowance made by the Assessi .....

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