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TMI Blog2021 (8) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Private Limited under an agreement for arranging a sales promotion meeting at Srilanka. 3) The Learned Commissioner of Income Tax (Appeals) erred both in facts as well as in law, in observing that the function at Srilanka had no nexus with the purpose of the business carried on by the Appellant Company. 4) The Learned Commissioner of Income Tax (Appeals) erred both in facts as well as in law, in ignoring the facts that the video coverage, was all about the food supplement products dealt in by the Appellant Company. The entire exercise was meant for apprising the sales representatives with the details of food value of various ingredients of the products they were going to sell in the market. 5) The Learned Commissioner of Income Tax (Appeals) erred both in facts as well as in law, in ignoring the contents of the video coverage and concluded based mainly on the finding of the Assessing Officer. 6) The Learned Commissioner of Income Tax (Appeals) erred both in facts as well as in law, in ignoring the bills presented by the event manager/ travel agent in arranging the video coverage at Srilanka without recording any valid reason. Though the bill was drawn up in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, 25% of the expenditure was allowed as deduction and 75% of the expenditure (Rs. 78.17 lakhs) was treated as preoperative expenses. The AO has also allowed deduction of 1/5th of pre-operative expenses amounting to Rs. 15,36,487/-, thereby resulting in net disallowance of Rs. 62,53,938/-. 3. Before the CIT(Appeals), the appellant has claimed that it had entered into an agreement with the holding company for carrying out the marketing of the products traded by the appellant company including the sales and distribution of the products through its agents. It is claimed that for these activities, for every sale of Rs. 2,000/- one point was allotted to the holding company for marketing the products, which was reimbursed at the rate of Rs. 350/- per point. As per the details furnished, the appellant had claimed that during the year, the holding company has earned 23280 points. Accordingly, at the rate of Rs. 350/-per point, the appellant has stated that the holding company had raised a bill of Rs. 87,88,429/- for sales made up to February 2012 and a bill for Rs. 1,98,952/- for March 2012. The appellant has also claimed that apart from this, various other sundry expenditures were inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence payment of sales promotion expenses at the rate of 5% of the sales turnover was found to be reasonable and adequate. For the year under consideration the total sales turnover has been reported at Rs. 385,69,609/- and therefore, the allowable sales promotion expenditure at the rate of 5% is computed at Rs. 19,28,480/-. Accordingly, the AO was directed to allow the same and add back the excess amount of Rs. 84,94,766/-, in place of Rs. 62,53,9381- disallowed in the assessment order. 7. We have heard both the parties on this issue and perused the material on record. In this case, the assessee claimed an amount of Rs. 104,23,246 as expenditure incurred towards sales promotion. It is the contention of assessee that it was incurred on launch of its products in Sri Lanka and it has to be allowed u/s. 37 of the Act. However, the AO observed that the assessee commenced business on 21.12.2011 and as on 29.12.2012 the assessee has claimed it has spent Rs. 87,88,429 and for the next month i.e., March, 2012, it has expended Rs. 1,98,952. The balance amount was spent in cash and the AO doubted the genuineness of the balance payment. However, he considered 75% of expenditure i.e., Rs. 104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the assessee and beneficiary to incur this expenditure, though it was not mandatory, to claim this expenditure for the purpose of business. However, the assessee has to establish with documentary and cogent evidence that such expenditure was indeed incurred for the purpose of assessee's business. Before us the ld. AR for the assessee has not been able to lead any cogent evidence about the nature of services rendered by the beneficiary on this count. We have gone through the various expenditure details submitted by the assessee. Most of the details include hotel (lodging) and food bills and also car hiring charges. It was explained by the ld. AR that 320 employees of assessee went to Sri Lanka to launch its products and it is reflected in the video recorded by the assessee. The assessee submitted list of 320 persons stating that they are employees of the assessee company and went to Sri Lanka to launch the product of the company. However, there is no documentary evidence to show that 320 persons are employed by the assessee as the assessee has not filed any appointment orders or any correspondence of these persons stated to be employees of assessee company. We have carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X
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