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TMI Blog2023 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 in favour of the assessee, whereas, Ld. DR relied upon the orders passed by the authorities below. 3. Factually, the assessee made donation of Rs.25 Lakhs to the Institute in the 2014 and claimed weighted deduction of Rs.43.75 Lakhs, but subsequently, the registration of the said Institutions were withdrawn on 26.09.2016 w.e.f. 01.04.2007. However, it appears that when the donation was made by the assessee to the Institute, at the material point of time, the donor was an approved Institution under Section 35(1)(iii) of the Act. There was no lacuna found by the authorities below against the said Institute and neither there was any embargo imposed during the relevant point of time against the said institution. On this identical issue, we have further considered the judgment relied upon by the assessee passed by the Co-ordinate Bench in ITA No. 2888/Ahd/2017, wherein relying upon the ratio laid down by the Hon'ble Gujarat High Court in the matter of PCIT vs. M/s. Thakkar Govindbhai Ganpatlal HUF in Tax Appeal No. 881 of 2019, relief has been granted to the assessee. While granting relief, the Co-ordinate Bench was pleased to observe as follows: "3. Ld. Counsel appearing for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arely covered in favour of the assessee. On the other hand, the ld.DR was unable to controvert this contention of the ld.counsel for the assessee. 5. We have duly considered rival contentions and gone through the record carefully. In the case of S.G.Vat care P.Ltd. (supra), the Tribunal has recorded the following finding: 2. In the first ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.8,75,000/- on account of alleged bogus donation to Herbicure Healthcare Bio-Herbal Research Foundation. 3. Brief facts of the case are that the assessee has filed return of income on 20.11.2014 declaring total income at Rs.4,47,910/-. On scrutiny of the accounts, it revealed that the assessee-company has given donation to Herbicure Healthcare Bio-Herbal Research Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issued by the Income Tax Department. It has been getting donations from various sources, and after deducting certain amount of commission, these donations were refunded in cash. On the basis of that surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue. It is dismissed. 7. In the result, appeal of the Revenue is dismissed." 5. Since the donation has not been doubted by the Revenue in the case of the assessee, in the absence of any changed circumstances, respectfully relying upon the judgment passed by the Co-ordinate Bench we allow the appeal preferred by the assessee. Consequentially, the addition made by the authorities below is deleted." In the absence of any changed circumstances, we do not find any reason to deviate from the stand taken by the Co-ordinate Bench and, thus, respectfully relying upon the same, we allow this ground of appeal preferred by the assessee. 4. The next ground relates to disallowance on sales promotion expenses. The assessee has debited an amount of Rs.47,04,385/- under the head 'sales promotion expenses'. Details were filed before the Ld. AO in regard to such expenses. However, the Ld. AO disallowed expenditure of Rs.43,87,742/- on the ground that the same are not made for business purposes. These gift items were given to the business associates and executives. Similar expense is made every year by the assessee as the case made out by it. The same are wholly and exclusively for bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference of Rs, 11,13,238/- should not be treated as unexplained expenditure and not added to the income of the assessee. 2. Assessee Firm is engaged in the business of Trading in Chemicals and has a turnover of more than Rs. 280 Crores. As part of its Sales Promotion Activities, it incurs various expenditure from time to time to incentivise and motivate its customers, suppliers and employees. As part of its promotional activity, assessee had assessee firm had bought Blackberry Mobile Phones to be distributed amongst its customers, suppliers and employees. A copy of bill for the purchase of mobile expenses is being submitted as Annexure -1 of this letter. 3. Assessee Firm has been carrying on its business of trading in chemicals for past more than 25 years. It has a customer list of more than 1000 customers and suppliers with whom it carries on its business from time to time. Every year on the auspicious festival of Diwali and Dev Diwali, assessee firm distributes various gifts and sweets to its business associates, employees, suppliers, consultants etc. Even in the year under consideration, assessee had purchased gold coins and silver articles to be distributed on the occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue the Co-ordinate bench in case of ACIT vs. Armee Infotech (supra), has been pleased to pass order with the following observation: "18. We take facts first from the Asstt.Year 2012-13. In this assessment year, the assessee has debited a sum of Rs.1,29,93,438/- towards sales promotion expenses, and claimed the same in the profit & loss account. The ld.AO found that it has given costly gifts to certain parties. He worked out such amount at Rs.1,17,40,918/-. The AO disallowed this amount out of total claim made by the assessee. The reasons assigned by him is that the assessee failed to give list of persons to whom such valuable gifts have been made for business promotion. On appeal, the ld.CIT(A) has restricted this disallowance to Rs.9.50 lakhs. 19. In the Asstt.Year 2014-15, the assessee has debited a sum of Rs.1,15,86,601/- as sales promotion expenses. The ld.AO found that Rs.30,52,101/- were debited by the assessee against trading business and Rs.85,34,500/- against commission income. The AO has disallowed a sum of Rs.85,34,500/- and this disallowance has been confirmed by the ld.CIT(A). 20. With the assistance of the ld.representatives, we have gone through the record ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to hold that the AO is not justified in making the impugned addition toto and is against the principle of natural justice. The truth lies somewhere down the line wherein sense of proportion and principle of natural justice would be met. In the facts and circumstances of the case, it is decided that a lump sum addition of Rs.9,50,000/- would serve the ends of justice. Accordingly, addition to the extent of Rs.9,50,000/- is confirmed and the balance amounting to Rs.1,07,90,918/- is hereby directed to be deleted. The appellant gets relief of Rs.1,07,90,918/-. The ground No.3 is allowed." 21. Stand of the assessee is that it was in the business of trading in computer spares and peripheral. It was also providing maintenance services. There are many suppliers in the area of business, in which the assessee was engaged. In order to remain in the market, and also to maintain assessee's hold in the market, it is essential to incur expenditure on sale promotion. The assessee further contended that it has achieved a turnover of Rs.102.32 crores, and against which it has incurred expenditure of Rs.1,29,93,438/-, which is just 1.14% of the total turnover. The expenditure cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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