Disallowance of Advertisement Expenses under the Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL,
DELHI BENCH: ‘SMC-1’ NEW DELHI

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
[Through Video Conferencing]

ITA No. 8961/Del./2019
Assessment Year: 2016-17

Ms. Aarti Aggarwal,
L-1/18, Hauz Khas
Enclave,
Delhi
PAN :ACEPA9904F
(Appellant) 

Vs. 

ACIT,
Special Range-11,
New Delhi
(Respondent) 

Appellant by Sh. Piyush Jain, CA
Respondent by Sh. R.K. Gupta, Sr.DR

Date of hearing 08.06.2021
Date of pronouncement 28.06.2021

ORDER

PER O.P. KANT, AM:

 This appeal by the assessee is directed against order dated 18/09/2019 passed by the Learned Commissioner of Income Tax (Appeals)-11, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds:

1. THAT Ld CIT (A) has erred both on facts and in law while disallowing 1/5th of the amount of expenditure incurred on account of advertisement expenses amounting to Rs 2,14,956/-. The addition confirmed by Ld CIT (A) was without any basis and against the principal of natural justice. 

2. THAT Ld CIT (A) has erred both on facts and in law while adding back the foreign travelling expenses amounting to Rs. 3,84,170/- . The basis of confirming the additions made by the Assessing Officer is not tenable as all the supporting documentary evidence related to foreign traveling travelling were submitted during the assessment proceeding.

3. THAT the appellant craves leave to amend, alter, vary, and / or to add to all or any of the grounds of appeal and to raise such additional / fresh ground(s) as may be considered necessary or required at any time thereafter.

4. THAT the above grounds are in the alternative and without prejudice to one another.

2. Briefly stated facts of the case are that the assessee, an individual, filed return of income on 14/10/2016 declaring total income of ₹ 36,26,130/-. During the relevant assessment year, the assessee carried on business activity relating to manufacturing/trading of wooden articles and providing consultancy services relating to designing etc. The assessee also derived income from salary from M/s. Globe Automobile Private Limited, M/s JCBL India Private Limited and M/s JCBL Marrel Tippers Private Limited.

2.1 The return of income filed by the assessee was selected for scrutiny assessment. In the assessment completed under section 143(3) of the Act on 16/12/2018, the Assessing Officer made certain disallowances. On being appeal filed by the assessee, the Ld. CIT(A) allowed part relief. Aggrieved with the addition sustained, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.

3. Before us, the parties appeared through Video Conferencing facilities and the assessee filed a paper-book in electronic form.

4. In support of ground No. 1, the learned Counsel of the assessee referred to Annexure -1 of the paper-book and submitted that all the documents in respect of advertisement expenses were already submitted before the Assessing Officer. According to him, Learned CIT(A) is not justified in disallowing part of the advertisement expenses i.e. 1/5th expenses on the ad-hoc basis in terms of section 37(1) of the Act.

5. On the other hand, the learned DR relied on the order of the lower authorities.

6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The assessee claimed advertisement expenses of ₹ 10,74,782/- in the year under consideration as against ₹ 5,71,944/- claimed in the immediately preceding year. According to the Assessing Officer, sales of the assessee in the immediately preceding year were higher as compared to the present assessment year, and therefore he disallowed the entire advertisement expenses of ₹ 10,74,782/-. The Ld. CIT(A) has sustained the 1/5th of disallowance observing as under: 

To know more in details find the attachment file