PUNIT PROTEINS PVT. LTD.,BARODA vs. THE ACIT, CIRCLE-4, BARODA

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ITA 3045/AHD/2014Status: DisposedITAT Ahmedabad25 January 2019AY 2011-124 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the liability for the expenses was incurred in the assessment year when the scheme commenced, even though the payment and distribution occurred in the next year. Therefore, the disallowance was incorrect.

What were the facts?

The assessee claimed Rs. 5,00,000/- as sales promotion expenses for purchasing silver coins to be given as prizes in a scheme. The scheme ran from January to March 2011, but the prizes were claimed and distributed in the subsequent financial year.

What were the issues?

Whether expenses incurred for a sales promotion scheme, where the liability arose in one year but payment was made in the next, are allowable in the year the liability was incurred.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD

For Appellant: Shri M. J. Shah, AR

PER MAHAVIR PRASAD, JUDICIAL MEMBER

1.

This appeal by the Assessee is directed against the order of the Ld. CIT(A)-III, Baroda dated 20.08.2014 pertaining to A.Y. 2011-12 and has taken a single

ITA No. 3045/Ahd/2014 2 . A.Y. 2011-12 ground that ld. CIT(A) has erred in disallowing of Rs. 5,00,000/- made on account of Sales Promotion Expenses.

2.

Briefly stated the facts of the case are that the appellant company is carrying on the business of manufacturing and trading of pulses/cereals at Padra, Vadodara, Gujarat since long back.

3.

In order to boost, the sale of Tuver Dal. The appellant company has kept plastic card randomly inside 25 Kg packet of Tuver Dal and announced the scheme to its probable customers that if any purchaser of above said item found plastic card in the 25 Kg Tuver Dal packet, the same plastic card to be replaced by a Silver coin. And for that purpose, assessee purchased Silver Coin of Rs. 5,00,000/- for advertisement and sale promotion and same was claimed as expenses. But ld. A.O. disallowed the same for the reason that any expenditure which is said to have accrued only when a demand is made and the same is accepted by the party. In the same Financial Year, such expenses to be allowed but in assessee’s case demand for the Silver Coins have been made in the next year. Therefore, claim is not admissible and made the disallowance of Rs. 5,00,000/-.

4.

In appeal before the ld. CIT(A), he confirmed the action of the A.O.

5.

Now appellant has come before us.

6.

We have gone through the relevant record and impugned order. We can see, this scheme was made available from 15.01.2011 to 31.03.2011 for Krishna and Punit Brand of Tuver Dal. And appellant company has kept plastic card

ITA No. 3045/Ahd/2014 3 . A.Y. 2011-12 randomly inside 25Kg of Tuver Dal bag. On receiving these plastic cards from each dealer in the subsequent year, appellant purchased Silver Coin as mentioned in the scheme and handed over to the concerned dealer. Assessee purchased these Silver Coins on 31.03.2011 and made the payment on 02.04.2011.

7.

As we can see, although the payment of the Silver coin has been purchased in the next year but however, scheme was commenced in the last assessment year and thus the liability was incurred in the last year itself. In such case, the expenses so incur cannot be denied.

8.

In support of its contention, ld. A.R. has cited an order of Supreme Court in the case of Bharat Earth Movers vs. CIT 254 ITR 428 wherein it has been held:

“If a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated -with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in present though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.”

9.

Respectfully following the aforesaid judgment, we allow the appeal of the assessee.

ITA No. 3045/Ahd/2014 4 . A.Y. 2011-12

10.

In the result, appeal filed by the Assessee is allowed.

Order pronounced in Open Court on 25- 01- 2019

Sd/- Sd/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 25/01/2019 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad

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