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Facts
The assessee, a firm exporting marine products, claimed sales promotion expenses. The Assessing Officer disallowed the claim due to lack of documentary proof and agreement copy. The CIT(A) deleted the addition, relying on High Court and Tribunal precedents.
Held
The Tribunal held that the assessee had furnished sufficient details and evidence regarding sales promotion expenses, which were considered by the CIT(A). The Assessing Officer's observation that no details were provided was incorrect.
Key Issues
Whether the deletion of addition by the CIT(A) regarding sales promotion expenses was justified, considering the evidence provided by the assessee.
Sections Cited
142(1), 37
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
Year: 2021-22 The Assistant Commissioner of Vs. V V Marine Products, Income Tax, No. 17C, Keeraikaran Thattu, Central Circle 2, Tisayanvillai, Tirunelveli 627 657. Madurai. [PAN:AALFV2122R] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Ms. E. Pavuna Sundari, CIT ��थ� की ओर से/Respondent by Shri R. Venkata Raman, C.A., : Shri R.S. Lakshmi Narayana, Advocate & Shri K. Vishwa Padmanaban, CA सुनवाई की तारीख/ Date of hearing : 07.05.2025 घोषणा की तारीख /Date of Pronouncement : 29.05.2025 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order dated 30.09.2024 passed by the ld. Commissioner of Income Tax (Appeals) 19, Chennai for the assessment year 2021-22.
The Appellant-Revenue raised 6 grounds of appeal, amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in deleting the addition made by the Assessing Officer on account of claim of sales promotion expenses.
Brief facts relating to the case are that the assessee is a firm engaged in the business of exporting marine products. The Assessing Officer, vide para 3.1 of the assessment order discussed the issue of sales promotion expenses; wherein, he asked the assessee to furnish details vide notice under section 142(1) of the Act. The assessee filed reply. The Assessing officer observed that no documentary proof was furnished for the nature of service received and the copy of agreement entered upon. In the absence of aforesaid evidences, the claim made by the assessee under the head “sales promotion commission” was disallowed under section 37 of the Act. The ld. CIT(A) deleted the addition by placing reliance on the decision of the Hon’ble High Court of Karnataka in the case of PCIT v. Hindustan Coca-Cola Beverages Pvt. Ltd. [2020] 424 ITR 430 and the orders of Delhi and Mumbai benches of the Tribunal. Aggrieved by the order of the ld. CIT(A), the Appellant- Revenue is in appeal before the Tribunal.
The ld. DR Ms. E. Pavuna Sundari, CIT submits that no details were furnished before the Assessing Officer during the course of assessment proceedings and drew our attention to page 9 of the impugned order and argued that the assessee filed such details before the ld. CIT(A) for the first time and there was no occasion to the Assessing Officer for verification of the same. Further, the ld. CIT(A) did not conduct any enquiry and simply accepted the submissions of the assessee in giving relief and deleting the addition made by the Assessing Officer. The ld. DR vehemently argued that the order of the ld. CIT(A) is bad in law for not giving opportunity to the Assessing Officer and drew our attention to ground No. 5 of the appeal memo Form 36.
The ld. AR Shri R. Venkata Raman, CA submits that all the details were furnished before the Assessing Officer and drew our attention to para 3 of the assessment order. He submits that the assessee furnished all the details on 05.12.2022 and 12.12.2022 and argued that the contention raise by the ld. DR, with reference to non-submission of details before the Assessing Officer, is incorrect. He referred to page 8 of the paper book, submits that the assessee furnished all the details through e- mail, in compliance against notice under section 142(1) of the Act. Further, he referred to pages 9 & 10 and submits that the assessee furnished all the details in respect of sales promotion expenses in Annexures. Further, referring pages 11 & 12 of the paper book and submits that the assessee furnished all the details in respect of purchases, sales, salary & wages, ship freight, bank address and sales promotion commission in PDF form. He argued that every detail available before the Assessing Officer, but, it was not considered by the Assessing Officer. He strongly relied on the order of the ld. CIT(A). He drew our attention to debit note and bank statement at pages 13 & 14 of the paper book and argued that the payments of commission is clearly established. Further, referring to page 15 of the paper book, submits, clearly showing export details and commission thereof. He prayed to dismiss the grounds raised by the Revenue.
Heard both the parties, perused the material available on record. Admittedly, the Assessing Officer held that no documentary evidence in respect of sales promotion payment and also copy of agreement entered into in support of the claim, but, however, in para 3, as referred by the ld. AR, clearly shows that the assessee has given reply vide letter dated 05.12.2022 and 12.12.2022 in response to the question sought for in notice under section 142(1) of the Act. We find, at page 8 of the paper book refers to acknowledgement from ITBA portal regarding e-proceeding response acknowledgement, which clearly shows that the assessee submitted covering letter dated 05.12.2022 along with Annexures. Further, it shows in the “Remarks” column that the details were sent through e-mail as they are voluminous in nature. Further, page 9 of the paper book is a covering letter dated 05.12.2022, which also establishes the details regarding sales promotion expenses were furnished in Annexure-7. Further, page 11 is an e-mail correspondence shows the details furnished as an attachment, wherein the sales promotion commission expenses is clearly evident in pdf format and also other details like purchases, sales, salary & wages, ship freight, bank address, etc. Further, page 12 of the paper book is a ledger account of sales promotion commission in the hands of the assessee, which clearly states foreign overseas commission to an extent of ₹.3,49,94,562/-. Page Nos. 13 & 14 clearly shows the debit note of bifurcating against the invoices of the assessee. It is also clearly mentioned that the said commission payment may be made to the beneficiary account, which clearly shows in page 14 of the paper book. Further at page 15 of the paper book, it is observed that the commission payment made is reflecting in ICES system, which is an exporter copy in the name of the assessee. Therefore, we find that the observation of the Assessing Officer is not correct in stating that no details were furnished during assessment proceedings. The ld. CIT(A) accepted the submissions of the assessee and found satisfied with every details furnished by the assessee in compliance to notice under section 142(1) of the Act in respect of sales promotion expenses of ₹.3,38,96,612/- and ₹.24,53,997/- towards foreign tracking and custom duty expenses. The ld. DR did not bring on record anything contrary to the finding of the ld. CIT(A). Thus, the reasons recorded by the ld. CIT(A) in para 6.6 to 6.15 of the impugned order is justified in deleting the additions made on account of sales promotion expenses and foreign tracking and custom duty expenses. Accordingly, the grounds raised by the Appellant-Revenue are dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 29th May, 2025 at Chennai.