INTERPOLE TECHNOLOGIES PVT LTD.,MUMBAI vs. ITO 14 (2)(1), MUMBAI

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ITA 7514/MUM/2019Status: DisposedITAT Mumbai04 October 2021AY 2013-144 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed the appeal regarding Card Renewal Fee due to lack of documentary evidence and the inapplicability of the consistency rule. However, it allowed the Business Promotion Expenses, noting that the authorities below failed to examine the credit card statements furnished by the assessee.

What were the facts?

The assessee, an IT company, claimed Card Renewal Fee and Business Promotion Expenses. The Assessing Officer disallowed both, but the CIT(A) allowed Club Membership Fee and disallowed Card Renewal Fee. The assessee appealed against the disallowance of Card Renewal Fee and Business Promotion Expenses.

What were the issues?

Whether Card Renewal Fee is an allowable business expenditure without documentary evidence, and whether Business Promotion Expenses were wrongly disallowed without examining supporting credit card statements.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Hearing: 22/07/2021Pronounced: 04/10/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-22, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 21/08/2019 for the assessment year 2013-14.

1.

आअसं. 7514/मुं/2019 (िन.व.2013-14) (A.Y.2013-14) 2. Ms. Neelam Jadhav appearing on behalf of the assessee submitted that the assessee in appeal has assailed: 1. Disallowance of Card Renewal Fee Rs. 56,180/- 2. Disallowance of Business Promotion Expenses Rs. 2,25,102/- The ld. Authorized Representative (AR) of the assessee submitted that the assessee is engaged in Information Technology business. In the books, the assessee interalia claimed Club Membership Fee and Card Renewal Fee. In assessment proceedings, the Assessing Officer (AO) disallowed both the aforesaid expenditure holding it to be unrelated to the business. The assessee carried the issue in appeal before the CIT(A). The CIT(A) allowed Club Membership Fee as Business Expenditure and disallowed Card Renewal Fee. The ld. AR submitted that the Card was exclusively used for business purposes. In the preceding AYs and succeeding AYs, the Card Renewal fee was allowed as business expenditure in assessments completed under section 143(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. 2.1 With regard to business promotion expenses, the ld. AR submitted that the details of expenditure incurred were submitted during assessment proceedings. Substantial payments on this account were made through Credit Card. The Credit Card statement was furnished to substantiate that payments were made for business purpose. The expenditure has been disallowed merely for the reason that the names of the clients and the place of meeting were not furnished. The assessee has been claiming business promotion expenses of similar nature in the past. In AY 2007-08, the expenditure was allowed in assessment completed under section 143(3) of the Act.

आअसं. 7514/मुं/2019 (िन.व.2013-14) (A.Y.2013-14) 3. Per contra, Sh. Sanjay J. Sethi representing the Department vehemently supported the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submitted that the assessee has failed to establish nexus between renewal of Card Membership and the business activities. With regard to disallowance of Business Promotion Expenditure, the ld. AR submitted that in absence of corroborative evidence, the AO and the CIT(A) disallowed assessee’s claim.

4.

Both sides heard, orders of the authorities below examined. The assessee is in appeal against disallowance of card renewal fee. A perusal of the impugned order shows that the assessee has paid annual card fee of Rs. 56,180/-. The assessee purportedly upgraded the card which provides higher reward points and better foreign exchange rate. The sole contention of the assessee is that in the preceeding and succeeding AYs, similar expenditure has been allowed. However, no documentary evidence whatsoever was furnished by the assessee to show that the card is being used for business purpose. The ld. AR of the assessee has admitted that in preceding AY and succeeding AYs similar expenditure has been allowed in assessments completed under section 143(1) of the Act. Thus, there was no occasion for the AO to examine the nature of expenditure and its allowability. Therefore, the rule of consistency will not apply. Hence, the ground no.1 raised in appeal is dismissed.

5.

In ground No.2 of appeal, the assessee has assailed disallowance of business promotion expenditure. The contention raised by ld. AR is that the payment for expenditure was made through Credit Card. The statements of the Credit Card were furnished to substantiate nature and expenditure, however, the authorities below failed to examine the same. Once, the assessee has

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