M/S. SHREE BAHUBALI STOCK BROKING LTD., (FORMERLY KNOWN AS SHREE BAHUBALI INTERNATIONAL LIMITED),KOLKATA vs. ITO, WARD - 5(1), KOLKATA

The grounds of appeal raised by the assessee are as follows:

Brief facts qua the issue are that during the scrutiny proceedings, A.O noticed from the Profit and Loss a/c that assessee has debited an amount of Rs.89,17,970/- on account of sales promotion expenses. The assessee incurred expenses of Rs. 24,15,400/- for a dinner arrangement in Taj Bengal, a five star hotel also which included in the total amount of Rs.89,17,970/-. At the time of scrutiny proceeding the A/R of the assessee stated that dinner party was thrown for sub brokers and the clients of the assessee. However, A.O noticed that no such dinner party for 850 persons was thrown in the previous year 2011-12 though the volume of business as well profit were substantially higher in the last F. Y. 2011-12. The A.O also noticed that these sales promotion expenses for F.Y 2012-13 has been shown by the assessee more than double the previous year. Therefore, A.O held that the payment for dinner party for Rs.24,15,400/- is nothing but a personal expenditure, hence A.O made addition of Rs.24,15,400/-.

Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the Assessing Officer.

We have heard the rival submissions and persued the materials available on record. Ld. DR for the Revenue reiterated the stand taken by Assessing Officer, whereas ld. Counsel for the assessee relied on the submissions made before the ld. CIT(A). We note that the AO has made the entire disallowance of sales promotion expenses paid to Taj Bengal for booking for dinner party for sub- brokers, business associates and clients organized by the assessee. The AO should have considered the nature of the business of the assessee and the direct relationship of the parties. The assessee has incurred these expenses to maintain business relationship. The Board Resolution passed by the company clearly shows about incurring these expenses. The letter issued by the company to the 3 M/s Shree Bahubali Stock Broking Ltd. hotel and accepted by the Manager of the Hotel also mentioned the business relation of the dinner. It is purely a business transaction necessary for the carrying on of the business. We note that A.O has framed assessment u/s 143(3) and books of accounts were not rejected. The assessee incurred these expenses for business purposes. The Assessing Officer has not doubted the genuineness of these expenses. Therefore, considering the factual position narrated above, we delete the addition of Rs.24,15,400/-.

In the result, the appeal of the assessee is allowed.