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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The Assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-8, Chennai in 16 dated 03.02.2017 for the assessment year (AY) 2012-13.
M/s. Leo Prime Comp (Private) Ltd., the assessee, is engaged in the business of manufacturing of auto components required for various industries. While making the assessment for AY 2012-13, the Assessing Officer (AO), inter alia, disallowed Rs. 1,37,61,000/- claimed to have been incurred for business promotion expenses. Aggrieved against that order, the assessee filed an appeal before CIT(A). The ld. CIT(A) dismissed this issue. Aggrieved against that order of the ld. CIT(A), the assessee filed this appeal.
The ld. Authorized Representative submitted that the ld. CIT(A) erred in sustaining the business of promotion expenses without appreciating that the various expenses were incurred wholly and exclusively for the purpose of business and without considering the submission made by the assessee before the AO as well as the ld. CIT(A). Per contra, the ld. Departmental Representative (DR) submitted that the assessee has filed various data, gross value of business promotion expenditure etc. for the last three years etc. however, it did not explain the nature of the expenditure and how it is relevant to the business activity etc. Therefore, the AO disallowed the above sum, which has been rightly dismissed by the ld. CIT(A). The ld. AR rebutted stating that the assessee’s company is primarily in customer and product specific market, manufacturing customized products as the requirements of the customer, it was having six manufacturing plants at various locations of Tamil Nadu and Pondicherry. Considering the size of the company and the industry in which it operates, the scale of business etc. it is necessary for the company to incur business promotion expenses.
The assessee has incurred business promotion to the extent of 1.61% of the turnover, which is reasonable and acceptable and hence, pleaded to allow the appeal.
We heard the rival submissions and gone through the relevant material on record. Though the assessee has provided statistical data etc, it is seen that it has not furnished the basic requirements like the nature of the expenditure, the relevancy of business expenditure etc. In the facts and circumstances of the case, we deem it fit to remit this issue back to the file of AO for a fresh examination. Since, the assessee is claiming the expenditure, the onus is on the assessee to lay all material in support of its contention and explain the nature of expenditure and the business expediency etc. before the authorities concerned. Therefore, the assessee shall lay all material in support of its contention before the AO and comply with the requirements of the AO in accordance with law.
The AO is at liberty to conduct appropriate enquiry as deemed fit, however, he shall afford adequate opportunity to the assessee on the material etc. to be used against it and after considering the assessee’s reply etc. shall pass an order in accordance with law.
In the result, the appeal filed by the assessee is treated as allowed 5. for statistical purposes.
Order pronounced in the open Court on 16th October, 2019 in Chennai.