DCIT, CIR-25, KOLKATA, KOLKATA vs. SMT. JHUMA DUTTA, KOLKATA

The grievances raised by the revenue are as follows:-

The facts of the case which can be stated quite shortly are as follows: The assessee does business in trading of poultry feed, through her proprietary concern, M/s. J S Enterprise. During the assessment proceedings, the AO noted that the assessee had claimed business promotion expenditure to the tune of Rs. 56,42,059/- in the profit and loss account. The details of these business promotion expenditure are given at page-2 of the assessment order. During the assessment proceedings, the assessee was asked to submit the evidences in support of the claim of business promotion expenses. In response, the assessee submitted an explanatory statement and a copy of ledger account, stating about the nature of expenditure against each debit entry. The assessee furnished the explanation stating that she had purchased some items for making free gifts to some clients and some officials of client concerns for business promotion programme, and achievement of turnover criteria. The expenses were also incurred for arranging lunch party for clients and officers. However, the assessing officer rejected the claim of the assessee and noted that the assessee could not file sufficient evidence in support of business promotion expenses, therefore, he disallowed the business promotion expenses to the tune of Rs. 56,42, 059/- and added the same to the total income of assessee.

Aggrieved by the stand so taken by the AO, the assessee carried the matter in appeal before the ld. CIT(A), who partly allowed the appeal of the assessee. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us.

The ld. DR for the revenue submitted before us that there is no evidence that these gifts purchased by the assessee, were distributed among the recipients as incentives. The gift items were purchased by the assessee for her personal use, and therefore, the ld. CIT-(A) has wrongly concluded that these expenses were allowable as business expenses. The gift expenditure incurred by the assessee do not relate to business activity of the assessee and these expenses were not for the purpose of business.

On the other hand, the ld. Counsel for the assessee has defended the order passed by the ld. CIT(A). The Counsel submitted that various gift items distributed by the assessee were related to business activity to achieve the turnover and to expand business promotion. These sales promotion expenses are not only to achieve business turnover in the assessment year under consideration, but in subsequent assessment years also i.e by these sales promotion expenses the assessee would get advantage in subsequent assessment years also. The ld. Counsel also submitted that assessee was claiming these expenses in previous years and these expenses were allowed in previous years by the department.

We have given a careful consideration to the rival submissions and perused the material available on record. We note that expenditure on these promotional incentives were incurred by assessee to increase the sales and to achieve the targeted turnover. The amount of expenditure incurred by the assessee by way of these promotional incentives are very much close with the target to achieve turnover. We note that the assessee has been claiming these expenses in the past and it has been allowed by the Assessing Officer in the past. The assessing officer has not disputed this trading practice. For example in financial year 2009-10 and 2010-11, the assessee had incurred business promotional expenses and the same were allowed by the assessing officer. It is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular's view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Assessing Officer on the basis of change in facts. For that we rely on the order of the Hon’ble Supreme Court in RadhasoamiSatsang vs. CIT 193 ITR 321 (SC), wherein it was held as follows:

We note that the assessee has been able to produce bills related to the expenses and the circular issued to customers linking sales to incentives. The ld. AO has failed to bring any cogent evidence on record to prove that the gifts given by the assessee, for the purpose of business, are not genuine. We note that assessee has furnished following chart of business promotion expenses for two years before and two years after, which is given below for ready reference:

In the result, the appeal of Revenue is dismissed.