M/S. PRAKASH CHAND JAIN & SONS (HUF),KOLKATA vs. ITO, WARD - 44(2), KOLKATA, KOLKATA

The assessee is a HUF and has a proprietary business in the name and style of Prakash Chand Jain & Sons. It is in the business of trading in ferro alloys, minerals and chemicals etc. The issue before him is the disallowance made on account of the business promotion expenses of Rs.3,04,000/-, Dipawali expenses of Rs.4,25,515/-, vehicle running and maintaining expenditure of Rs.1,58,978. The other disallowance being loss on trading of real estate property and of donation given for social welfare activity, though raised as Ground No. 3 & 5 in the appeal, are not pressed by the assessee. Ground No. 6 is general in nature.

On the issue of disallowance of business promotion expenses, I find that the total claim is Rs.6,05,491/-. Out of this amount a claim of Rs.3,04,000/- was Assessment Year: 2012-13 M/s. Prakash Chand Jain & Sons (HUF) disallowed by the Assessing Officer, as this pertained to distribution of gold coins on the ground that it does not relate to business. The assessee produced copies of the bills of purchase. The ld. Counsel for the assessee, Mr. Siddhartha Agarwal, pointed out that for the earlier Assessment Year the turnover of the assessee was above Rs.7 Crores /- and the business promotion expenses was around Rs.5.89 Lakhs and that this expenditure was allowed in that year and that the turnover in this year was Rs.9 Crores/- and the assessee has incurred the expenditure of Rs. 6 Lakhs/- for its business promotion and to hold that this expenditure is not for business purpose, is against the facts of the case. The ld. D/R submits that the assessee has not furnished any evidence to the receipients of the gold coins whom it claims to be its clients. He also submitted that the assessee did not furnish at least the list as to whom the gold coins were distributed and what was the business relation. 3.1. I agree with these findings of the ld. CIT(A). The burden is on the assessee to furnish the minimum details of the person to whom these gold coins were given and the nature of the relationship with the business of the assessee. Mere purchase of gold coins does not prove that the expenditure was incurred was for the purpose of business. Each gold coin cost around Rs.12,183/-. At least a list of persons to whom they were given should have been produced. Hence this disallowance is upheld and Ground No. 1 of the assessee is dismissed.

Ground No. 2 is on the issue of Dipawali expenses. 4.1. Dipawali expenses are being incurred by the assessee year after year and the assessee explained that it is customary for it to incur the expenditure as can be seen from the accounts of the earlier Assessment Years. Reliance is also placed on the decision of the ITAT Ahmedamad Bench in the case of ITO vs. SLM Maneklal Industries Ltd. (1986) 17 ITD 515 (Ahd). On going through the facts of this case and considering that similar expenditure has been incurred and allowed during the previous year and keeping in view the customs and traditions, I am of the considered opinion that this claim of expenditure should be allowed. Accordingly Ground No. 2 of the assessee is allowed.

Ground No. 3 is dismissed as not pressed.

Ground No. 5 is dismissed as not pressed.

Ground No. 6 is general in nature.

In the result, appeal of the assessee is allowed in part. Kolkata, the 25th day of May, 2018. Sd/- [J. Sudhakar Reddy] Accountant Member Dated: 25.05.2018 {SC SPS} Copy of the order forwarded to: 1. M/s. Prakash Chand Jain & Sons (HUF) 6/A, Iron Side Road Block-B Kolkata – 700 019 2. Income Tax Officer Ward-44(2), Kolkata 3, Government Place Kolkata – 700 001 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.