INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance of business promotion expenses - AO did not examine the details furnished by assessee -

Assessee was engaged in the business of selling health based wellness products through multi-level marketing. AO noticed that assessee had claimed business promotion expenses. Assessee explained that its business had started picking up and hence, in order to improve the business further, several incentive schemes were organized. AO observed that assessee had not furnished any documentary evidence except a chart giving the break-up details of business promotion expenses and certain comments. AO also observed that assessee failed to furnish copies of invoices or actual nature of expenses. Accordingly, disallowed the entire claim. Held: Business promotion expenses have been incurred for the purpose of improving sales of the assessee. Every businessman would be incurring advertisement and business promotion expenses in anticipation of higher sales in accordance with his sales promotion strategy. AO had not examined the details furnished by assessee. Accordingly, issue required fresh examination and matter was remanded back to AO for examining it afresh by duly considering the information and explanations furnished by the assessee.

Relied:Collector, Land Acquisition v. Katiji And Others (1987 AIR 1353) : 1987 TaxPub(DT) 1279 (SC) C. Ganesh Mallya v. ITO (ITA No.1009 of 2017 dated 8-4-2019) CIT v. Prakash B Nichani (ITA No.399/2009 dated 18-08-2015).

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2014-15

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