Tribunal allows appeal on recalled matter & disallowance of payment to Related Parties

The appeal was allowed by the Tribunal on the issues of recalled matter due to ex-parte disposal and disallowance of payment to Related Parties u/s. 40(A)(2)(b). The Tribunal found in favor of the assessee, noting consistency in arrangements, acceptance of similar claims in previous assessments, and both parties being in the highest tax bracket. Consequently, the additions were deleted. Additionally, the disallowance of Gift Article Expenses was overturned based on supporting documentary evidence, leading to the allowance of this ground of appeal. The order was pronounced on 10th May 2021.

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Issues:
1. Recalled matter due to ex-parte disposal
2. Disallowance of payment to Related Parties u/s. 40(A)(2)(b)
3. Disallowance of Gift Article Expenses

Issue 1: Recalled matter due to ex-parte disposal
The matter was recalled as the appeal was earlier disposed-off ex-parte, but later recalled for fresh hearing. The appeal pertains to Assessment Year 2014-15, where the assessee was aggrieved by two additions confirmed by the Ld. CIT(A). The assessee is a subsidiary company of M/s. Ventura Securities Limited, engaged in commodities broking generated through sub-brokers and references.

Issue 2: Disallowance of payment to Related Parties u/s. 40(A)(2)(b)
The disallowance of payment made to Related Parties u/s. 40(A)(2)(b) was challenged. The assessee reimbursed a specific amount to M/s. Ventura Securities Ltd. for sales leads, but failed to provide details of customers generated from these leads. The disallowed amount was contested based on the argument that the payment was towards marketing and advertising expenses shared with the related party. The Tribunal found the arrangement consistent since AY 2011-12, accepted similar claims in previous assessments, and noted both parties were in the highest tax bracket. Consequently, the addition was deleted.

Issue 3: Disallowance of Gift Article Expenses
The disallowance of Gift Article Expenses was also contested. The assessee purchased gold coins for distribution to sub-brokers as incentives for generating business. Despite providing supporting invoices and details of recipients, the deduction was disallowed on the presumption of not being incurred for business purposes. The Tribunal found the claim supported by documentary evidence and deemed the disallowance unsustainable, leading to the allowance of this ground of appeal.

In conclusion, the appeal was allowed based on the Tribunal's findings on both issues, with the order pronounced on 10th May 2021.

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