1981 (2) TMI 107 - AT - Income Tax

ITAT allows appeal, deletes Rs. 4,000 disallowance for advertisement expenses

The ITAT Bombay-C allowed the assessee's appeal, deleting the disallowance of Rs. 4,000 advertisement expenses as they were deemed incidental to the ... Business expenditure - advertisement expenses - presentation articles as promotional expenditure - incidental to business - allowability of promotional giftsAdvertisement expenses - presentation articles as promotional expenditure - incidental to business - burden of proof on assessee - The disallowance of advertisement expenses of Rs. 4,000 was deleted and the expenses were held allowable as business expenditure. - HELD THAT: - The Tribunal examined whether items characterised as cost of presentation articles and a portion of souvenir advertisement expenses, which led to a disallowance of Rs. 4,000, were properly excluded from business expenditure. The assessee, a partnership firm dealing in cloth with substantial turnover and declared gross profit accepted by the ITO, explained that the presentation articles were customarily given to customers or prospective customers at the start of the year and were thus incidental to the business. Although the CIT(A) recorded that no vouchers were produced to show the business purpose, the assessee contended vouchers had been furnished to the ITO and were available. Weighing the nature and volume of the expenses relative to total turnover and the commercial purpose of promoting business, the Tribunal found the expenses were incidental to and incurred for the purpose of the assessee's business and therefore deductible. On this basis the disallowance was deleted.Disallowance of Rs. 4,000 deleted; the advertisement and presentation-article expenses held allowable as incidental to business.Final Conclusion: Appeal allowed; the disallowance of advertisement expenses was deleted and the expenses treated as allowable business expenditure for asst. yr. 1977-78. The appeal was filed by the assessee against the CIT(A) order disallowing Rs. 4,000 of advertisement expenses. The ITAT Bombay-C held that the expenses were incidental to the business and allowed the appeal, deleting the disallowance.