TaxTMI 
TaxTMI 
2004 (5) TMI 278
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....the expenditure on the presentation/gift articles such as leather bags, sweets, clothes, silver articles, etc., given to the executives of the customers with a view to keep good business relation are subject to disallowance under r. 6B(1) of the IT Rules. 1.2 The learned CIT(A) failed to appreciate that the presentation/gift articles presented by the appellant did not bear the brand name of the company, nor these were meant for advertisements of the product of the company, but these were for keeping good business relations with the business connections and thus, were for the business promotion and hence, the restrictions laid down in r. 6B(1)(a) are not applicable for such presentation articles. 1.3 The learned CIT(A) ought to have de....
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....ava, the learned Departmental Representative relied on the order of the AO and of the CIT(A). He contended that the order of the CIT(A) needed to be upheld. 6. We have considered the rival submissions and have perused the orders of the authorities below. While making the disallowance, the AO noted in para 13 of his order as under: "The assessee has incurred expenditure of Rs. 11,503 on gifts, etc. where the value of each of the gifted items is more than 50 rupees. The assessee claimed that these gifts are not in the nature of advertisement but are to have human and smooth relations. As the assessee has not established direct nexus between the expenditure and the assessee's business, I disallow Rs. 11,503 under this head." 7. The ob....
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....discharging the rule, the Court observed as under: "This question pertains to the asst. yr. 1979-80. For that year, the AO disallowed, in the course of the assessment, a sum of Rs. 10,905 by applying the provisions of r. 6B of the IT Rules. This expenditure was in respect of articles of presentation or gift incurred by the assessee. The Tribunal has held that these presentation articles did not bear either the name of the company nor its logo and could not be considered as meant for advertisement and, hence, r. 6B would not be attracted. In view of these findings of fact which are arrived at by the Tribunal, if we examine the r. 6B, it becomes clear that r. 6B deals with expenditure on advertisement. Rule 6B(1) provides that the allowanc....
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.... which did not have the logo of the company and therefore, were not in the nature of advertisement. In para 7 of its order dt. 6th April, 1989, it was held by the Tribunal that such expenses were allowable under s. 37(1) if the following conditions were satisfied: (i) the genuineness of the purchase of the articles is proved; (ii) it is customary practice in the commercial trade to give such items by way of gifts to customers and suppliers in order to maintain relations; (iii) the expenditure is reasonable vis-a-vis the volume of the business. 12. In the present case, the claim of the assessee was for an expenditure of only Rs. 11,503 and therefore, considering the facts and circumstances of this case and respectfully following ....