Advertisement expenses allowed as they were explained and for business purpose
Advertisement expenses allowed as they were explained and for business purpose
Gillette India Ltd claimed advertisement and sales promotion expenses of Rs. 63,98,61,831. Assessee was asked justify claim of expenses and that they were exclusively for business purpose. AO disallowed advertisement expenses of Rs. 50 lakhs. CIT(A) confirmed AO’s order. Allowing assessee’s appeal, ITAT held that these expenses were for penetration of the market and to increase the sale, and they were correctly documented and explained.-500093
1. The assessee claimed advertisement and sales promotion expenses of Rs. 63,98,61,831/-. During the course of assessment proceedings also, the assessee was asked justify the claim of expenses and to establish that the same were incurred wholly and exclusively for the purpose of business. The complete bills and vouchers to justify these expenses have not been provided. There is no justification for such increase in advertisement and sales promotion expenses. In the absence of complete bills and vouchers of these expenses, AO disallowed the expenses on account of Advertisement expenses of Rs. 50,00,00.
2. CIT(A), who had also confirmed the order of the Assessing Officer.
3. On appeal, ITAT held as under:
It is undisputed fact that percentage of expenses on advertisement and sales promotion with reference to sale of substantial increase compared to preceding year. In immediate preceding year, these expenses were at 10.96% on sale and in current year it increases at 14.11% on sale. The reply submitted by the assessee further shows that in A.Y. 2006-07 and this ratio has increased at 16.05% but no disallowance has been made by the Assessing Officer. Even the assessee's sale has gone down from Rs. 454 crores in preceding year i.e. 2005-06 to Rs. 412 crores in A.Y. 2006-07. Therefore, there is no correlation between the expenses incurred and sale increased or decreased. The assessee incurred these expenses for penetration of the market and to increase the sale with the help of experts in the line of marketing. It is not necessary that the expert opinion always worked in positive line. The assessee is a multinational company and their share holders are not directly involved in the ordinarily activity of the business of the company. The assessee has submitted all the details of advertisement and sales promotion expenses in CD form and in form of hard copy it was rendering into around 600 pages on for details. Each and every voucher has been maintained by the assessed as there is an audit has been made by the auditor and not qualifying comment had been made by him under this head. The ld Assessing Officer also even not made any addition in A.Y. 2006-07 under this head where the ratio of expenses increased up to 16.05%. In other year also i.e. A.Y. 2007-08 and 2009-10, the ld Assessing Officer has not disallowed any amount from this head on the ground that the assessee had not incurred these expenses wholly and exclusively for the business purposes. The assessee's submission has not controverted by him, therefore, we allow the assessee's appeal on this ground.
4. In the result, the assessee's appeal is allowed.
Case Reference- BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM ITA No. 221/JP/2014 Assessment Year : 2005-06 M/s Gillette India Limited, Vs. Assistant Commissioner of 65-A, Industrial Area, Bhiwadi Income Tax,
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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