The Kolkata Bench of Income Tax Appellate Tribunal(ITAT)allowed the deduction of Rs. 4,81,477 as sales promotion expenses under section 37(1) of Income Tax Act,1961 after the assessee provided additional evidence, including a balance sheet and acquisition agreement, supporting the claim that the expenses were legitimate business expenditures. YG Capital Ltd.,appellant-assessee,filed an appeal that was delayed by 860 days. The appeal was first filed on time with the Pune ITAT, but was dismissed due to jurisdiction issues, as it should have been filed with the Kolkata ITAT. The order was received on 03-05-2024, and the appeal was filed online on 09-05-2024.

The assessee requested the delay be excused, and the  tribunal agreed, admitting the appeal for further review. Become a PF & ESIC expert with our comprehensive course – Enroll Now The assessee challenged the disallowance of Rs. 86,224 under section 14A. The assessee counsel argued that the CIT(A) erred in confirming the disallowance, as the AO applied Rule 8D and no suo motu disallowance was made. The revenue counsel did not press the grounds, and both were dismissed. The assessee raised the ground regarding the disallowance of Rs. 4,81,477 as sales promotion expenses. The CIT(A) upheld the AO’s disallowance, stating the appellant failed to provide supporting bills or prove the expenses were for business purposes. Despite claiming the expenses were for a meeting after acquiring a manufacturing unit, the appellant did not provide sufficient evidence.

The ground was dismissed by CIT(A). Become a PF & ESIC expert with our comprehensive course – Enroll Now The two member bench comprising Sonjoy Sarma(Judicial Member) and Rakesh Mishra(Accountant Member) observed that the assessee had not initially provided sufficient details or supporting evidence regarding the newly acquired unit. However, the assessee counsel later presented a balance sheet as of 31.03.2010, showing additions to plant and machinery, furniture, and fixtures, and explained that the assessee had acquired a new unit in Aurangabad and began manufacturing paper cores and fibres. The tribunal was provided with an agreement dated 14.08.2009, detailing the acquisition of the business, including assets and liabilities for Rs. 1,43,62,000/-. Given the new information, the bench concluded that the expenses of Rs. 4,81,477/- related to sales promotion  were legitimate business expenses and allowed the deduction under section 37(1) of the Act. In short the appeal filed by the assessee was partly allowed. To Read the full text of the Order CLICK HERE