Reimbursement of sales promotion expenses incurred by credit card to directors cannot be refused: ITAT
The Income Tax Appeal Tribunal (ITAT), Bombay Bank, while removing a disallowance, ruled that reimbursement of sales promotion expenses incurred by credit card to directors of the Company is allowable under the provisions of the Income Tax Act, 1961.
The assessee, M/s. Well Wisher Construction Pvt. Ltd challenged an appraiser’s order in which the officer dismissed the business promotion expenses claimed by the assessee, observing that the evidence is only hotel bills from VIVANTA Holiday Village in Goa and credit card payments made on behalf of both directors. The AO observed that the assessee did not provide any information regarding meetings, lectures, presentations, etc. that had taken place. As a result, he concluded that these were simply personal expenses debited from the profit and loss account of the company and rejected the total sum of Rs 2,42,514/- in the assessment.
On first appeal, the CIT(A) upheld the order. Before the Tribunal, the assessee argued that he is in the business of real estate development and that, in this regard, the administrators had to meet various people in various places to market the real estate project for the purpose of selling apartments. Therefore, the business link is proven beyond doubt.
Shri M.Balaganesh (accounting member) & Smt Kavitha Rajagopal (Judicial Member) observed that since the payments had been made on credit cards belonging to the directors, the assessed company had reimbursed the same to the directors.
“It is not of a personal nature. Further, payment to Ambey Valley City was made by check No. 003239 to the bank account of the company valued in the amount of Rs 1,55,411/-. The entire of the invoices issued by the various vendors was duly filed by the assessee before the ld.AO Without examining any of these invoices, the ld.AO, out of mere suspicion, conjecture and conjecture, treated the entire expenditure as being of a personal nature and was dismissed. We hold that the action of Ld. AO and Ld. CIT(A) is certainly unsustainable in the eyes of the law. The observations we have made above for ground 1 above above as well as the cited case law would also apply to this ground. Consequently, we order the ld.AO to remove the rejection made for trade promotion expenses in the amount of Rs 2,42,514/-”, said the ITA.