Sponsorship fees for Lifetime Achievement Awards not treated as Business Expenditure

Sponsorship fees for Lifetime Achievement Awards not treated as Business Expenditure

CA Bimal Jain | Oct 5, 2021 |

Sponsorship fees for Lifetime Achievement Awards not treated as Business Expenditure

Sponsorship fees for Lifetime Achievement Awards not treated as Business Expenditure

In NCC Limited, Hyderabad v. Asst. Commissioner of Income Tax, Circle-16(1), Hyderabad [ITA No. 595/Hyd/2020 and ITA No. 596/Hyd/2020 dated September 27, 2021], the current appeal has been filed against Orders dated September 21, 2020 and September 04, 2020 in Appeal No. Nos.10823 & 10710 /19-20 / DCIT,Cir-16(1) / CIT(A)-4 / Hyd / 20-21 passed by Commissioner of Income Tax (Appeals) (“CIT(A)”) wherein CIT(A) upheld the disallowance of sponsorship fees as business expenditure under Section 37 of the Income Tax Act, 1961 (“the IT Act”) by the Assessing Officer (“AO”).

NCC Limited (“the Appellant”) had made an entry under “Sponsorship Fees” the details of which were called for. The Appellant submitted that they had partnered with M/s The New Indian Express Group for promotion of “Devi Uttar Pradesh Awards” which were conferred upon 10 women displaying innovation and dynamism in their line of work as part of their business development.

The Appellant contended that such contribution is made for empowerment of women however, the CIT(A) in its order observed that although the expenditure was for a noble cause, it has no nexus contribution made and the income generated for the business of the Appellant company under Section 37 of the IT Act which provides for expenditure under the head “’Profits and gains of business and profession”.

The Hon’ble Income Tax Appellate Tribunal, Hyderabad (ITAT) relied on the case M/s. Hyundai Motors India Ltd. Vs. DCIT [ITA No.2157/MAS/2011] after considering the case of Sassoon J. David & Co. (P) Ltd., Bombay vs C.I.T., Bombay [1979 AIR 1441, 1979 SCR (3) 878] passed by the Hon’ble Supreme Court wherein it was noted that any expenditure claim raised under Section 37 of the IT Act ought to be wholly and exclusively incurred for the purpose of the concerned business only.

Further, noted that there lies no merit in the grievance of the Appellant on the current issue because the Appellant has failed to pin point a distinct direct nexus between its day to day business activity relating to the impugned alleged sponsorship fee paid to the eligible women for their life time achievements.

(Author can be reached at [email protected])

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

StudyCafe Membership

Join StudyCafe Membership. For More details about Membership Click Join Membership Button
Join Membership

In case of any Doubt regarding Membership you can mail us at [email protected]

Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"




Author Bio
My Recent Articles
Actions taken by the department during enquiry need not necessarily be termed as harassment Who are liable to generate e-invoice w.e.f October 1, 2022 Personal penalty cannot be imposed on the Chairman of the Company for failure in ensuring proper accounting of the goods Stayed the order of cancellation of GST Registration of the assessee for continuing the trading activities Can CA be arrested- Section 69 vs Section 132 of the CGST ActView All Posts