ITAT : Disallows Law-firm’s sponsorships towards media event ; No ‘triumph’ for celebrating Achievements

Delhi ITAT upholds CIT(A)’s order disallowing a portion of the conference expenses relating to amount spent on party and dinner, media event, purchase of expensive watches, jackets, T-shirts, etc. by assessee (a Law firm) during AY 2010-11; Regarding expenses on distribution of T-shirts, caps and jackets having assessee firm’s logo on annual day celebration, ITAT remarks that“nothing is brought on record as how the distribution of the merchandise among the counsels has served the business purpose of the assessee firm, which is firm of the Advocates.”, further notes no evidence of distribution was submitted; Likewise, for dinner / video coverage expenses in relation to a party hosted to celebrate assessee-firm’s achievements in which all clients and counsels of the firm along with various dignitaries were invited, ITAT states that, “The assessee has not brought on record anything to support that the dinner hosted was for furtherance of the business interest.”; Also, ITAT disallows sponsorship fee paid by assessee for the event “PEI India Forum” for enhancing its visibility and recognition, holds the same was in violation of the Bar Council rules [whereby Indian Law firms are not allowed to advertise their practice in the market] , thereby triggering Explanation 1 to Sec. 37; With respect to the expensive watches distributed as rewards to two employees for their exceptional work, ITAT observes that assessee did not provide any rationale of watches distribution to only two such employees:ITAT