2006 (6) TMI 267 - AT - Income Tax

Issues Involved:

1. Deletion of addition on account of car running expenses.
2. Deletion of addition on account of telephone expenses.
3. Deletion of addition on account of Diwali expenses.
4. Deletion of addition on account of travelling expenses.
5. Deletion of addition on account of sales promotion and advertisement expenses.
6. Deletion of addition on account of subscription expenses.

Detailed Analysis:

1. Deletion of Addition on Account of Car Running Expenses:

The Assessing Officer disallowed Rs. 1,24,045 as car running expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, noting that similar disallowances had been consistently deleted in the assessee's previous assessment years (1998-99, 1997-98, 1995-96, and 1992-93). The Tribunal found no evidence that the company's car was used for non-business purposes.

2. Deletion of Addition on Account of Telephone Expenses:

The Assessing Officer disallowed Rs. 1,62,685 as telephone expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, referencing prior Tribunal decisions where similar disallowances were deleted. The Tribunal noted that the CIT(A)'s decision was consistent with the Tribunal's earlier rulings and supported by the decision in 76 ITD 32.

3. Deletion of Addition on Account of Diwali Expenses:

The Assessing Officer disallowed Rs. 1,00,000 as Diwali expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, referencing prior Tribunal decisions where similar disallowances were deleted. The Tribunal noted that the Department did not prove the expenditure to be bogus or show that it was incurred on Diwali gifts.

4. Deletion of Addition on Account of Travelling Expenses:

The Assessing Officer disallowed Rs. 6,97,268 as travelling expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, noting that the assessee provided detailed claims showing that the travels were for business purposes. The Tribunal distinguished the case from the Bhor Industries (P) Ltd. decision, where the foreign tour was not for business purposes.

5. Deletion of Addition on Account of Sales Promotion and Advertisement Expenses:

The Assessing Officer disallowed Rs. 4,00,000 as sales promotion and advertisement expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, referencing prior Tribunal decisions where similar disallowances were deleted. The Tribunal noted that the expenses were incurred for business purposes and were consistent with previous rulings.

6. Deletion of Addition on Account of Subscription Expenses:

The Assessing Officer disallowed Rs. 40,000 as subscription expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, noting that subscription expenses cannot have personal use in the hands of the company. The Tribunal found that the expenses were incurred for business purposes and justified the deletion of the addition.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of all disallowances made by the Assessing Officer. The Tribunal consistently found that the expenses were incurred for business purposes and referenced prior decisions in the assessee's favor. The decision was pronounced in open court on 2-6-2006.

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