9911796707
|
Home
Issues Involved:
1. Disallowance of traveling expenses. 2. Disallowance of PF and ESIC under section 43B read with section 36(1)(va). 3. Addition on account of MODVAT credit. Issue-wise Detailed Analysis: 1. Disallowance of Traveling Expenses: The assessee claimed Rs. 80,405 as traveling expenses for the chairman's wife and children, asserting it was due to the chairman's ill health and based on a doctor's advice. The Assessing Officer (AO) disallowed the claim due to lack of evidence, referencing a decision by the Hon'ble Madras High Court. The CIT(A) upheld this disallowance, noting no new evidence was provided during the appellate proceedings. The Tribunal emphasized that under section 37(1) of the Income-tax Act, the expenditure must be wholly and exclusively for business purposes. The onus is on the assessee to prove the business necessity of the expenditure. The Tribunal found that the assessee did not follow the required procedures for authorizing such expenses, such as board meeting resolutions and detailed reports on the business purpose of the trip. Consequently, the disallowance by the CIT(A) was confirmed. 2. Disallowance of PF and ESIC under section 43B read with section 36(1)(va): The revenue authorities disallowed Rs. 14,68,664 under section 43B read with section 36(1)(va) due to late payment of PF and ESIC. The Tribunal noted that the law is settled on this issue, referencing the decision of the Hon'ble Jurisdictional High Court in CIT v. Pamwi Tissues Ltd., which held that for assessment years prior to 2004-05, contributions not paid within the due date are disallowable. Given that the assessment year in question was 1999-2000, the Tribunal upheld the CIT(A)'s order confirming the disallowance. 3. Addition on account of MODVAT Credit: The assessee contested the addition of Rs. 12,28,727 related to MODVAT credit on closing stock, arguing it followed a consistent method of accounting. The Tribunal acknowledged the complexity of section 145A, which mandates adjustments for taxes and duties in the valuation of inventory. The Tribunal referred to the Institute of Chartered Accountants of India's guidelines and previous ITAT decisions, noting that adjustments under section 145A should reflect both in opening and closing stock to avoid double counting. The Tribunal also referenced the Delhi High Court's decision in CIT v. Mahavir Aluminium Ltd., which supports corresponding adjustments in opening stock. The Tribunal concluded that the matter required verification to ensure the assessee had appropriately adjusted both opening and closing stock and claimed deductions under section 43B correctly. The case was remanded to the AO for verification. Conclusion: The appeal was partly allowed. The disallowance of traveling expenses and PF/ESIC contributions was upheld, while the issue of MODVAT credit was remanded for further verification by the AO.
|
