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2013 (3) TMI 653 - AT - Income TaxDisallowance of entertainment expenses - Held that - The expenses were incurred wholly and exclusively for the purpose of business - books of account have been audited - expenses were not in the nature of personal expenses - Decided in favor of assessee Disallowance of car maintenance expenses - Held that - The expenses debited was mainly reimbursement of expenses on conveyance incurred by the employees - car repair and petrol expenses of the cars of the company - incurred for the purpose of business - Decided in favor of assessee Disallowance of tour and traveling expenses - Held that - AO had not pointed out any specific defects on the vouchers and the disallowance was made on an adhoc basis - accounts were duly audited by the auditor under company s act - Moreover, merely because in the opinion of the AO, the expenses are excessive, it cannot be a ground for disallowance - Decided in favoe of assessee
Issues:
1. Disallowance of entertainment expenses 2. Disallowance of car maintenance expenses 3. Disallowance of tour and traveling expenses Analysis: Issue 1: Disallowance of Entertainment Expenses The Revenue challenged the deletion of &8377; 19,79,713 disallowed by the Assessing Officer on account of entertainment expenses. The ITAT upheld the CIT(A)'s decision based on a previous ruling in the assessee's case for AY 2005-06. The ITAT emphasized that expenses incurred by directors for business purposes should not be disallowed without proper justification. Since the facts were identical to the previous year, the ITAT upheld the CIT(A)'s decision, rejecting the Revenue's appeal on this ground. Issue 2: Disallowance of Car Maintenance Expenses The Revenue contested the deletion of &8377; 4,07,302 disallowed by the AO for car maintenance expenses. The ITAT noted a typographical error in the Revenue's ground and corrected the amount. Referring to a similar decision in AY 2005-06, where the disallowance was deleted by the CIT(A), the ITAT upheld the CIT(A)'s order. The ITAT found that most of the expenses were related to conveyance reimbursements for employees and were incurred for business purposes. Therefore, the ITAT rejected the Revenue's appeal on this issue. Issue 3: Disallowance of Tour and Traveling Expenses The Revenue challenged the deletion of &8377; 39,57,448 disallowed by the AO for tour and traveling expenses. The ITAT reviewed the AO's reasoning for disallowance and the CIT(A)'s decision to delete it. The ITAT agreed with the CIT(A) that the expenses were legitimate business expenditures and were supported by vouchers and details. The ITAT emphasized that mere suspicion of excessive expenses cannot warrant a blanket disallowance. As the expenses were found to be incurred for business purposes and adequately documented, the ITAT rejected the Revenue's appeal on this ground. In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds, emphasizing the necessity for expenses to be incurred for business purposes and adequately supported by evidence to avoid disallowance.
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