2011 (11) TMI 735 - AT - Income Tax

2016 (7) TMI 1009 - AT

Issues Involved:
1. Disallowance of business promotion expenses.
2. Disallowance of function expenses.
3. Disallowance of training expenses.
4. Disallowance of bus-pass/commission/discount expenses.
5. Disallowance of conveyance and mobile allowance expenses.
6. Disallowance of license fee expenses.
7. Addition under Section 68 for cash credits in partners' capital accounts.
8. Disallowance under Section 40(a)(ia) for advertisement expenses.
9. Disallowance of donation expenses.
10. Disallowance of car and telephone expenses for personal use.
11. Interest charged under Sections 234B, 234C, and 234D.

Detailed Analysis:

1. Disallowance of Business Promotion Expenses:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 1,22,320/- due to non-production of vouchers. The Tribunal upheld the CIT(A)'s decision, noting that the assessee paid fringe benefit tax on the entire amount, treating it as business expenditure. Therefore, no disallowance was warranted.

2. Disallowance of Function Expenses:
The Revenue challenged the deletion of Rs. 50,000/- out of Rs. 1,00,000/- disallowed by the AO. The CIT(A) restricted the disallowance to Rs. 50,000/- due to non-production of vouchers but accepted the expenditure as business-related. The Tribunal upheld this decision, agreeing with the CIT(A)'s detailed findings.

3. Disallowance of Training Expenses:
The CIT(A) reduced the disallowance from 50% to 20% of the training expenses, considering the payments to technically qualified partners as reasonable. The Tribunal upheld this decision, finding no infirmity in the CIT(A)'s well-reasoned order.

4. Disallowance of Bus-Pass/Commission/Discount Expenses:
The CIT(A) deleted most of the disallowance, retaining only Rs. 10,000/-, as over 99% of the expenses were proven to be business-related. The Tribunal upheld this decision, agreeing with the CIT(A)'s detailed and reasonable findings.

5. Disallowance of Conveyance and Mobile Allowance Expenses:
The CIT(A) deleted the Rs. 2,00,000/- disallowance, noting that such expenses are legitimate business expenditures. The Tribunal upheld this decision, finding no valid ground to interfere with the CIT(A)'s findings.

6. Disallowance of License Fee Expenses:
The CIT(A) deleted the Rs. 2,50,000/- disallowance, treating the license fee as revenue expenditure for the annual renewal of licenses. The Tribunal upheld this decision, agreeing with the CIT(A)'s detailed and well-reasoned findings.

7. Addition under Section 68 for Cash Credits:
The CIT(A) deleted the Rs. 5,75,000/- addition, noting that the partners had confirmed their contributions, and the firm had no obligation to prove the source of the source. The Tribunal upheld this decision, agreeing with the CIT(A)'s detailed and well-reasoned findings.

8. Disallowance under Section 40(a)(ia) for Advertisement Expenses:
The Tribunal restored this issue to the CIT(A) for fresh adjudication, noting the lack of documentary evidence indicating the basis of quantification and reimbursement of advertisement expenses. The CIT(A) must provide a proper and reasonable opportunity to the assessee before adjudicating the issue afresh.

9. Disallowance of Donation Expenses:
The CIT(A) reduced the disallowance to Rs. 26,000/-, accepting the eligibility for deduction under Section 80G. The Tribunal directed the AO to delete the entire Rs. 52,000/- disallowance, agreeing with the CIT(A)'s findings.

10. Disallowance of Car and Telephone Expenses for Personal Use:
The CIT(A) allowed a partial relief of Rs. 15,090/- but sustained Rs. 1,24,480/-. The Tribunal deleted the remaining disallowance, noting that the AO's additions were based on presumptions and assumptions without verifiable vouchers.

11. Interest Charged under Sections 234B, 234C, and 234D:
The Tribunal directed the AO to allow consequential relief, if any, at the time of giving effect to the order.

Conclusion:
The appeal of the revenue was dismissed, and the appeal of the assessee was partly allowed for statistical purposes. The Tribunal upheld the CIT(A)'s decisions on most issues, finding them well-reasoned and based on a proper appreciation of facts and legal principles.

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