2010 (11) TMI 1055 - AT - Income Tax

Summary

Issues Involved: Assessment u/s 143(3) for AY 2006-07; Disallowance of expenses - conveyance, business promotion, welfare; Disallowance of vehicle expenses; Disallowance of telephone expenses.

The judgment by the Appellate Tribunal ITAT Mumbai pertains to an appeal by an individual assessee for the assessment year 2006-07 u/s 143(3) of the Income Tax Act. The assessee, engaged in the manufacture and sale of designer garments, also derives income from property, capital gains, and other sources.

Disallowance of Conveyance, Business Promotion, and Welfare Expenses:
The first ground of appeal challenges the disallowance of 20% of conveyance expenses, business promotion expenses, and other welfare expenses. The Assessing Officer and CIT(A) disallowed a portion of these expenses, totaling &8377; 5,95,547, based on a chart provided by the assessee. However, upon review, the Tribunal found the expenses to be reasonable and proportionate to the income declared by the assessee. Noting the absence of evidence indicating inflated expenses, the Tribunal allowed this ground and deleted the disallowances.

Disallowance of Vehicle Expenses:
The second ground concerns the disallowance of 20% of vehicle expenses amounting to &8377; 2,12,916. The Tribunal acknowledged the potential for personal use of the vehicle but deemed the disallowance excessive. Consequently, the Tribunal reduced the disallowance to 10% of the expenses, partially allowing this ground.

Disallowance of Telephone Expenses:
The third ground challenges the disallowance of 15% of telephone expenses totaling &8377; 1,27,300. While the nature of the assessee's business supported the reasonableness of these expenses, the Tribunal recognized the possibility of personal use. To address this, the Tribunal reduced the disallowance to 10% of the telephone expenses, partially allowing this ground.

In conclusion, the Tribunal partly allowed the appeal, overturning the disallowances on conveyance, business promotion, and welfare expenses, reducing the disallowance on vehicle expenses, and adjusting the disallowance on telephone expenses.

This summary provides a detailed overview of the issues involved in the legal judgment, outlining the Tribunal's decisions on each ground of appeal related to the disallowance of various expenses by the assessing authorities.