2013 (12) TMI 1266 - AT - Income Tax

Disallowance of entertainment expenses The assessee was carrying on the business of network marketing for procuring and promoting the business he had to travel outside and had to incur expenses on entertaining the people - Held that - The assessee could not provide the bills for the expenses incurred Bills cannot be provided for such small expenses incurred for entertaining people The appeal was partly allowed in favour of assessee. Disallowance of travelling and conveyance Held that - No receipt can be obtained from Taxi operator or for local conveyance, auto rikshwa or manual rikshwa - The expenditure made for refreshment to various agents for which vouchers may not be available Partly allowed in favour of assessee. Disallowance of personal expenses Telephone and mobile expenses - Held that - For telephone only 10% of the telephone expenses is to be treated for personal usage Depreciation on mobile phone should be allowed as the expenses have been treated as capital expenditure Partly allowed in favour of assessee. Car running and maintenance expenses Held that - In the absence of details of personal usage, confirmation of personal usage cannot be denied - In case of motor car expenses only 10% of the expenses, can be disallowed towards personal a usage Partly allowed in favour of assessee. Addition on account of household expenses The assessee has shown a sum of Rs. 30,000 towards household withdrawals - The assessee s wife had also shown household withdrawals of Rs.13,756 Held that - Keeping in view the gross receipts of Rs. 23 lakhs of assessee, the AO estimated household expenses of Rs.10,000/- per month - Many expenses which has been claimed were held to be bogus by the Assessing Officer - Sufficient cash which is shown to have been incurred towards such bogus expenses, is available with the assessee Decided in favour of assessee.

Summary

Issues:
1. Disallowance of entertainment expenses
2. Disallowance of traveling expenses
3. Disallowance of telephone expenses
4. Disallowance of car maintenance expenses
5. Disallowance of household expenses
6. Charging of interest u/s 234B and 234D

1. Disallowance of Entertainment Expenses:
The Assessing Officer disallowed a portion of claimed entertainment expenses due to lack of proper bills. The appellant argued that bills for small refreshments during meetings are generally not available. The Tribunal acknowledged this but limited the disallowance to Rs. 25,000, considering the lack of detailed bills from hotels.

2. Disallowance of Traveling Expenses:
The Assessing Officer disallowed a significant portion of claimed traveling expenses citing inadequate bills. The appellant contended that expenses related to creating a network for business were essential, and bills for items like taxi fare were not always available. The Tribunal agreed and allowed an additional Rs. 3,50,000 from the claimed traveling expenses.

3. Disallowance of Telephone Expenses:
The Assessing Officer disallowed a part of telephone expenses, including the cost of a Nokia handset, treating it as a capital expense. The Tribunal directed the allowance of depreciation for the handset and restricted the disallowance for personal usage to 10% of total telephone expenses.

4. Disallowance of Car Maintenance Expenses:
The Assessing Officer disallowed a portion of car maintenance expenses as personal expenses. The Tribunal reduced the disallowance to 10% of the expenses, considering the lack of details regarding personal usage.

5. Disallowance of Household Expenses:
The Assessing Officer disallowed a significant amount of claimed household expenses. The Tribunal noted that the wife of the assessee also contributed to household expenses and considered the overall background of the case. Ultimately, the Tribunal deleted the disallowance of household expenses.

6. Charging of Interest u/s 234B and 234D:
The Tribunal directed the Assessing Officer to calculate the interest u/s 234B and 234D accordingly. Overall, the appeal of the assessee was partly allowed, with adjustments made to various disallowances and charges as detailed above.