2014 (1) TMI 699 - AT - Income Tax

Addition on account of disallowance of business promotion expenses Held that - The CIT (A) has rightly adjudicated the issue of disallowance of business promotion expenses - the assessee is under statutory obligation to prove that the expenditure by way of silver coins is expanded wholly and exclusively for business purposes and not for the personal reasons - The assessee failed to do so Decided against Assessee. Ad-hoc Disallowance of conveyance and general office expenses Held that - CIT (A) has rightly restricted the disallowance @7.5%, out of the conveyance and general office expenses incurred by the assessee which would meet the both ends of justice Personal element can be seen in general office expenses and some what extent in conveyance expenses - decided against Assessee.

Summary

Issues Involved:
1. Disallowance of business promotion expenses
2. Ad-hoc disallowance of conveyance and general office expenses

Analysis:

Issue 1: Disallowance of Business Promotion Expenses
The appeal was filed against the order of CIT (A) for the assessment year 2008-2009. The first issue pertained to the disallowance of business promotion expenses amounting to Rs. 2,25,015. The Assessing Officer (AO) disallowed 50% of the expenses related to the purchase of silver coins as the assessee failed to provide evidence of distribution and business purpose. The CIT (A) upheld the disallowance citing lack of evidence and business purpose. The Tribunal considered the arguments of both parties and noted that the assessee failed to prove the expenditure was wholly and exclusively for business purposes. Referring to a previous Tribunal order, the Tribunal found the current case distinguishable and upheld the CIT (A)'s decision, dismissing the appeal.

Issue 2: Ad-hoc Disallowance of Conveyance and General Office Expenses
The second issue concerned the ad-hoc disallowance of conveyance and general office expenses by the AO. The AO disallowed 15% of these expenses due to incomplete verification of self-made cash vouchers. The CIT (A) granted partial relief to the assessee, reducing the disallowance to 7.5% for conveyance and general office expenses. The Tribunal observed that the CIT (A) had rightly restricted the disallowance to 7.5%, finding it just and proper. The Tribunal upheld the CIT (A)'s decision on this issue as well, dismissing the appeal raised by the assessee.

In conclusion, the Tribunal upheld the orders of the CIT (A) on both issues, dismissing the appeal of the assessee regarding the disallowance of business promotion expenses and the ad-hoc disallowance of conveyance and general office expenses for the assessment year 2008-2009.