2013 (1) TMI 1001 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of provision for gratuity.
2. Addition on account of cash loss during a fire.
3. Addition u/s 41(1).
4. Addition u/s 14A.
5. Disallowance of bad debts.
6. Disallowance of foreign travel expenses of Director's wife.
7. Disallowance of foreign travel expenses on estimated basis.

Summary:

1. Addition on account of provision for gratuity:
The Department appealed against the deletion of Rs. 3,62,096/- made on account of disallowance being provision of gratuity. The CIT(A) allowed the assessee's claim, observing that the amount was claimed on an actual payment basis and not as a provision. The Tribunal upheld the CIT(A)'s findings, noting that the Department did not controvert the facts presented by the assessee. Thus, this ground was dismissed.

2. Addition on account of cash loss during a fire:
The Department contested the deletion of Rs. 6,86,253/- on account of cash loss during a fire. The CIT(A) admitted additional evidence under Rule 46A(4) and allowed the claim, noting no adverse inference by the AO. The Tribunal found no reason to interfere with the CIT(A)'s order as the Department did not provide evidence to the contrary. This ground was dismissed.

3. Addition u/s 41(1):
The assessee appealed against the addition of Rs. 3,54,201/- u/s 41(1) for some credit balance outstanding. The CIT(A) confirmed the addition, but the Tribunal set aside the order, noting that the assessee had not written back these amounts in the Profit & Loss Account, indicating no remission or cessation of liability. This ground was allowed.

4. Addition u/s 14A:
The assessee contested the addition of Rs. 16,13,623/- u/s 14A. The Tribunal restored the issue to the AO for verification of the quantification of disallowance, based on the assessee's submission that the disallowance should have been Rs. 13,68,231/-. This ground was allowed for statistical purposes.

5. Disallowance of bad debts:
The assessee appealed against the disallowance of Rs. 2,04,091/- of bad debts. The Tribunal restored the matter to the AO to examine the claim in light of the submissions made, noting that the fire incident and the recording of sales in the Accounts Department were not disputed. This ground was allowed for statistical purposes.

6. Disallowance of foreign travel expenses of Director's wife:
The assessee contested the disallowance of Rs. 2,90,020/- for the foreign travel expenses of Mrs. Priti Saraf. The Tribunal upheld the CIT(A)'s order, noting that the assessee did not establish any business connection with the foreign travel. This ground was dismissed.

7. Disallowance of foreign travel expenses on estimated basis:
The assessee appealed against the disallowance of Rs. 85,269/- out of foreign travel expenses on an estimated basis. The Tribunal set aside the CIT(A)'s order, noting that all expenses incurred during foreign visits for business purposes should be treated as business expenses, and no ad-hoc disallowance was justified. This ground was allowed.

Conclusion:
The Assessee's appeal was partly allowed for statistical purposes, and the Department's appeal was dismissed.