2018 (1) TMI 384 - AT - Income Tax

Disallowing 10% of travelling expenses - Held that - In this case the AO observed that a sum of ₹ 1,46,539/- was incurred by the assessee in cash on account of travelling expenses and the same was not verifiable. Hence, the AO disallowed 20% of ₹ 1,46,539/- which comes to ₹ 29,308/- and thus made an addition of ₹ 29,308/- in the hands of the assessee. In first appeal, the ld. CIT(A) has reduced the same to 10% which comes to ₹ 14,654/-. During the course of hearing, the assessee submitted the ledger account of travelling expenses incurred by the assessee vide PBP 13 to16. Taking into consideration the facts and circumstances of the case, it will be in the interest of equity and justice to reduce the travelling expenses to ₹ 4,654/-. Thus the assessee will get the partial relief of ₹ 10,000/-. Hence, the ground no. 1 of the assessee is partly allowed. Long Term Capital Gain on sale of gold after allowing the indexed cost of acquisition - Held that - CIT(A) computed the indexed cost of acquisition at ₹ 7,58,400/- . From the records submitted by the assessee, it is observed that the assessee had purchased 300 gms. Gold in F.Y. 2006-07 and 1000 gms. Gold in F.Y. 2004-05 whereas the 800 gms is sold during the year. The ld. CIT(A) is therefore, justified in holding that 800 gms. gold sold during the year is out of the gold purchased in F.Y. 2004- 05 by following the FIFO method. In this view of the matter, the Bench concurs with the finding of the ld. CIT(A) in allowing the indexed cost of acquisition at ₹ 7,58,400/-. Thus Ground No. 2 of the assessee is dismissed.

Summary

Issues:
1. Disallowance of 10% of travelling expenses.
2. Increase in long term capital gain by reducing the value of purchase of gold.

Analysis:

Issue 1: Disallowance of 10% of travelling expenses
The Assessing Officer (AO) disallowed 20% of the travelling expenses claimed by the assessee for personal use and cash payments. The ld. CIT(A) reduced this disallowance to 10% after considering the submissions and ledger account provided by the assessee. The assessee contended that the disallowance was unjustified and requested further reduction. The Tribunal found it equitable to reduce the travelling expenses to ?4,654, granting partial relief of ?10,000 to the assessee. The ground was partly allowed, emphasizing the need for fairness and justice in determining the disallowance amount.

Issue 2: Increase in long term capital gain
The AO computed the Long Term Capital Gain on the sale of gold at a certain amount, making an addition to the figure computed by the assessee. The assessee argued that the indexed cost of acquisition should be higher, resulting in a lower Long Term Capital Gain. However, the ld. CIT(A) calculated the indexed cost of acquisition at a different amount, considering the purchase details and applying the FIFO method. The Tribunal agreed with the ld. CIT(A)'s findings, dismissing the assessee's appeal regarding the computation of Long Term Capital Gain. The decision was based on a thorough analysis of the purchase and sale transactions of gold by the assessee.

In conclusion, the appeal of the assessee was partly allowed, with the Tribunal addressing and deciding on the issues related to the disallowance of travelling expenses and the computation of long term capital gain on the sale of gold. The judgment provided detailed reasoning for each issue, ensuring a fair and just outcome based on the facts and circumstances presented during the proceedings.