1981 (10) TMI 88 - AT - Income Tax

Summary

Issues:
1. Disallowance of cartage payments
2. Disallowance of meals expenses to staff
3. Disallowance of publicity charges

Issue 1: Disallowance of Cartage Payments
The appellant contested the AAC's decision to restrict the addition under cartage payments to Rs. 3,000 for the year 1978-79. The ITO disallowed Rs. 5,000 due to alleged defects in the maintenance of the register. The AAC reduced the disallowance to Rs. 3,000. The ITAT held that there was no justification for any disallowance. Similar claims in preceding years were allowed in full without any disallowance. The genuineness of the payments was not doubted, and no material defects were found. The ITAT set aside the disallowance in full.

Issue 2: Disallowance of Meals Expenses to Staff
The authorities disallowed a sum of Rs. 1,301 under "meals expenses to the staff" as there was no agreement between the assessee and its employees. The appellant argued that providing meals during the tobacco season was a customary expenditure for quick work and business interest. The ITAT accepted the appellant's argument, stating that the expenditure was incurred out of commercial expediency and business interest, and therefore, set aside the disallowance.

Issue 3: Disallowance of Publicity Charges
The appellant contested the addition of Rs. 30,000 under "publicity charges," claiming a deduction of Rs. 50,000. The ITO viewed the payment as a donation to a political party and restricted the claim to Rs. 20,000. The AAC upheld this decision. The appellant argued that the entire amount was spent on advertisement purposes for business. The ITAT examined the evidence, including the AICC Souvenir and a letter confirming the advertisement, and found that the expenditure was wholly and exclusively for business purposes. Referring to previous tribunal orders, the ITAT held that there was no justification for any disallowance and set aside the disallowance of Rs. 30,000.

In conclusion, the ITAT allowed the appeal in part, overturning the disallowances of cartage payments, meals expenses to staff, and publicity charges.