2013 (11) TMI 139 - AT - Income Tax

Disallowance of deduction u/s 80HHC Loss on exports incurred by the company - Held that - The assessee could not reconcile the figures before the Revenue The issue went to files of assessing officer for fresh adjudication Decided in favour of assessee. Disallowance of amount contributed to provident fund u/s 56(2) Held that - Following Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT In view of retrospective amendment to section 43B stating that the deduction shall be allowed if payment is made on or before the due date of furnishing of return of income assessee made the payment before filing of Return of Income Decided in favour of assessee. Disallowance out of motor car expenses Interest on car loans Depreciation on cars Held that - Assessee has not allowed the cars for personal use of either the Director or employee of the assessee Following CIT vs. Metalman Auto P. Ltd 2011 (2) TMI 330 - PUNJAB AND HARYANA HIGH COURT - Depreciation under section 32 was allowable to the assessee company on the assets which were purchased in the name of managing director of the assessee company and his wife but, used exclusively for the assessee s business Decided in favour of assessee. Disallowance of expenses on foreign travelling Held that - The onus to prove that expenses are incurred for business purposes is on assessee The company has not made any exports/ imports to/ from the country visited The assessee has not produced any evidence regarding any meeting or letter of intent for import of appellant s goods / material from any party in London or UK Not furnished the name and other details of any party whom the persons met for the purpose of any business in London - Decided against assessee. Busineses promotion and telephone expenses Held that - In view of deficiencies of bill and vouchers of the expenses, the disallowance was restricted to 10% in case of business promotion expenses and 5% in respect of telephone expenses as against disallowance of 25% an 10% respectively made by the assessing officer Decided against assessee.

Summary

Issues involved:
1. Allowability of deduction u/s 80HHC.
2. Disallowance of employees' contribution to Provident Fund u/s 56(2).
3. Disallowance of interest on motor car loans, motor car expenses, and depreciation on motor cars.
4. Disallowance of foreign travel expenses.
5. Disallowance of business promotion and telephone expenses.

Issue 1 - Allowability of deduction u/s 80HHC:
The appeal raised concerns regarding the disallowance of deduction u/s 80HHC for export incentives due to negative export profits. The CIT (A) denied the benefit citing discrepancies in reconciling figures. The ITAT remanded the issue to the AO for fresh adjudication as the figures were not reconciled by the assessee. Ground no.1 was allowed for statistical purposes.

Issue 2 - Disallowance of employees' contribution to Provident Fund u/s 56(2):
The ITAT allowed the deduction of employees' contribution to Provident Fund based on settled legal principles favoring the assessee, as per relevant court judgments. Ground no.2 was allowed in favor of the assessee.

Issue 3 - Disallowance of interest on motor car loans, motor car expenses, and depreciation on motor cars:
The AO disallowed various claims related to cars, including interest on car loans, motor car expenses, and depreciation, as the cars were held in the name of the Director or an employee. The ITAT, after considering relevant legal precedents, allowed the claims as the cars were purchased by the company and appeared in the books as fixed assets. Ground nos. 3, 4, and 7 were allowed in favor of the assessee.

Issue 4 - Disallowance of foreign travel expenses:
The disallowance of foreign travel expenses was upheld as the assessee failed to prove the business purpose of the travel, especially since no exports were made to the visited country. The ITAT agreed with the CIT (A) that the expenditure was not incurred for business purposes, leading to the dismissal of ground no.5.

Issue 5 - Disallowance of business promotion and telephone expenses:
The AO disallowed a portion of business promotion and telephone expenses due to deficiencies in bills and vouchers. The CIT (A) reduced the disallowances, and the ITAT found the decision fair and confirmed the disallowances. Ground no.6 was dismissed accordingly.

In conclusion, the ITAT partly allowed the appeal filed by the assessee, granting relief on various issues related to deductions, expenses, and allowances after detailed analysis and consideration of legal principles and precedents.