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2014 (1) TMI 35 - AT - Income TaxDisallowance of payment made to consultants u/s 40A(a)(2b) of the Act Held that - From the certificates placed on record, it is revealed that Ms.R.B.Tanna has received remuneration ranging from Rs.1,000/- to Rs.5,000/- for the entire year from a few companies - She has also stated to have received a remuneration of Rs.36,000/- from Mercury Marketing & Consulting Services - There is nothing on record to prove that she has obtained any other qualification with respect to medicines and pharmacy which could help in marketing the products manufactured by the assessee - CIT(A) has held that the nature of the services rendered by Ms.R.B.Tanna includes the work of technical nature and for which she does not appear to be technically qualified - the entire amount cannot be considered for disallowance, however a fair estimate of disallowance needs to be made thus, the disallowance restricted to Rs.80,000 Decided partly in favour of Assessee. Disallowance of marketing expenses and Gift articles expenses Held that - AO while perusing the voucher on sample basis noted that it was without bills or invoices has not disallowed the entire expenses but only 1% of expenses - CIT(A) while upholding the order of AO has held that assessee has filed to furnish supporting evidences to establish that all expenditure incurred were wholly and exclusively for business purposes - AO has not disallowed the entire expenses but only 1% which has been upheld by CIT(A) for the reason that no details were filed by assessee - there was no reason to interfere with the order of CIT(A Decided against Assessee.
Issues:
- Disallowance of payment of consultant charges made to Ms.R.B.Tanna - Disallowance of marketing traveling expenses - Disallowance of gift articles expenses Disallowance of Payment of Consultant Charges Made to Ms.R.B.Tanna: - The assessee, a pharmaceutical distribution company, filed its return declaring total income at Rs. NIL for AYs 2001-02 & 2002-03. - The AO disallowed payment of consultant charges to Ms.R.B.Tanna of Rs.1,80,000/-, confirmed by CIT(A). - ITAT remitted the issue back to the AO for further examination. - The CIT(A) upheld the disallowance due to lack of evidence on services rendered by Ms.R.B.Tanna. - The assessee appealed, arguing that the services were essential for business. - The ITAT considered the certificates provided by the assessee but found no proof of technical qualifications of Ms.R.B.Tanna for the work. - The ITAT reduced the disallowance to Rs.80,000 for AY 2001-02 and Rs.75,000 for AY 2002-03, allowing partial relief to the assessee. Disallowance of Marketing Traveling Expenses: - The AO disallowed 1% of marketing traveling expenses of Rs.80,610 for AY 2002-03 due to lack of supporting bills or invoices. - The CIT(A) upheld the disallowance, noting insufficient evidence to establish the expenses were wholly and exclusively for business purposes. - The assessee contended that the disallowance was arbitrary without specific instances of non-business expenses. - The ITAT upheld the CIT(A)'s decision, finding no reason to interfere with the disallowance. Disallowance of Gift Articles Expenses: - The assessee claimed Rs.16,98,535 for gift articles expenses, but the AO disallowed 1% due to unverifiable details of recipients. - The CIT(A) upheld the disallowance, stating no details were provided by the assessee. - The assessee argued that the disallowance was made without specifying non-business expenses. - The ITAT affirmed the CIT(A)'s decision, finding no grounds to overturn the disallowance. In conclusion, the ITAT partially allowed the appeals of the assessee concerning the disallowance of consultant charges, marketing traveling expenses, and gift articles expenses, reducing the disallowances based on the evidence and arguments presented by the parties.
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