2014 (1) TMI 1321 - AT - Income Tax

Disallowance on account of staff training expenses Held that - No FBT was paid in respect of staff training - It cannot be denied that some of the employees were going to the company s various areas of operation and since the amount have been debited by the company, therefore, no additional evidence is possible to substantiate this claim thus, the disallowance is restricted and the AO is directed to allow training expenses. Disallowance on account of customer expenses Held that - In the details of FBT report in respect of sale promotion, total expenditure shown is Rs. 4,09,015/-, therefore, it cannot be said that the assessee has paid FBT on whole of the customer expenses - vouchers are not available - However, it is also correct that disallowance has been made on higher side the disallowance of Rs. 2.00 lakhs would meet the ends of justice order of the CIT(A) set aside and the AO is directed to disallowance of Rs. 2.00 lakhs on account of customer care. Disallowance on account of selling and distribution expenses Held that - The disallowance has also been made on excessive basis, thus, the disallowance is restricted to 15% of Sales and Distribution of the expenses - the order of the CIT(A) set aside and the AO is directed to allow 15% of SND expenses. Disallowance on account of Vehicle Running and Maintenance Expenses Held that - For personal usage of vehicles, disallowance of 10% is justified order of the CIT(A) set aside and the AO directed to Accordingly we set aside the order of the ld. CIT(A) and direct the Assessing Officer to make disallowance @ 10% of the total expenditure - Decided partly in favour of Assessee.

Summary

Issues:
1. Disallowance of Staff Training Expenses
2. Disallowance of Customer Expenses
3. Disallowance of Other Selling and Distribution Expenses
4. Disallowance of Vehicle Running and Maintenance Expenses
5. Double Taxation Issue

Analysis:

Issue 1 - Disallowance of Staff Training Expenses:
The Assessing Officer disallowed Rs. 2,53,950 claimed as Staff Training Expenses due to lack of proper vouchers. The CIT(A) upheld the disallowance stating that the expenses were not adequately substantiated. The Tribunal found that no FBT was paid for staff training and allowed Rs. 1,15,181 incurred for training by Maruti Udyog Ltd. The remaining Rs. 1,44,204 disallowance was upheld due to lack of proper vouchers.

Issue 2 - Disallowance of Customer Expenses:
The assessee claimed Rs. 15,28,580 as Customer Expenses, but 30% was disallowed for lack of vouchers. The CIT(A) confirmed the disallowance. The Tribunal noted that FBT was paid on part of the expenses and reduced the disallowance to Rs. 2.00 lakhs, considering overall circumstances.

Issue 3 - Disallowance of Other Selling and Distribution Expenses:
A disallowance of Rs. 3,29,765 was made by the AO and confirmed by the CIT(A) out of Sales & Distribution expenses. The Tribunal considered this excessive and restricted the disallowance to 15% of the expenses.

Issue 4 - Disallowance of Vehicle Running and Maintenance Expenses:
A disallowance of 30% of vehicle running and maintenance expenses for personal usage was confirmed by the CIT(A). The Tribunal referred to previous decisions and reduced the disallowance to 10% of the total expenditure.

Issue 5 - Double Taxation Issue:
The Tribunal did not find it necessary to adjudicate separately on the double taxation issue as it was considered while addressing other grounds.

The appeals were partly allowed in favor of the assessee, with specific disallowances being adjusted based on the Tribunal's findings for each issue.