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TMI Blog2012 (12) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... e at D-153, Sector-40, Nodia and Pune Office at A-1/7, Army Welfare Housing Society, Salunke Vihar, Pune. However, these so called offices are dealt in the foregoing paragraphs. 3. During course of scrutiny assessment, the Assessing Officer made various disallowances out of expenditure incurred on commission, supervision charges, salary etc. 4. By the impugned order, the ld. CIT(A) confirmed the addition against which assessee is in appeal before us. 5. Following grounds have been taken by the assessee in the assessment year 2001-02 :- "On the facts and in the circumstances of the case, the Ld. CIT(A) - II, Indore erred and was not justified:- 1. in sustaining even in parts the assessment order of the Ld. AO under this appeal which is contrary to the facts on record and also contrary to the law; 2. in sustaining the disallowance made by the Ld. AO for payment of Rs. 68,571 to Shri S.C. Mehra holding it to be not genuine; 3. in sustaining the disallowance made by the Ld. AO for payment of Rs. 91,329 to Shri S. K. Khanna comprising of - a. Commission Rs.59,995 b. Supervision Charges Rs. 31,334 holding these payments to be not genuine; 4. in not giving any finding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance made by the Ld. AO of Rs. 1,07,050 for depreciation on business assets purchased at Pune exclusively used for business purposes; 7. in sustaining the disallowance made by the Ld. AO of Rs. 12,630 being one-fourth for depreciation on vehicles holding that it was partly used for personal use; 8. in sustaining the disallowance made by the Ld. AO of Rs. 3,100 for repairs and maintenance on vehicles holding that it was partly used for personal use; 9. in sustaining the disallowance made by the Ld. AO of Rs. 24,440 being 10% for telephone expenses for personal use and dismissing the ground by stating as not pressed; 10. in sustaining the disallowance made by the Ld. AO of Rs. 20,758 for Diwali expenses; 7. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that the assessee was engaged in the business of trading in specialized veterinary medicines and surgical instruments. Business was carried on in her proprietorship capacity in the name and style of Helpro Health Productss & Services. In the assessment year 2001-02, the Assessing Officer disallowed commission on sales paid to Shri S. C. Mehra amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was paid by cheque. As per the documents placed on record Shri Sumit Khanna never stayed in the said flat and he was in job at Mumbai. The assessee was using the said flat for storage of inventory and medicines and instruments. Merely because small part of the said flat was also used by father of Shri Sumit Khanna to run his proprietorship concern, will not render the payment of rent by assessee for use of major part of the shop for her business purpose. Accordingly, we reverse the action of lower authorities for disallowance of rent payment to Shri Sumit Khanna amounting to Rs. 30,000/-. 13. In ground no. 6, the assessee is aggrieved for disallowance of commission of Rs. 42,425/- and salary of Rs. 45,000/- to Shri Kapil Sarin. 14. So far as the disallowance of commission is concerned, we found that no TDS has been deducted on the commission payment and assessee was unable to substantiate the extra services rendered by Kapil Sarin, in addition to the services for which he was paid salary, therefore, disallowance of commission was justified. So far as the payment of salary is concerned, we found that Shri Kapil Sarin is a qualified and experienced person, who worked for 8 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diency. The assessee has furnished actual expenses bills for verification. In the present day business environment such type of expenditure is required to be incurred to promote the business. Keeping in view personal element for such expenses, we direct for restriction of disallowance to the extent of 10%. 20. The Assessing Officer has also disallowed 1/5th of telephone, conveyance and vehicle repair maintenance expenses. We found that proprietor of the concern is having personal telephone at her home and also personal vehicle. A separate telephone of Airtel was existed at her residence for which total payment of Rs. 18525/- was made by Helpro and debited to Shri S. C. Mehra. Keeping in view the totality of the facts and circumstances, we direct the Assessing Officer to restrict the disallowance to the extent of 1/10th of the expenses incurred on account of telephone, conveyance, vehicle repairs, maintenance and telephone. 21. In the course of assessment after pointing out certain defects, the Assessing Officer has rejected the books of account and estimated gross profit at 40% resulting into addition of gross profit of Rs. 6,45,873/-. From the record, we found that a detailed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the rival contentions and found from record that new office at Pune was purchased on 19.9.2002 and a regular pharmacists joined the Pune Office w.e.f. 17.1.2003 i.e. during the year under consideration. The assessee had also got commercial tax registration under the Maharashtra Commercial Tax Laws and the same was received on 31.1.2003. Merely because the actual operation started in the next assessment year, the fact that preparatory steps for starting business operation was duly undertaken during the year under consideration. There is no valid reason for disallowance of depreciation on the assts, which is already put for business use during the year under consideration. Accordingly, the Assessing Officer is directed to delete the disallowance of depreciation. 28. With regard to disallowance of depreciation of car, repairs and maintenance of vehicles and plea of personal use, we direct the Assessing Officer to restrict the disallowance to 1/10th on the plea of personal use. 29. Disallowance of Telephone Expenses at 1/10th is being confirmed. 30. With respect to Diwali expenses of Rs. 20,758/-, we found that the assessee has produced vouchers for purchase of Raymond's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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