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TMI Blog2013 (1) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... /- towards the foreign travel (from New York to London) in December, 1996 and incurred an expenditure of Rs.1,00,523/- and the business purposes of the same are not ascertainable. It is a trite law that the onus is on the assessee to discharge when a claim of deduction is made in the books of accounts, thus the said expenditure should not be held as the business expenditure. Telephone expenditure on the telephone installed at director’s home and use of the car (repairs, fuel and depreciation) - Held that:- Assessee reliance on Sayaji Iron & Engg. Co. vs. CIT (2001 (7) TMI 70 - GUJARAT HIGH COURT) for no disallowance is not acceptable as case is distinguishable on the facts that cars in question were outsourced by the Company and placed them at the disposal of the Directors’ of that company. Whereas, in the present case, the car in question was owned by the assessee and use of the vehicles wholly and exclusively was not demonstrated with the help of log book to support the nature of use of the cars - the assessee does not have evidences in its possession as they are lost in transit and in effect, the assessee failed to discharge its legal responsibility before the AO. No just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities can only be disallowed and therefore, general expenses incurred are for the purpose of business of the assessee and the same ought not to be disallowed. However, there is force in the arguments of the learned DR that fresh evidence was admitted by the CIT (A) in violation of Rule 46A which could not be controverted by the learned AR of the assessee. In the circumstances it will be just and fair to restore the above issues back to the file of the AO in the interest of justice. The AO is directed to re-adjudicate the issue after allowing reasonable opportunity of hearing to the assessee as per law. Thus, the above grounds of appeal of the Revenue are allowed for statistical purposes. 4. For giving effect to the said order of the Tribunal, Assessing Officer initiated the set aside proceedings on the four of the additions on accounts of, namely (i) Travelling Expenses (ii) Remuneration and Benefits (iii) Telephone Expenses and (iv) Motorcar Expenses. During the set aside assessment proceedings, the AO in para 2 mentioned that the Company has not started its manufacturing activity and earned only commission income of Rs. 22,72,869/- and AO also mentioned that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in full on lines with the assessment year 1998-1999. Revenue was of the opinion that substantial portion of expenditure definitely pertains to setting up of manufacturing unit and such portion cannot be allowed against commission income. BEFORE THE TRIBUNAL IN SECOND ROUND: 7. Aggrieved with the above finding of the CIT (A), assessee filed the present appeal before us with the concise grounds reproduced herein above. Before us, Ld Counsel for the assessee mentioned that this is second round of the proceedings before the Tribunal and mentioned that the Tribunal in the first round already given finding on the grounds raised before the Tribunal and set aside to the AO to meet out the principle of the natural justice regarding the fresh documents filed before them. In this regard, he read out the portion from the order of the tribunal extracted above. Further, regarding travelling expenditure, it is an undisputed fact that assessee made a claim of Rs. 10,40,154/- and the breakup for the same are given in page 37 of the paper book. It shows that the said expenditure was incurred on account of the travelling expenses of Director (Rs. 4,44,993) and Managing Director s wife (Rs.1,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commencement of the business. 9. Thus, the facts of the case, the arguments of the parties and the existing direction of the Tribunal show that we need to decide about the requirement of the disallowances (i) on account of the Manufacturing Expenditure prior to the cut off date discussed by the Tribunal and (ii) on account of the General expenditure. So far as the Manufacturing expenditure incurred prior to the cut off date of 20 May of the Financial year is concerned, Ld AR fairly quantified the same at Rs. 1,54,789/-. Therefore, in our opinion, despite the objection of the Ld DR for bringing finality to the longstanding litigation (nearly 14 years), the argument of the Ld Counsel should be accepted notwithstanding the assessee s failure to produce any bills and vouchers for the reasons of lost in transit . To the extent of Rs 1,54,789/-, as consented by the Ld Counsel, revenue succeeds and thus, relevant ground of the assessee is dismissed. 10. Now we shall take up the other issue of genuineness of the general expenditure claim of Rs.21,79,289/-for the period subsequent to the cut off date 20.5.1996. In this regard, we have perused the individual accounts of travelling exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty bound to evidence the claims. We find no justification in making any disallowances on account of remuneration and benefit as they relate to the employees account and they are needed for running of the business and conducting of business of earning commission income is undisputed in this case. Considering the above and also the assessee s failure to discharge the onus, we are of the opinion the disallowance @ 1/10th on the expenditure incurred on residential telephone at the premises of the assessee and also 1/10th of the motorcar expenses (for fuel, repairs and depreciation on car) will meet the both ends of the justice. 12. To sum up, we confirm the addition of Rs. 1,54,789/- as expenditure incurred prior to 20.5.1996. Out of the balance of expenditure of Rs. 21,79,289/-, we confirm the disallowance of foreign travel expenses on account of Managing Director s wife to the tune of Rs.1,00,523/- and 1/10th expenditure on the residential telephone installed at Director s house and 1/10th of the car expenses claimed by the assessee. Thus, the assessee has part relief. Grounds are adjudicated accordingly. 13. In the result, the appeal of the assessee is partly allowed. (O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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