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TMI Blog2013 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... made out of expenses claimed under other heads. c. relief of Rs. 4,80,202/- out of the disallowance of Rs. 6,00,000/- made out of business promotion expenses. d. relief of Rs. 40,009/- out of the disallowance of Rs. 50,000/- made out of courier charges. e. relief of Rs. 25,000/- out of the disallowance of Rs. 50,000/- made out of staff welfare expenses. f. relief of Rs. 43,910/- out of the disallowance made out of festival expenses. g. relief of Rs. 38,623/- out of the disallowance of Rs. 40,888/- made out of repair and maintenance (relief was erroneously mentioned as Rs. 40,009/- in the grounds of appeal f iled earlier before the ITAT). 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in ignoring the fact that the assessee had vide letter dated 23/10/2008 and 04/12/2008, admitted that it does not have any supporting evidences as mentioned in paragraph 10 of assessment order and further that the assessee could not establish that the expenditure was incurred wholly and exclusively for business purposes. 3. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing relief despite the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the receipts in order to provide the cargo to the clients on time. As regards names of persons stated against payments made by the assessee, it was submitted that the persons mentioned in the ledger accounts were the persons to whom the payments were actually made as these persons were labourers/transporters and workers working at the airports/docs who had provided various services and since they are not regular employees, their name may be different. The assessee submitted that the AO was satisfied about the credential of the vouchers and had confirmed that these vouchers bear the credentials to support the cause of expense. The assessee further submitted that though the AO confirmed that no adverse inference can be drawn in this regard, he had arbitrarily and on presumption alleged that the inflation in the expenses could not be ruled out, however, the AO had no proof. Finally, he emphasized on the necessity of incurring the above expenses in cash in line of assessee's business, therefore, requested to allow the same. After considering the submissions of the assessee, and after calling the remand report from the AO, the CIT(A) held as under:- "12. I have perused the written s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. The CIT(A) further observed that the AO has not given any basis for considering the quantum of disallowance from such expenses and in AY 2007-08 the AO has passed order u/s 143(3) disallowing 15% of handling and freight charges. The CIT(A) after considering all the aspects of the issue, disallowed 10% of out of handling and freight expenses. Therefore, we do not find any error in the order of the CIT(A) and the same is hereby upheld. 8. As regards the ground against relief of Rs. 2,41,657/- out of the disallowance of Rs. 3,33,505/- made out of expenses claimed under other heads, it is observed that the assessee claimed expenses under various heads aggregating to Rs. 9,32,852/-. Out of the said expenses Rs. 3,33,505/- was disallowed by the AO on the ground of personal expenses as well as expenses for want of vouchers. We find that the AO had made the disallowance mainly due to incurrence of the expenses in cash and for non-production of vouchers in support of the same. Before the CIT(A), the assessee submitted that the expenses were incurred for the purpose of business only, and considering that the individual amount per voucher is very small and third party evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses in the nature of lunch/dinner for the clients for meeting them personally, send them gifts on various occasions to maintain goodwill and to provide them with decent hotel facilities as and when they visit the city, therefore, the assessee had to incur the said expenses to make new clients as well as to retain the old ones. It was further submitted that the AO had disallowed an amount of Rs. 6,00,000/- arbitrarily without appreciating the business necessity of the assessee. It was argued that the AO had not disputed that the expenses had been incurred by the assessee and the AO had himself stated that some examples like purchase of silver coins, purchase of television, tour to Khandala, hotel stay can be considered as business promotion expenses. The CIT(A) after considering the submissions of the assessee and remand report obtained from the AO, held as under:- "16. I have considered the written submissions of the appellant and the remand report submitted by the AO. On one hand the AO, in his remand report, admitted that the expenses are incurred for the purpose of the business and on the other hand he has contended that proper records are not maintained. He has recommended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges against the total claim of Rs. 1,44,612/- on the ground that no vouchers for such expenses was produced. Before the CIT(A), it was contended that in respect of small courier for intra city no bills are given by courier service provider whereas such charges is a business necessity. It was argued that out of total total expense of Rs. 1,44,612/- only an amount of Rs. 99,914/- had been incurred in cash rest of the expenditure is incurred through cheque, therefore, it was argued that such expenditure may be allowed. After considering the submissions of the assessee, the CIT(A) held that in the normal course, for small courier bills are not received by many of the parties, nevertheless appellant is a regular business man, hence it has to procure and preserve bills and vouchers for claiming such expenditure. He further held that considering the force in rival contention, it is found appropriate to restrict the disallowance from the cash expenses. Therefore, out of cash expenses debited in courier charges, the disallowance of Rs. 9,991/- is sustained and rest of the addition of Rs. 40,009/- is deleted. Aggrieved, the revenue is in appeal before us. 17. After considering the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds purchase of Christmas tree, chocolates and gifts during the Christmas and for celebration of new year as this festival expense is not of personal nature and the details of the same are available on record. After considering the submissions of the assessee, the CIT(A) held that the AO has wrongly disallowed festival expenses, ignoring the details, which reveal the expenditure not of personal nature, therefore, merely for want of some vouchers, it is not appropriate to disallow 100% of such expenditure. He, therefore, deleted the disallowance of Rs. 43,910/- made by the AO. Aggrieved, the revenue is in appeal before the Tribunal. 21. After hearing the parties and perusing the record as well as the orders of the authorities below, we are of the view that the purchasing of gifts, etc. during the festival is a common practice in any business line, therefore, the expenditure incurred towards gifts is an allowable expense. The CIT(A) has rightly deleted the disallowance made by the AO by holding that merely for want of some vouchers it is not appropriate to disallow 100% of such expenditure. We do not find any infirmity in the order of the CIT(A) and the same is upheld. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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