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TMI Blog2013 (9) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... reimbursement to the amount disallowed which is not understandable. Further, in our humble opinion, if the sellers are not filing their sales tax return, parties dealing with such person cannot be questioned or held responsible for such lapses. The whole payment has to be considered in the light of the provisions of section 37(1) of the Act which provides that any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expanded wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession" - Decided against Revenue. Disallowance of foreign travel expenses - Held that:- out of the total disallowance of Rs. 8,10,521, the learned Commissioner of Income-tax (Appeals) has allowed Rs. 1,33,852 as expenses incurred for the purpose of business. Nothing has been brought before us in support of the claim by the authorised representative nor by the Departmental representative to controvert the findings of the learned Commissioner of Income-tax (Appeals). We find that the learned Commissioner of Income-tax (Appeals) has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is claimed as incurred by office staff and various sales officers all over India and out of the balance a sum of Rs. 2.24 crores is attributed to purchases made from 5 parties whose confirmations were filed along with their ledger accounts. The Assessing Officer observed that even though the names and addresses of the parties were different, the confirmations of accounts submitted by the assessee are signed by one person in four out of 5 parties. On further verification by issue of notice under section 133(6) of the Act, the Assessing Officer observed that one notice was returned unserved while other four did not comply with the notice but the notices were found to be duly served. The Assessing Officer further observed that the addresses given on the confirmation filed by the assessee, the addressees were not found. On further verification of the bank accounts of the five parties, the Assessing Officer observed that the proprietor in the bank account were different from the proprietor given in the confirmations. To verify the genuineness of the payments made for sales promotion items and corresponding purchases thereof, a survey action under section 133A was carried out at the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer observed that no details were furnished and further considering the nature of business of the assessee there does not appear to be any business feasibility or expediency necessitated by such expenses. On that note, the Assessing Officer disallowed the entire foreign travelling expenses claimed at Rs. 8,10,520. The issue was carried over to the learned Commissioner of Income-tax (Appeals). Before the learned Commissioner of Income-tax (Appeals), the assessee argued that it has debited Rs. 2,38,36,827 towards sales promotion expenses in the profit and loss account after netting of scheme reimbursement received from clients. However, the Assessing Officer has added total amount of purchases at Rs. 3,75,49,810 when this amount has never been charged to the profit and loss account. It was further pointed out before the learned Commissioner of Income-tax (Appeals) that the assessee has filed confirmations from all the five parties along with necessary details like copies of gift schemes, ledger accounts and bills from parties. After considering the fact and submissions made by the assessee, the learned Commissioner of Income-tax (Appeals) observed that the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various outlets of canteen stores department which is under the Ministry of Defence and operates to cater the needs of the defence personnels. Learned counsel submitted that the assessee-company is doing business with the companies which are exhibited at page 52 of the paper book. Learned counsel further submitted that the assessee is receiving commission from these companies for the services rendered by it to various CSD to promote the products of its client companies, the assessee has to give certain small gift items to promote this sales. To substantiate his claim, learned counsel drew our attention exhibited at pages 53 to 57 of the paper book and pointed out that the assessee is giving gift items like wall clock, wrist watches, photo frame, pen set with clock, leather bags and calculators which items are purchased from various parties. Learned counsel further took us to the copy of the ledger account of all the five parties from whom purchases have been made. These copies are exhibited from pages 58 to 64 of the paper book. Learned counsel took a strong view on the observations of the Assessing Officer in respect of his finding that BST and CST Nos. mentioned on the invoices w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ients which are credited to the scheme reimbursement account such reimbursements are made by companies like Cadbury (India) Ltd., Wipro, Colgate Palmolive (India) Ltd., Timex Watches and UDV India. These companies are reimbursing the claim made by the assessee which itself proves that the assessee-company is actually incurring certain expenses on account of sales promotion otherwise why would such big companies reimburse the claims made by the assessee. The Assessing Officer grossly failed to appreciate this fact. The Assessing Officer further erred in adding the entire amount received as reimbursement to the amount disallowed which is not understandable. Further, in our humble opinion, if the sellers are not filing their sales tax return, parties dealing with such person cannot be questioned or held responsible for such lapses. The whole payment has to be considered in the light of the provisions of section 37(1) of the Act which provides that any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expanded wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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