9911796707
TMI Blog2014 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... der (lead AY 2001-02):- 2.1. Assessee is a company engaged in the business of distribution of pharmaceutical formulations. The assessee filed its return of income on 30-12-2001 declaring the total income at Rs.NIL. The case was selected for scrutiny and while finalizing the assessment u/s.143(3) vide order dated 11.08.2006, the AO disallowed payment of consultant charges made to Ms.R.B.Tanna of Rs.1,80,000/-. The assessee preferred an appeal before the CIT(A) and CIT(A) vide its order dated 12/06/2003 confirmed the disallowance of Rs.1,80,000/- Aggrieved by the order of the CIT(A), the assessee preferred an appeal before the ITAT. ITAT set side the order of the CIT(A) and remitted back the issue to the file of AO so as to enable the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1,80,000/- which was made his predecessor and confirmed by CIT(A). Aggrieved by the aforesaid order of the AO, the assessee carried the matter before the CIT(A). CIT(A) dismissed the appeal of the assessee by holding as under: "4.2. On careful consideration of the matter, I find that the issue involved is not with regard to the reasonableness of the expenditure but relates to genuineness of payment for the purpose of business expediency. It has transpired from the records that the appellant has failed to bring evidence regarding the services rendered by Ms. R.B.Tanna. Allegedly the services rendered by her includes the work of technical nature which includes the work of assisting the company in launching new medicines, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced below:- "BRIEF OF THE SERVICES RENDERED BY M/S. R.B. CONSULTANTS M/s. R.B. Consultants, a proprietary concern of Smt. Rekhaben B. Tanna, is working as our consultants to provide their services to our field staff as well as for our product promotion purpose. They assist and direct us to prepare our promotional materials viz. Visual Aids, Literatures, Brochures and detailing stories, which are very important and key roles in marketing our products. The consultant visits our office as well as our designers of visual aids at distant places for this purpose as and when required. One of their important services is to give training to our newly appointed medical representatives / managers / executives time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that services availed by the assessee are not in dispute and therefore, the AO was not justified in making disallowance of the amount paid to her. It was further submitted that Ms.R.B.Tanna is not a relative of any partner and thus not covered by the provisions of section u/s.40A(2)(b) of the Act and hence the addition made was not justified. 4. On the other hand, from the side of the Revenue, ld.DR Mr.Sunit Kumar appeared and submitted that Ms.R.B.Tanna is a Post Graduate in the field of Commerce but the services rendered by her included the work of technical nature. The technical work requires technical qualification for which Ms.R.B.Tanna does not haveany technical qualification. He thus supported the order of the CIT(A). 5. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that she has been paid consultancy charges but the consultancy charges appears ranging from Rs.1000 p.a. to Rs.36,000 p.a. to be meager as compared to the remuneration of Rs.1,80,000/- p.a. paid by the assessee for similar work. It is also a fact that though Ms.R.B.Tanna appeared before AO in the 2nd round of hearing but there is nothing on record to demonstrate that her statement was recorded by AO. Considering the entire factual position, we feel that the entire amount cannot be considered for disallowance, however a fair estimate of disallowance needs to be made. In the present case, therefore, we are of the view that considering the issue in entirety, a disallowance of Rs.80,000/- would meet the ends of justice. We accordingly restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred were wholly and exclusively for the business purpose. The AO has disallowed only 1% which is reasonable. In the given matrix, I refute to intervene in the action taken by the AO. Thus, this ground of appeal fails." 8. Before us, ld.AR for assessee submitted that the disallowance has been made on adhoc basis without pointing a single instance of expense to be of non-business in nature. The ld.DR, on the other hand, supported the order of CIT(A). We have heard the rival submissions and perused the material on record. We find that AO while perusing the voucher on sample basis noted that it was without bills or invoices has not disallowed the entire expenses but only 1% of expenses. CIT(A) while upholding the order of AO has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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