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TMI Blog2015 (1) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... visits of the Directors were also not disputed - possibility of involvement of personal expenditure in the traveling expenses cannot be ruled out - However, the involvement of personal expenditure could not be to the magnitude of 50% - The disallowance, even if made on estimate basis, it should be a fair and justifiable estimate considering the surrounding circumstances – the disallowance is restricted to the extent of 25% of the total expenditure. TDS u/s 194C – expenses incurred for convening meeting of dealers – Held that:- The assessee has not hired services of any event organizer - It simply booked the hotel for boarding - The hotel did not work on behalf of the assessee as a contractor - Otherwise every guest whosoever stay in a h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of dealing farm equipments, machinery, spares, wind power generation etc., It has filed its return of income on 18.10.2007 declaring total income of ₹ 42,82,050/-. The case of the assessee was selected for scrutiny assessment and notice u/s 143(2) was issued and served upon the assessee. According to the Assessing Officer, twelve opportunities of hearing were granted to the assessee. On an analysis of the accounts, it revealed to the Assessing Officer that the assessee had debited an amount of ₹ 22,19,188/- towards Directors' travellinge expenses. Out of this amount, a sum of ₹ 17,43,047/- was incurred on the foreign travel of four Directors. The learned Assessing Officer analysed the details as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording the following findings: 6.2 On an examination of the ledger account, I find hat in respect of the foreign tours, while the hotel bills and ticket expenses are reflected in the vouchers, the purpose of the tours and the expediency thereof are not established on a tour-wise basis. For example, Sri Vasudeva Murthy traveled extensively in Europe and UK for 15 days from 6.9.07 - 21.9.07 and likewise the ledger account reveal extensive payments made to the Directors in cash and in the form of air tickets. However, I have to note that the expediency of these trips is not established before me, apart from submission of some copies of bills from foreign hotels. The appellant's only general defense is that it imports goods from Italy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business or not?, the supporting evidence was not produced. The learned CIT (A) has observed that it cannot be construed that total expenses were not incurred for the purpose of business. Therefore, on an estimate basis, she has upheld disallowance up to 50% of the claim. 6. On due consideration of these facts, we are of the view that import of machinery was not disputed by the Assessing Officer. The visits of the Directors were also not disputed. The dispute is whether these visits were exclusively for the purpose of business or they were pleasure trips. Therefore, possibility of involvement of personal expenditure in the traveling expenses cannot be ruled out. However, the involvement of personal expenditure could not be to the mag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rate applicable. 12.4 When the above issue was brought to the notice of A.R the A.R. could not substantiate the reason fro the same. 12.5 Therefore, an amount of ₹ 4,84,147/- is added back to the total income of the assessee company. Thus, the addition under this head is ₹ 4,84,147/- . 8. On appeal, the learned CIT (A) did not give any relief to the assessee. The learned Counsel for the assessee submitted that the assessee has not availed services of any event organizer. It simply booked the hotel and also arranged other items food etc., from outside. On the other hand, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1994 which was challenged in the High Court. The Hon'ble High Court has considered the following question based on the circular and has quashed the circular. The Hon'ble Court held that section 194 C is not applicable for payments made by the customer to the hotel. The first and last three paragraphs of the judgment read as under: 1. The said circular provides that all service contracts are covered under section 194C of the Income Tax Act, 1961 ('Act' for short). As a result whereof, every customer of the petitioner No.1 hotel, while making payment to the hotel for occupying its room and availing other facilities /amenities provided by the hotel is required to deduct income tax at the rate specified in section 194C of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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