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TMI Blog2015 (1) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... otal expenses at 2,02,102/-, which was restricted by the Assessing Officer at 1,25,000/-. The learned A.R. has not controverted the findings given by the learned CIT(A) as well as the Assessing Officer that the assessee was unable to produce the complete bills and vouchers related to repair and maintenance. Therefore, he was reasonable to restrict the disallowances at 5%. - Decided partly in favour of assessee. Disallowance of foreign traveling expenditure of directors, employees - the employees were directors’ wives, who travelled with the directors due to their personal relation - Held that:- Considering both the sides and case laws referred by the learned A.R., which are not squarely applicable on the case of assessee as the relative in all the case laws referred by the assessee were on foreign tour related to business purposes. However, in case of assessee, no evidence was produced before the lower authorities as well as before us that purpose of the directors as well as their wives and directors employees was for business. Therefore, we confirm the order of the learned CIT(A).- Decided against assessee. Ad hoc disallowance under the head Staff Welfare Expenses - Held that:- Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) the appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing." Grounds in Cross Objection "1. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming disallowance of ₹ 61,783/- incurred on foreign travelling expenditure of director's employees by holding that the employee's are director's wives who travelled with the directors due to their personal relations. 2. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming ad hoc disallowance out of various expenditures as under:- Staff welfare Expenses ₹ 19,038/- Show Room Expenses ₹ 72,378/- Business Promotion Expenses ₹ 42,361/- Repair & Maintenance Expenses Rs.1,25,000 /- 3. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming disallowance of ₹ 58,315/- out of depreciation on vehicles by holding that the vehicles are not allowed to be used without insurance which was done after the end of the year ignoring that the vehicles were registered by RTO as on 31/3/2008 and thus were used during the year. 4. The learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2007 of ₹ 32,412/- issued by Frig Care Centre and payment of ₹ 54,140/- to JVVN Ltd. were included therein. Month wise salary payment had also been included. The assessee was also failed to produce all the bills and vouchers related to repair and maintenance expenses. Therefore, he presumed that the entire expenses were not related to the business activities of the assessee company. Thus, a lump sum disallowance of ₹ 2,02,102/- being 10% was disallowed and added to the total income of the assessee. Further the Assessing Officer verified the incentive and remuneration paid to the customers, which had been debited in total at ₹ 23,85,961/- in P&L account. On verification of detail, the learned Assessing Officer found that an amount of ₹ 11,07,092/- had been claimed as paid to the customers, ₹ 7,52,466/- had been debited as service tax expenses and ₹ 5,26,403/- had been paid to the employee. He further found that out of total incentive received from M/s Sundaram Finance Ltd., 7,89,279/- was paid to customers and ₹ 1,10,763/- had been paid against the service tax. However, in other cases, no such evidence was found. The finance company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 823/-. The assessee paid to the employee out of this incentive at ₹ 4,47,726/- and only ₹ 21,058/- was passed on to the customers. Accordingly he held that incentive paid to the employees was reasonable and no disallowance is called for. 4. Now the Revenue is in appeal as well the assessee is in C.O. before us. The learned D.R. vehemently supported the order of the Assessing Officer and argued that the expenses incurred by the assessee either in cash was not supported with proper bills or vouchers, therefore, he prayed to confirm the order of the learned Assessing Officer. 5. At the outset, the learned A.R. for the assessee submitted that expenditure incurred is wholly and exclusively for the purpose of the business and duly supported with proper supportings and bills. The nature of these expenses are such that pakka bills are not possible and few payments are to be made in cash. However, payment in cash does not mean that the expenses are not genuine. Each cash payment is supported by the signature of the recipient on the vouchers. Hence, simply because the payment is in cash no adverse inference is called for. The expenses are reasonable considering the volume of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (P) Ltd. Vs. DCIT 43 DTR 397 (Del) (Trib) He further submitted that the assessee has received gross commission/incentive of ₹ 2,67,51,209/- from various banks/finance companies/insurance companies against which it has incurred expenses of ₹ 23,85,961/- towards service tax & incentive paid to customers/employees. In course of assessment proceedings, assessee has furnished the finance/bank wise details of the gross commission received & incentive/service tax paid. In respect of service tax paid, complete details were furnished which was accepted by the AO. In case of incentive given to the customers/employees, sample copy of the customer ledger account, copy of invoice, customer payment details, letter from the finance company containing details of the amount passed on to customers in respect of finance through Sundram Finance Ltd. , SBI , ICICI Bank & HDFC Bank was filed. The learned AO accepted the incentive passed on to the customer in respect of finance through Sundaram Finance Ltd. but without any basis ignored the similar incentive passed on to the customer where finance is obtained from other banks. In case of incentive paid to the employees/adjusted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors, employees by holding that the employees were directors' wives, who travelled with the directors due to their personal relation. The learned Assessing Officer observed that the assessee incurred expenditure on travelling at ₹ 8,83,522/-. It is found that ₹ 1,37,598/- and ₹ 1,66,598/- were incurred on account of foreign travelling of director's family members alongwith Shri Ram Bhatia and his family members on various dates. The expenses of ₹ 68,000/- and ₹ 1,04,814/- were incurred on foreign travelling of children and wives. The assessee failed to justify such foreign travelling for business purposes, therefore, he held that the expenses of ₹ 1,73,613/- was not incurred wholly and exclusively for business purposes. The learned CIT(A) verified the expenditure, which was found at ₹ 1,66,598/- in place of ₹ 1,73,613/- and held that none of the employee other than the family members of directors went on tour to China and Athens and travelled for their personal relation not as an employee of the company. Accordingly, he held personal expenditure incurred by the company. He confirmed the addition of ₹ 1,04,814/- and deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to the family members of the staff is a normal business/courtesy. The expenditure incurred in course of running the business for maintenance of cordial relation with the staff. After considering the assessment order as well as finding given by the learned CIT(A) we hold that no specific defects had been pointed out by the lower authorities except holding that they were claimed on self made vouchers. The assessee had incurred these expenses on staff welfare, which are required to maintain the cordial relation with the staff, so that the company's target can be achieved. We find that these expenses were incurred wholly and exclusively for the business purposes, therefore we delete the addition confirmed by the learned CIT(A) on this ground. Accordingly, this ground of assessee's C.O. is allowed. 9. The third ground of assessee's C.O. is against disallowance of ₹ 58,315/- out of depreciation on vehicles by holding that the vehicles are not allowed to be used without insurance, which was done after the end of the year ignoring that the vehicles were registered by the RTO as on 31/3/2008. The learned Assessing Officer observed that the assessee had claimed depreciation on Demo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The 4th ground of the assessee's C.O. is against confirming the disallowance of ₹ 11,200/- out of payment of ₹ 55.105/- of road tax for trucks by treating the same as prepaid expenditure. The learned Assessing Officer found that the assessee had claimed ₹ 1,84,758/- under the head truck expenses. On verification of details, it was found by the Assessing Officer that ₹ 55,105/- was paid/deposited on account of road tax on 25/3/2008, which included a sum of ₹ 11,200/- as prepaid road taxes, which pertained to next financial year. Thus, he made addition of ₹ 11,200/- in the income of the assessee, which was confirmed by the learned CIT(A) by observing that as per Section 43B of the Act, the expenses is allowable if the same is allowable otherwise. This expense of ₹ 11,200 is not allowable otherwise as pertained to next year. The learned AR submitted that as per Section 43B, a deduction otherwise allowable under this Act, is allowable in the previous year in which such sum is actually paid. The road tax is expenditure allowable under the Act and therefore the same is to be allowed on actual payment basis even if a part of it relate to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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