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TMI Blog2016 (4) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted. However, the AO was of the view that those expenses could have been recovered from the clients and accordingly made the disallowance of the entire expenses incurred under the head ‘entertainment’ and ‘travelling’. In the present case, it appears that the AO did not appreciate this fact that the assessee had incurred approximate 3% of the personal fee for entertainment expenses and incurred about 17% of the professional fee on account of travelling expenses which cannot be considered to be unreasonable. At the same time, the assessee had not produced the vouchers for all the expenses incurred, moreover, in such type of cases, involvement of personal element cannot be ruled out. In our opinion, the ld. CIT(A) was justified in restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riction the addition made by the AO on account of travelling expenses since, the principals of the assessee denied having any link/connection w.r.t the travelling expenses stated to have been incurred by the assessee for the clients of the principals. 4. In the facts and circumstances of the case the Ld. CIT(A) grossly erred in restriction the addi6tion made by the AO on account of travelling expenses since, the assessee was getting a fixed monthly retainer-ship form the Principals and the assessee could not prove the need and genuineness of incurring the expenses for/on behalf of employer without reimbursement. 5. In the facts and circumstances of the case the Ld. CIT(A) grossly erred in restriction the addition made by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was selected for scrutiny. The AO accepted the trading result as the net profit shown by the assessee at 32% in the year under consideration was better than the net profit @ 26.40% shown in the preceding year. The AO also noticed that the assessee incurred entertainment expenses of ₹ 8,01,890/- in the year under consideration. He asked the assessee to prove that such expenses were incurred wholly and exclusively for earning of professional receipt. The AO was of the view that the assessee could not substantiate his own claim with supporting documentary vouchers. He, therefore, disallowed the claim of the assessee on account of entertainment expenses amounting to ₹ 8,01,890/-. 5. Being aggrieved the assessee carried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t necessarily have their origin in contractual obligations and if the assessee carrying on a business finds that it is a commercial expediency to incur directly or indirectly, it would be open to such an assessee to do so notwithstanding the fact that whether a formal deed did not precede the incurring of such expenditure. The ld. CIT(A) by considering this fact that the total fee from both the law firms amounted to ₹ 2,48,50,000/-, whereas the entertainment expenditure incurred while rendering services amounted to ₹ 8,01,890/- constituting only 3% approximate of such fee, which were nominal in nature, was of the view that the disallowance of the entire expenditure was not justified. However, by keeping in view the personal elem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hl Co. to render consultancy services and advice on the matters relating to his field of expertise. The AO asked the aforesaid firms u/s 133(6) of the Act about the involvement of the assessee and in response the above said two firms did not deny the facts that the services were rendered by the assessee. In the present case, the incurring of expenses was not doubted. However, the AO was of the view that those expenses could have been recovered from the clients and accordingly made the disallowance of the entire expenses incurred under the head entertainment and travelling . In the present case, it appears that the AO did not appreciate this fact that the assessee had incurred approximate 3% of the personal fee for entertainment expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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