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TMI Blog2016 (6) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld. Counsel for the assessee. Although no revenue receipts are generated during the year, however, the company is in existence and has started generating revenue in the next year, a fact stated by the Ld. Counsel for the assessee and not controverted by the Ld. Departmental Representative. In the immediately preceding assessment year, the company has paid remuneration of 9,00,000/- and no disallowance has been made. In our opinion, once a Director is in employment his salary should not be reduced in a particular year because there is no generation of revenue. The logic given by the revenue authorities in the instant case in our opinion is not justified. We therefore set aside the order of the CIT(A) and direct the AO to delete the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on motor cars amounting to 1,17,453/- out of 2,34,906/- is not justified. The addition, if any, can be made in the hands of the Directors as perquisite. Disallowance of Electricity expenses - Held that:- As we find the same has rightly been disallowed by the AO and upheld by the CIT(A) since the same relates to the bills of Radhika Bungalow where the parents of the assessee are residing and bills of the residence of one of the Directors Shri Sandip Mantri. Appeal decided partly in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... pany does not have any business set up or has ceased to do business activity. On the contrary the company as a going concern is in existence and owns reasonable infrastructure, assets and has employed labour force and is ready/in a position to execute contracts/render services. It was submitted that during the impugned assessment year the assessee company has incurred the following major expenses : Sr. No. Particulars Rupees 1. Personnel Costs 12,01,641 2. Site Development Charges 2,96,665 3. Rent Paid 2,43,000 4. Travelling and Conveyance 2,96,232 5. Usage Charges 1,77,000 6. Postage and Telephone 1,58,620 7. Office Electricity Charges 63,389 8. Legal and Professional Fees 42,798 9. Sales Promotion Expenses 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure appears to be unreasonable. Further, bills to the extent of ₹ 29,905/- pertains to sister concern M/s.Global Constro. He therefore disallowed ₹ 29,905/- out of sales promotion and other expenses. 6. So far as Travelling and Telephone expenses are concerned, the AO noted that the assessee has claimed ₹ 2,96,232/- on travelling and ₹ 1,58,620/- on postage and telephone totalling to ₹ 4,52,852/-. He noted that the travelling expenses include travel to Bangkok, Malaysia and Kaulalumpur. The explanation of the assessee that it has been shown for venturing into a new business of mining was rejected by the AO. He accordingly disallowed an amount of ₹ 2,27,426/- being 50% out of the expenses of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not press for the disallowance of the following expenses : 1. Sales promotion expenses - ₹ 29,905/- 2. Electricity Expenses - ₹ 35,419/- 3. Job work charges - ₹ 93,224/- 9. So far as the other disallowance is concerned, he submitted that the CIT(A) is not justified in sustaining the above addition. He submitted that the AO and CIT(A) cannot sit in judgement regarding the commercial expediency or reasonableness of the various items of expenses incurred by the assessee. 10. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e immediately preceding assessment year, the company has paid remuneration of ₹ 9,00,000/- and no disallowance has been made. In our opinion, once a Director is in employment his salary should not be reduced in a particular year because there is no generation of revenue. The logic given by the revenue authorities in the instant case in our opinion is not justified. We therefore set aside the order of the CIT(A) and direct the AO to delete the disallowance of ₹ 4,13,500/- out of remuneration to Directors. 12. So far as the payment of rent is concerned, it is an admitted fact that no such rent was paid in the preceding year when the business was going on. When there is no business activity during the year, there was no justificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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