9911796707
TMI Blog2011 (11) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 50,000/- out of total of ₹ 1,00,000/- made by the AO on a/c of disallowance out of function expenses, without appreciating the fact that the disallowance had been made as the expenses-in-question were not incidental to the business. 3. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of ₹ 1,54,000/- out of total of ₹ 2,22,500/-, made by the AO on a/c of disallowance out of training of staff expenses, without appreciating the fact that the disallowance had been made as the expenses-in-question were excessive in comparison to prevailing market rates. 4. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of ₹ 4,24,088/-, out of total of ₹ 4,34,088/- made by the AO on a/c of disallowance out of bus-pass/commission/discount expenses, without appreciating the fact that the disallowance had been made as the expenses in question had not been incurred wholly and exclusively for business purposes. 5. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of ₹ 2,00,000/-, made by the AO on a/c of disallowance out of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated the submissions made before him. 3.2. The Ld. DR , on the other hand, relied on the order of the Assessing Officer. 4. Having regard to the facts of the case and the submissions made by the assessee before the Ld. CIT(A) and the findings thereto given by the Ld. CIT(A), in his detailed order, we are of the considered opinion that the Ld. CIT(A) rightly deleted the addition, which was made by the A.O. without appreciating the facts in right perspective. We, therefore, do not find any valid ground to interfere with the findings of the Ld. CIT(A). Accordingly, we uphold the findings of the CIT(A), on this issue and dismiss this ground of appeal of the revenue. 5. In the second ground of appeal, the revenue contended that the Ld. CIT(A), erred in deleting the addition of ₹ 50,000/- out of the total of ₹ 1,00,000/- made by the AO on account of disallowance out of function expenses. The brief facts of the case are that the AO found that the assessee had shown expenses of ₹ 1,17,319/- charged to profit loss account as function expenses. The A.O. called for details and vouchers of such expenses and found that the amount of ₹ 48,000/- was show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case are that in the course of assessment proceedings, the AO noticed that the assessee had debited an amount of ₹ 4,45,000/- in profit loss account on account of training to staff. The assessee was asked to file details of such expenditure. On perusal of such details, the AO found that two partners, namely, Sh. Navdeep Walia and Smt. Deepika Walia received payments of ₹ 1,60,000/- and ₹ 1,95,000/- respectively for the training work done. The A.O. observed that for four days training on 14.03.2008, 15.032008, 16.03.2008 and 17.03.2008, the appellant had claimed expenditure of ₹ 3,55,000/- which worked out to ₹ 88,750/- per day. The training for the four days was given to only eight candidates, which is covered under section 40A(2) of the Act. The payment claimed to have been made by the assessee on account of training to staff excessive was considered excessive by the A.O. Thus, he disallowed 50% of the expenditure claimed by the assessee under the head training to staff at ₹ 2,22,500/- out of total expenditure of ₹ 4,45,000/-. Aggrieved by the order of the A.O., the assessee filed an appeal before the Ld. CIT(A). The CIT(A), called fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that no disallowance needs to be made from the payment of ₹ 90,000/- paid to M/s. BHN Computers, Khanna for the training work done. This amount needs to be reduced by the A.O. before calculating the 20% disallowance. 8.1. In view of the above legal and factual discussions of the issue in question, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. Hence, this ground of appeal of the revenue is dismissed. 9. In the fourth ground of appeal, the revenue contended that the CIT(A) was not justified in deleting the addition of ₹ 4,24,088/- out of the total of ₹ 4,34,088/- on account of disallowance out of bus-pass/commission/discount expenses. The brief facts of the case are that during the assessment proceedings the A.O. noticed that the assessee had debited an amount of ₹ 17,36,355/- in the profit and loss account on account of commission, discount and bus-passes paid to the students. The A.O. issued summons u/s 131 of the Act to sixteen persons/students in order to verify the genuineness of the claims made. The A.O. recorded statements of four persons and on the basis of each statement held that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to have been spent. The A.O. examined and scrutinized the expenditure by calling the beneficiaries u/s 131 of the Act and recording their statements. They had all satisfied the test that the expenditure had been incurred exclusively for the purpose of business. The reasonableness of the expenditure has also been gone into by the A.O. and the purpose of determining whether the amount was actually spent has been established. In such circumstances only a small portion of the expenditure i.e. to say about ₹ 10,000/- can be allowed to be sustained and the balance deleted. 10.1. In view of the above legal and factual discussions of the case, we concur with the findings of the Ld. CIT(A) and uphold his action. Hence, this ground of appeal of the revenue is dismissed. 11. In the fifth ground of appeal, the Department contended that the Ld. CIT(A) erred in deleting the addition of ₹ 2,00,000/- made by the AO on account of disallowance out of conveyance and mobile allowance expenses. Briefly stated, the facts of the case are that the AO noticed that the assessee had debited in the profit and loss account an amount of ₹ 3,07,200/- on account of conveyance all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial expediency. The adhoc disallowance made is, therefore, deleted . 12.1. Considering the totality of the facts, as narrated hereinabove, we are of the considered opinion that the Ld. CIT(A), was justified in deleting the addition which made by the A.O. without appreciating the facts in right perspective. We, therefore, do not find any valid ground to interfere with the findings of the CIT(A). According, we uphold the same and dismiss this ground of appeal of the revenue. 12. In the sixth ground of appeal, the revenue contended that the Ld. CIT(A), was not justified in deleting the addition of ₹ 2,50,000/- made by the AO on account of disallowance of license fee expenses. The brief facts of the case are that the assessee had claimed expenditure of ₹ 2,50,000/- in the profit loss account for making payment towards license fees to M/s. PTU and CAL-C. The A.O. asked the assessee to explain how such license fees had been claimed as revenue expenditure. Being not satisfied with the explanation of the assessee, the A.O. disallowed the same by holding that the same was capital in nature. Aggrieved by the order of the Assessing Officer, the assessee filed an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any infirmity in the findings of the Ld. CIT(A) and the same are upheld. Accordingly, this ground of appeal of the revenue is dismissed. 14. In the seventh ground of appeal, the revenue contended that the Ld. CIT(A), was not justified in deleting the addition of ₹ 5,75,000/- made by the A.O. u/s 68 of the Act on account of cash credits in the capital accounts of the partners. The brief facts of the case are that the during the assessment proceedings, the A.O. noticed that there were cash credits of ₹ 2,25,00/- and ₹ 3,50,000/- appearing in the accounts of Sh. Navdeep Walia and Mrs. Deepika Walia. The AO asked the assessee to explain the source of these cash deposits along with documentary evidence. The assessee stated that all the partners were assessed to tax and they had introduced capital from their own sources. The A.O. observed that the assessee had failed to prove the source of the cash credits and also failed to discharge its burden of proving the identity as well as creditworthiness of the creditors and genuineness of the transactions. Therefore, he added the same to the income of the assessee. Aggrieved by the order of the A.O., the assessee fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of the firm were brought into the firm by way of the partners then no part of that amount can be held to be revenue income of the partnership firm. In the assessment proceedings of the partnership firm the incorrectness of the explanation offered as regards the source from which partner obtained the money would be of no effect. [Ref: Balbhadra Chand Munna Lal v CIT (1958) 33 iTR 781]. It is for the partners to explain the source of credit. The fact of actual advance may justify the assessment in the partners hands, even where the explanation of the partner as to the source is unexplained. The relevant provision for making such an addition is section 69 and not section 68 [Ref: CIT v. Shiv Shakti Timbers (1998) 220 ITR 505 (MP), (1983) 142 ITR 133 (Pat)]. Where funds clearly emanate from the partners either by way of cheque or otherwise it is possible to prove the advance of the amount by the partner of the firm, the burden of proof and assessibility in such cases are matters which can only be considered in the partners hands [ Ref: India Rice Mills v. CIT (1996) 218 ITR 239 (All)]. The addition made on this account is therefore deleted. 15.1. In view of the above lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred on payment of commission, discount and bus passes to students. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in sustaining and excessive disallowance of ₹ 1,24,480/- out of car and telephone expenses for personal use thereof. 7. On the facts and in the circumstances of the case, the Ld. CIT(A) has failed to pass an appropriate order on ground no.11 of the appeal filed before him contesting the charging of interest u/s 234B, 234C and 234D and that withdrawn u/s 244A of the I.T. Act. 8. The first five disallowances sustained by the CIT(A) and contested in Ground No. 1 to 5 being against the law and facts available on record, deserve to be deleted whereas the quantum of disallowance for personal use of car and telephone as mentioned in ground no. 6 above deserves to be reduced reasonably and the interest charged u/s 234B, 234C 234D and the withdrawal of interest u/s 244A deserve to be deleted/reduced. 9. The appellant craves leave to add, amend or delete any ground(s) of appeal before it is finally heard for disposal. 18. In ground No.1, the assessee challenged the confirmation of disallowance by the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was made by the association to the advertisement agencies or print media as the case may be. The tax was also deducted by it at source of such payments and deposited in the government account. These facts have been certified by the association in its confirmation a copy of which is placed at page 1 of the paper book. 2.2. Hence, the appellant merely reimbursed its share of expenditure incurred by the association, which as explained earlier, did not constituted a payment within the meanings of section 194C and no tax was required to be deducted therefrom under that section. The authorities below have wrongly presumed that the association was an advertisement agency and the payment made to it by the appellant was covered by that section. Since tax was not deducted at source, the expenditure was disallowed u/s 40(a)(ia) of the Act. 2.3. The submission of the appellant are supported by following decisions: i) 81 ITD 173 (Luck) in the case of U.P. State Industrial Corporation Ltd. v. ITO ii) 83 ITD 148 (Pune)Data Digamber Sekhari Kamgar Sanstha Ltd. V. ACIT iii) The reliance of the A..O. on the decision of the Supreme Court in the case of Associated Cemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provider advertisement agency. No evidence has been filed by the assessee indicating the basis of quantification and reimbursement of such advertisement expenses. It is also relevant to mention here that no bills were produced issued by the service provider either by All India PTU DEP Association or by the recipient of the services rendered by the advertising agency, to support their claim of quantification of the amount, incurred on advertisement. It is also not clear whether reimbursement was made vouchers based or on the basis of apportionment. No basis for apportion was filed by the assessee. In the present case, it appears that the present assessee, who is recipient of the services rendered by the advertising agency, All India PTU DEP Association and the service provider are principal entities. Needless to say that onus is on the assessee to establish the non-applicability of the provisions of section 194C of the Act to its case. In the absence of such material evidences, it is not possible to dispose of the case, having regard to the rival contentions and the orders passed by the lower authorities. In view of this, we consider it appropriate to restore this issue to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 5.4 of his order are reproduced hereunder for appreciation of the facts: 5.4. In view of the facts and circumstances of the case and rival submissions of both the A.O. in his remand report and written submissions of the counsel it is seen that it is not for the A.O. to judge whether the appellant could have avoided or reduced a particular expenditure on the ground that the motive behind the expenditure was to unduly satiate ones own religious or personal beliefs. An item of expenditure to be made eligible for deduction must be looked at from the point of view of the person making the payment and not of the recipient. To allow the claim for deduction is a matter of proof. Payment has to be proved by the appellant (Ref: Ramanand Sagar v. DCIT (2002) 256 ITR 134 (Bom.). However, it is no where A.O s case that such an expenditure made voluntarily was purely for personal reasons and not for purposes of business. There is a reasonable nexus between the expenditure and the business therefore such expenditure has to be regarded as having been incurred for the purposes of business. The A.O. has in his remand report rightly accepted the eligibility of deduction u/s 80G to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to the remand report the assessee submitted that expenses at least to the extent of ₹ 15,090/- being 1/5th of ₹ 75,458/- (consumption of diesel in generator), no disallowance was called for; as the generator was exclusively used for the purpose of business and there was no element of personal nature at all. However, in view of the remand report of the A.O. and submissions of the assessee, the CIT(A) allowed a relief of ₹ 15,090/- (being 1/5th of ₹ 75,458/-) from the total disallowance of ₹ 1,39,570/-. Now, aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before us against sustenance of addition of ₹ 1,24,480/-. 25.1 The Ld. DR relied on the orders of the authorities below. 25.2 In the course of present assessment proceedings, the Ld. Counsel for the assessee submitted that the assessee paid Fringe Benefit Tax on car and telephone expenses. He further submitted that the fringe benefit tax is levied on such benefits admitting those as business expenditure. Therefore, there should be no element of personal expenditure, which could disallowed u/s 38(2) of the Act. He further placed reliance on the decision dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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