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TMI Blog2014 (9) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to postponement of liability and in such eventuality Hon’ble Supreme Court judgment in the case of Excel Industries [2013 (10) TMI 324 - SUPREME COURT ] is also applicable. Therefore, this ground of the revenue is dismissed. Ad hoc disallowance in respect of items of expenditure on Gifts to dealer/mason on dealers/mason meet, Sweets etc. on occasion of festivals/visits of guest/Govt. Officials and Gifts to Govt. Officials/Guests on festival/visi tcannot be made. Assessees books are not rejected and the same are duly audited. We find no force in AOs vague and sweeping observations that expenditure is unverifiable. The expenditure being wholly and exclusively for assessee’s business is allowable. In view thereof, there is no justification in retaining the ad hoc 20% by ld. CIT(A). Consequently the CIT(A)’s direction about FBT becomes infructuous. Revenue ground in this behalf is dismissed and assessee’s grounds are allowed. - ITA No. 81/JP/2012, ITA No. 173/JP/2012 - - - Dated:- 30-9-2014 - T. R. Meena (Accountant Member) And R. P. Tolani (Judicial Member) For the Assessee : P. C. Parwal For the Department : Subhash Chandra ORDER R. P. Tolani (Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 52.50 crores from State Bank of Indian to finance its 17.50 MW Captive Power Plant. As per the terms and conditions of the term loan, interest amounting to ₹ 33,74,732/- became due for payment on 31-03-2008. As the assessee company was following mercantile system of accounting, it provided liability of interest of ₹ 33,74,732/- as on 31-03-2008 in books of account. The payment of such interest was made on 03-04-2008 i.e. before the due date of filing of return of income. Accordingly, in the income tax return, the same was claimed as deduction u/s 43B of the Act. AO however disallowed the claim. 5.2 In first appeal, the ld. CIT(A) deleted the addition by following observation. 4.12 I have gone through AO s finding and assessee's submission and also gone through the agreement and payment details. It is seen that the payment to the bank was made as per agreement and the interest became payable on the last day of the month (i.e. 31-03-2008). The interest was also paid before due date of filing of return. In view of the above the interest is allowable as expenditure in the year under consideration. The AO is directed to delete the addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,834/- The AO made adhoc disallowance of 50% out of the claimed expenses i.e. ₹ 12,00,917/- by observing that the expenses are unverifiable as the assessee company failed to file the complete details of the same. Assessee claims that the complete details of these expenses were submitted during the course of assessment proceedings vide letter dated 14-12-2010. From the said details, it is proved that the gifts have been distributed to dealers/Govt. officials on festival/visit which is a common phenomenon. The expenses are reasonable considering the volume of business of the assessee. The AO at page 10 of its order has referred to few gift items but has not pointed out the nature of defect in them and has not given any justifiable reasons for making adhoc disallowance. The entire expenditure incurred by the assessee company is necessarily and exclusively for the purpose of business and qualify for deduction u/s 37(1) of the Act. Assessee relied on the following case laws. 1. Sahara India Mass Communication vs. ACIT (2009-TIOL510-ITAT-DEL). 2. CIT vs. Varinder Agro Chemicals Ltd. (2007) 290 ITR 147 The AO however disallowed 50% thereof on the ad hoc bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal purpose is not allowable as deduction. However, such deduction would not be liable for FBT. Accordingly, in this case FBT on assessee would be leviable only on the balance amount out of total expenses under these heads as part of it has already been disallowed. It will be in the interest of justice that consequential relief is given by the AO in the assessment of assessee in respect of FBT. The AO is directed to give consequent benefit accordingly. 8.1 By Ground No. (iii) of the Revenue is aggrieved on the relief given by ld CIT(A) about the staff welfare expenses of ₹ 59,37,859/-. The AO observed that these expense include expenses incurred on canteen and guest house of ₹ 14,18,332/-, other expenses of ₹ 16,15,615/- and club expenses of ₹ 5,80,959/-. AO made adhoc disallowance of 50% out of the total claimed expenses i.e. ₹ 29,68,929/-. 8.2 The assessee in first appeal made following submissions. 4.41 (1) At the outset, it may be pointed out that the total expenditure claimed under this head is ₹ 59,37,859/-. However, the AO has only specified expenditure of ₹ 36,14,906/- under the three heads which according to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee also contended that assessee has already paid FBT on these amount and so no disallowance should be made under this head. As per Board Circular No. 8/2005 dated 29-08-2005, issued in the form of question answer, any expenditure incurred for personal purpose is not allowable as deduction. However, such deduction would not be liable for FBT. Accordingly, in this case FBT on assessee would be leviable only on the balance amount out of total expenses under these heads as part of it has already been disallowed. It will be in the interest of justice that consequential relief is given by the AO in the assessment of assessee in respect of FBT. The AO is directed to give consequent benefit accordingly. 8.4 Aggrieved both the parties are before us. 8.5 The ld. DR relied on the order of the AO. 8.6 Ld Counsel for the assesse apropos revenue grounds no i and ii relied on the order of ld. CIT(A). Apropos ground of assesses appeal and revenue ground no iii reiterated the facts and pleads that similar issue arose in assessee s case in AY 2009-10, which came to be adjudicated early by ITAT due to high demand appeal. The ITAT, Jaipur Bench (in ITA No. 361/JP/2012 of assessee and ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance should be deleted in view of ITAT judgment consequently the direction to give reduction in FBT will become non est. 8.7 We have heard the rival contentions and perused the material available on the record. Apropos revenue ground no (i), we see no infirmity in the order of ld CIT(A) in allowing the 43B claim to the assesse since it has not been disputed that amount in question was paid before due date of filing return of income and necessary evidence is brought on the record. Hence this ground of the revenue is dismissed. 9.1 Apropos revenue ground no (ii) also we see no infirmity in the order of ld. CIT(A) in respect of expenditure of ₹ 4,75,121/- as it has not been disputed that same pertained to AY 2008-09 and was booked in subsequent year before filing of the audit report. It is trite law that assesse can claim such expenditure relating to a year which is though accounted for in subsequent year but before filing of the audit report. In any case it will amount to postponement of liability and in such eventuality Hon ble Supreme Court judgment in the case of Excel Industries is also applicable. Therefore, this ground of the revenue is dismissed. 10.1 Apropos reve ..... 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