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TMI Blog2020 (7) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for attending conferences / meetings with the dealer Kirloskar is also accounted under the said head of expenses. The expenditure incurred is fully supported and are incurred through by banking channels. It is to be further noted that there are no qualifications, observations made by the Auditors in their report regarding these expenses are not incurred. AO has made an arbitrary adhoc disallowance of 30% without giving any reasons for the findings. A.O. has also not found out any defect / deficiency. Disallowance made is on the higher side taking into the given facts and circumstances of the case. As personal element in such expenses cannot be totally ruled out, and to meet the ends of justice 10% of the disallowance of the said expenditure would be sufficient on facts and circumstances of the case Adhoc disallowance under various expenses debited to the profit and loss account - HELD THAT:- The expenditures are very much in the nature of unavoidable expenditure in a small scale manufacturing unit. The quantum of such expenditure is also very small when compared to the volume of operations of the assessee. The assessee is running a small scale manufacturing unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 by assessing the total income of ₹ 22,83,230. 4. Two additions are challenged in this appeal, viz., (i) ₹ 1,99,787 being 30% of expenditure accounted under the head subscription and membership fees; (ii) ₹ 5,24,697 being 10% adhoc disallowance under various expenses debited to the profit and loss account. Disallowance of ₹ 1,99,787 5. The brief facts in relation to the above disallowance is that the assessee is engaged in the business of assembling, trading and marketing of diesel generator sets of Kirloskar. While completing the assessment, the Assessing Officer disallowed a sum of ₹ 1,99,787 being 30% of the expenditure accounted under the head subscription and membership fees on the ground that the expenditure claimed appears to be on the higher side and the assessee could not produce even 50% of the bills / proof in support of the claim. 5.1 On further appeal, the CIT(A) confirmed the view taken by the Assessing Officer. The CIT(A) observed that the disallowance is correct, fair and reasonable, for the following reasons:- (i) Higher personal element in such type of recreational expenses cannot be ruled out; (ii) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch presentations, meetings and discussions are held at various hotels, clubs. Such expenses incurred at hotels, clubs, for meeting, discussions, travelling etc. are accounted under the said head of subscriptions and membership fees, and also, travelling and other expenditures incurred for attending conferences / meetings with the dealer Kirloskar is also accounted under the said head of expenses. The expenditure incurred is fully supported and are incurred through by banking channels. It is to be further noted that there are no qualifications, observations made by the Auditors in their report regarding these expenses are not incurred. The Assessing Officer has made an arbitrary adhoc disallowance of 30% without giving any reasons for the findings. The A.O. has also not found out any defect / deficiency. Therefore, I am of the view that the disallowance made is on the higher side taking into the given facts and circumstances of the case. As personal element in such expenses cannot be totally ruled out, and to meet the ends of justice, I am of view that 10% of the disallowance of the said expenditure would be sufficient on facts and circumstances of the case. Hence, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 6.3 The learned Departmental Representative submitted that the disallowance of 10% of expenses which are essentially supported by self-made vouchers, is correct and no interference is called for. 6.4 I have gone through the details of the expenses aggregating to ₹ 52,46,970, which are as under:- Carriage outward 11,63,484 Expenditure on local transportation of goods purchased. The auditor has not given any adverse remark in respect of this expenditure. The observation of the AO that the auditors have also commented on this head of expenditure is wrong on facts. Commission Discount 13,71,732 Discount given to customers and commission paid to staff / others for procuring / canvassing orders. By the inherent nature of this expenditure which is originating from the appellant, normally such expenditure will be supported by self made vouchers only. Transportation charges 12,35,155 Expenditure incurred on local transportation of goods sold. By the inherent nature of this expenditure which is originating from the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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