9911796707
TMI Blog2005 (9) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... ire amount as entertainment expenses and has given the deduction of Rs. 65,693 allowable under s. 37(2). Thus, the AO disallowed a total amount of Rs. 10,80,693. The CIT(A) deleted the addition with the observation that the assessee has incurred the expenses of Rs. 10,25,000 for sales promotion and held that the said expenses were bona fide and reasonable. The CIT(A) accordingly deleted the addition of Rs. 10,25,000. 2.2 In respect of disallowance of Rs. 55,693 under s. 37(2), the CIT(A) observed that the AO has not given credit for the sum of Rs. 22,970 which has been disallowed by the assessee's tax auditors on account of entertainment expenses. He accordingly allowed the relief of Rs. 22,970. 2.3 The learned Departmental Representative supported the order of AO and submitted that the assessee has failed to prove the services rendered by the said party against which the payment was made. He further submitted that the assessee has simply explained the narration given in the debit note i.e. "being amount debited or account towards marketing support charges." The learned Departmental Representative submitted that the assessee has to prove the services rendered in respect of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Associates (2002) 174 CTR (Mad) 385 : (2002) 256 ITR 141 (Mad), Aruna Mills Ltd. VS. CIT (1957) 31 ITR 153 (Born) and CIT vs. Dhanrajgirji Raja Narasingirji 1973 CTR (SC) 445 : (1973) 91 ITR 544 (SC). 2.5 We have heard the learned representatives of the parties and perused the record. After considering the facts of the case, we notice that against the said payment of Rs. 10,25,000 being sales promotion expenses, the assessee got the job orders aggregating to Rs. 12.52 crores. It has been noticed from the order of the CIT(A) that these expenses have been incurred wholly and exclusively for the assessee's business. It has also been noticed that the assessee-company is engaged in the business of manufacturing equipments for chemical and other plants as also in the business of construction of chemicals and other plants at various sites throughout the country. In this regard, we find force in the submission of learned Authorised Representative that these expenses have been incurred for commercial expediency as without such expenses the large volume of the assessee's business cannot be achieved. It has also been noticed that M/s Bermaco Valves (P) Ltd., has issued various bills/debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve need of such expenses for the division. He further submitted that the assessee has debited only those expenses to the manufacturing division which relate to the manufacturing division and that it has not debited those expenses to the manufacturing division which do not pertain to the manufacturing division. The learned Authorised Representative submitted that the AO has not pointed out any specific expense which pertains to the manufacturing division, but which has not been debited to the manufacturing division. 3.4 We have heard the learned representatives of the parties and perused the record. We find that the AO has simply disallowed the claim of the assessee under s. 80-I on the basis of not correct apportionment of expenses whereas the C1T(A) has accepted the contention of the assessee and allowed the deduction under s. 80-I. The controversy before us is limited in the sense i.e., the proper apportionment of expenses between manufacturing units and others. For this purpose, it is relevant to state that the assessee is a private limited company and its books of account are subject to audit. The auditor is required to certify the P&L a/c as true and correct and in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the following narration: "Amount debited to the account of Indian Acrylics Ltd. and taken in the books as profit deducted from book profits as the same is not considered as income of Rs. 38,14,044.". The AO had noticed a note which is filed along with the return of income. The said note reads as under: "The assessee undertook the contract for the construction and erection of the plant of Indian Acrylics Ltd. at Sangrur in Punjab. While the construction and erection work was in progress, the site was attacked by terrorists and a large number of persons including the engineers employed by the assessee and the technical consultants to the project were killed/wounded. As a result, the site was unattended for a long time. The assessee at the request of the owners restarted and completed the work. However, the consultants did not return to the site and the final bill raised by the assessee was not certified by the consultants and it does not appear to have been accounted for by the customer. The total amount outstanding in the name of the customer in the books of the assessee is Rs. 53,14,044. This amount is not accepted by customer and no replies to the assessee's communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Drugs & Pharmaceuticals Ltd. (1991) 192 ITR 1 (Ker), it is held that mere passing of a unilateral entry in an assessee's books of account cannot give rise to any income when the said claim is challenged and rejected by the party concerned. Considering the facts and appellant's submissions discussed in detail above, and following the principles laid down in the judgments reported as CIT VS. Shoorji Vallabhdas & Co., CIT VS. A. Gajapathy Naidu, CIT VS. Nadiad Electric Supply Co. Ltd., CIT VS. Motor Credit Co. (P) Ltd. and CIT VS. Kerala State Drugs & Pharmaceuticals Ltd., it is held that the alleged income of Rs. 38,14,044 has not accrued to the appellant during the accounting year relevant to the assessment year under consideration. Therefore, the AO is directed to allow the appellant's claim for deduction of the said sum of Rs. 38,14,044. Therefore, the appellant gets a relief of Rs. 38,14,044 in this regard. " 5.2 The learned Departmental Representative supported the order of AO whereas the learned Authorised Representative supported the order of CIT(A). 5.3 We have heard the learned representatives of the parties and perused the record. The brief facts of the case are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the amount of Rs. 53,14,044 showing debited to the account of the awarder in the books of account of the assessee. However, the awarder has not accepted the said claim of Rs. 53,14,044. It has been pointed out before the CIT(A) that the maximum amount that could be payable to the assessee was Rs. 15 lakhs. Accordingly, the income of Rs. 53,14,044 has been credited in assessee's books of account, the assessee has debited the sum of Rs. 38,14,044 (Rs. 53,14,044 - Rs. 15,00,000) from the total income on the ground that assessee's claim was unilateral claim not accepted and acted upon by the customers. The contention of the assessee that the said claim cannot form the basis of the assessee's income. After considering the facts of the case and after going carefully through the orders of lower authorities, we find that the CIT(A) has elaborately discussed the issue at length. He has also discussed the various judgments cited by the learned Authorised Representative. After considering the facts of the case, we find that the CIT(A) has correctly held that the said income has not been accrued to the assessee during the year under consideration, we find that the CIT(A)' s order is reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made in cash to the labourers. Cash payments of Rs. 2,79,055 have been made to sub-contractors for paying wages to their employees. The contention of the assessee that the payments made in cash are duly covered by the exceptional and unavoidable circumstances as stipulated in r. 6DD(j). We find that the CIT(A) before deleting the addition discussed various judgments including the judgment of Calcutta High Court reported in Girdharilal Goenka VS. CIT (1989) 80 CTR (Cal) 140: (1989) 179 ITR 122 (Cal) wherein the object of s. 40A(3) has been discussed. The CIT(A) has also relied upon the judgment of Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh, Etc. VS. ITO (1991) 97 CTR (SC) 251 : (1991) ITR 667-672 and 673 (SC). We find that before deleting the addition, the CIT(A) has discussed the relevant judgments and CBDT circular No. 220 dt. 31st May, 1997. After considering the facts of the case, we find that the CIT(A) has correctly deleted the addition made under s. 40A(3) as the cash payments made were in exceptional circumstances, i.e., payment to labourers and in accordance with CBDT circular cited supra. We do not find any error in the order of the CIT(A). There ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
