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2017 (5) TMI 676 - AT - Income TaxAddition of sales promotion expenses and miscellaneous expenses - whether expenses being incurred for the purposes of business? - Held that:- The software has been developed by the principal company to be used by the distributor and names it as distributor's management software and by providing this software to the assessee, the principal M/s. Hero Moto Corps Ltd. billed the assessee with one-time charges-DMS. Thus, the assessee has been charged for the installation of the software package, which was designed by the principal company. The case of the assessee is duly covered by the said decision of the Hon’ble Madras High Court in CIT v. Southern Roadways Ltd. [2007 (6) TMI 193 - MADRAS HIGH COURT]. No contrary decision was brought to our knowledge. Therefore, respectfully following the decision of the Hon’ble Madras High Court, we delete the addition made - Decided in favour of assessee. Disallowance of the salary paid to Smt. Seema Gupta by applying the provisions of section 40A(2)(b) - Held that:- It is not denied that Smt. Seema Gupta is the wife of son of one of the partners. She has been appointed as a supervisory staff. Under section 40A(2)(b)(iv) of the Act, the relative of the partner is regarded to be a person referred to in section 40A(2)(a) of the Act. The relative has been defined under section 2(41) of the Act which means in relation to an individual, the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. Wife of son of the partner does not fall within the definition of the relative as defined under sub-section (2) of section 41 of the Act. In view of this fact the provisions of section 40A(2)(b) are not applicable. Disallowance under the head depreciation on car, under the head car running and maintenance and under the head postage and telephone expenses - Held that:- The disallowance on account of personal expenses is on the higher side. The personal use of the car has not been ruled out. Therefore, restrict the disallowance to one-tenth of these expenses. Therefore, the disallowance is reduced from ₹ 51,058 to ₹ 30,635. This ground stands partly allowed. Sales promotion and miscellaneous expenses - Held that:- Assessing Officer has disallowed these expenses by observing that all the vouchers related to these heads were not open to verification because for some vouchers, the names and addresses were not verifiable and were also paid in cash as well as self-drawn. The assessee although went in appeal but remained unsuccessful. The disallowance, in my opinion, is merely an ad hoc disallowance. If any of the expense was of unverifiable in nature and not incurred for the purpose of the business, only that expenditure could have been disallowed. It is not a case of the Revenue that the expenses incurred in cash exceeds the limit as prescribed under section 40A(3) of the Act.
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