TMI Blog2014 (5) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... highly unusual that the assessee shall deliver the vehicles to its customers without receiving full sale proceeds - there is no justification for disallowing the entire trade discount claimed by the assessee, but some disallowance due to various defects pointed out in the order is called for - the disallowance out of trade discount claimed by the assessee is restricted inclusive of the amount written off by the assessee as irrecoverable as against disallowance confirmed by the CIT(A). Disallowance of RTO taxes – Held that:- The assessee has paid RTO taxes to the Government Department of Road Transport and there is no material brought on record to doubt the genuineness of the said payment - The assessee has explained that a scheme was devised to attract customers, the assessee bore expenses relating to RTO and registration charges of the customers purchasing tractors from the assessee - Necessary entries were passed in the account book of the assessee and expenditure was for the business purpose only – thus, allowable u/s 37of the Act – Decided in favour of Assessee. Disallowance 25% of the demonstration expenses – Held that:- Adhoc disallowance was made for want of complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The ld.CIT(A) has grievously erred in law and or on facts in upholding the following disallowances: (i) Disallowance of trade discount Rs.45,29,151 (ii) Disallowance of RTO Tax Rs.10,51,740 (iii) Out of Demonstration Exp. @ 25% Rs.87,695 (iv) Out of Salary Exp. @ 25% Rs.4,51,117 (i) Out of Petrol Exp. @ 25% Rs.2,14,800 6. The learned counsel for the assessee submitted that the amount of trade discount includes insurance premium paid by cheque of Rs.5,99,884/-. He submitted that the assessee is in the business of sale of tractors/agriculture implement and services thereof, and has to give trade discount to its customers to effect sales on behalf of its principal. He submitted that due to trade discount allowed by the assessee, it was able to declare a total turnover of Rs.4.69 crores during the year, after deducting the amount of trade discount etc. He submitted that the insurance amount on the vehicles at Rs.5,99,884/- was paid by account payee cheques only to the insurance company, and therefore, no disallowance out of this head was called for. Regarding the balance trade discount, he submitted that it consists of cheque component of Rs.16,87,327/- and cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayee cheques, and there is no material brought on record to doubt the genuineness thereof. The insurance premium was paid by the assessee as a business policy and since was for business consideration, the same is allowed as allowable deduction to the assessee. With regard to the balance amount of disallowance out of trade discount, we find that the assessee has filed copies of discount vouchers from pages no.236 to 442 of the compilation before us, which bear the signature of the payee also. However, a chart filed by the assesee at page no.589 of the compilation shows that it includes the payment made by cheque of Rs.16,87,327/- and also made in cash at Rs.17,24,944/-. We find that the assessee could not prove the genuineness of the entire cash payment of Rs.17,24,944/- claimed to have been paid as trade discount to the customers. The possibility of inflation in the figure of trade discount could not be ruled out. Some of the cheques were issued as bearer cheque to the payee of the trade discount. In one case, the assessee has admitted that the amount of trade discount paid per cheque was encashed by some other person, than the person to whom the cheque was issued. Although we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and therefore allowable under section 37of the Act. Accordingly, the issue is decided in favour of the assessee, and the AO is directed to allow the amount of Rs.10,51,740/- as allowable deduction to the assessee. 12. Next is regarding the disallowance of Rs.87,695/- representing 25% of the demonstration expenses. We have heard parties. We find that adhoc disallowance was made for want of complete details regarding the meetings, number of attendance etc. We find that the assessee has claimed that the customers for tractor were illiterate persons of remote area and the tractor brand sold by the assessee was new, and therefore, the assessee has to give demonstration thereof so as to explain the features and benefits of the product dealt by the assessee. In these facts and circumstances of the case, we allow the amount of Rs.87,695/- to the assessee. 13. Next disallowance is Out of salary expenses, adhoc disallowance at 25% of Rs.4,51,117/- was made by the AO and confirmed by the CIT(A). 14. The learned counsel for the assessee submitted that these were employees of the principal company, and hence, TDS provision was not applicable, and was case of reimbursement of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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