TMI Blog2011 (6) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... ed both on facts and in law in confirming the disallowance of an amount of ₹ 26,74,542/- on account of car expenses. (ii) That the above disallowance has been confirmed despite the same being, incurred wholly and exclusively for the purposes of business and rejecting the contention of the assessee that there cannot be an element of personal nature in case of a company, being a separate legal entity. 3(i) On the facts and circumstances of the case, learned CIT (A) has erred both on facts and in law in confirming the adhoc disallowance of ₹ 4,17,336/- on account of entertainment expenses on account of personal use of employees and directors. (ii) That the above disallowance has been confirmed ignoring the explanation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in nature, hence no adjudication is required. Issues raised in grounds no.2(i) 2(ii) are related to disallowance from car expenses for personal use. Learned AR submitted that this issue is covered in favour of the assessee by the following decision of the Hon'ble Gujarat High Court :- (i) Sayaji Iron Engg. Co. vs. CIT (2002) 253 ITR 749 (Guj.); (ii) CIT vs. Dinesh Mills Ltd. (2005) 199 CTR 509 (Guj.); and (iii) Dinesh Mills Ltd. (2002) 254 ITR 673 (Guj.) Ld. AR pleaded to set aside the order of the authorities below and allow assessee s ground. 4. Learned DR relied on the orders of the authorities below and pleaded to dismiss assessee s grounds. 5. After hearing both the sides and considering the material on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms and conditions of service and, in so far as the assessee was concerned, it was business expenditure and no part of the expenditure could be disallowed. Revenue had not cited any contrary decision. Respectfully following the aforementioned decisions, we hold that the disallowances made by the Assessing Officer are not warranted insofar as the same has been made merely on the basis of personal use. Since the assessee is a corporate assessee such disallowances are not justified in view of case laws relied upon. We accordingly direct to delete the aforementioned disallowance. 6. In the ground nos.3(i) to 3(iii), the issue is regarding the ad hoc disallowance of ₹ 4,17,336/- out of entertainment expenses. In the ground no.4, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ₹ 42.23 lakhs which on an average work out to ₹ 20,000/- approximately for each working day. 5.8 As regards the business promotion expenses, the Ld. AO asked the assessee to establish the nexus with the business. It was further observed that many entries for the expenditure were of small amount and the expenses were incurred in cash for which no verification was possible. Therefore, invoking provisions of section 37(1), the AO made a part disallowance of the expenses claimed @ 20% holding the same to have been incurred for non-business purposes. 5.9 Subsequent to the discussion as mentioned above, the Ld. AR stated that he had no objection if the disallowance out of the entertainment and business promotion expenses is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of personal use of employees and directors. The CIT (A) has sustained part of the addition by holding that the Assessing Officer has pointed out various discrepancies in the expenses claimed and some of the expenses prima facie appeared to have been incurred for non-business purposes. The CIT (A) has also recorded that on many occasions, the expenses have been incurred in cash for which supporting evidences in respect of third party bills were not available. Many of the entries in the account were not having narration for what business purposes the same were spent. Similarly, in the case of business promotion expenses, the CIT (A) has confirmed the Assessing Officer s observation that the assessee has failed to establish the nexus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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