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2014 (5) TMI 239 - AT - Income TaxDisallowance of Trade discount - Held that:- As far as the component of insurance paid to the insurance company, with regard to the various vehicles sold by the assessee, it has been paid per account payee cheques, and there is no material brought on record to doubt the genuineness - The insurance premium was paid by the assessee as a business policy and since was for business consideration, it is allowed as allowable deduction to the assessee - the balance amount of disallowance out of trade discount, the assessee has filed copies of discount vouchers, which bear the signature of the payee also - 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. The trade discount disallowance also includes the amount written off due to short recoveries from the customers - The claim of the assessee of short recovery could not be supported by the assessee with any evidence on record - it is 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 details regarding the meetings, number of attendance etc. - 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 - the assessee has to give demonstration so as to explain the features and benefits of the product dealt by the assessee thus, the amount is allowed - Decided in favour of Assessee. Disallowance is Out of salary expenses Held that:- The payment was to the employees of principal company by way of reimbursement made to the field staff appointed directly by the principal company - CIT(A) has not disputed the basic facts, but confirmed disallowance by invoking the provision of section 40(a)(ia) of the Act, which is not applicable to the facts and circumstances of the case thus, the deduction is allowed Decided in favour of Assessee. Disallowance of 25% of the petrol expenses Held that:- There is no justification for any disallowance out of the petrol expenses pertaining to the employees of the assessee - 25% of the petrol expenses relating to the partners is justified - the disallowance at 25% of the petrol expenses is sustained pertaining to the partners Decided partly in favour of Assessee.
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