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2015 (8) TMI 127 - AT - Income TaxDisallowance of commission - Held that:- Such ad hoc disallowance without any basis is not justified and hence, we hold that no disallowance is called for out of these expenses claimed by the assessee under the head commission expenses because no basis has been indicated by the Assessing Officer in the assessment order for making this disallowance and the same was made by making a general observation that complete supporting evidence was not brought on record without indicating even one particular evidence, which was asked for by the Assessing Officer and could not be produced by the assessee. Similarly, in assessment year 2003-04 also, the Assessing Officer has made similar observations that the assessee failed to produce complete supporting evidence without pointing out even one particular evidence, which was required by the Assessing Officer and could not be produced by the assessee. Considering all these facts, we delete the complete disallowance under the head commission payment in both the years. - Decided in favour of assessee. Disallowance of telephone expenses - Held that:- As per the judgment of Sayaji Iron and Engg. Co. (2001 (7) TMI 70 - GUJARAT High Court), even if there is personal use of telephone and vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Thus we hold that the disallowance made by the Assessing Officer under the head telephone expenses on the allegation that there may be personal use by the Directors/employees of the assessee company is not justified. Accordingly, we delete the entire disallowance made by the Assessing Officer in both the years under the head telephone expenses. - Decided in favour of assessee. Disallowance of freight & cartage (outward) - Held that:- Even if we compare the expenses claimed by the assessee and turnover of assessment year 2003-2004 and assessment year 2001-2002, the increase in expenditure in assessment year 2003-04 over and above the expenditure of assessment year 2001-2002 is excess about 30% but since the expenses of assessment year 2001-02 itself are excessive and we feel that the disallowance of 30% out of expenses in assessment year 2001-2002 is not excessive, the disallowance of 30% in assessment year 2003-2004 is also reasonable because in assessment year 2003-2004 also, it is noted by the Assessing Officer that freight & cartage outward payment of ₹ 51.57 lac have been made in cash, which was not verifiable as per the Assessing Officer in Para 7 of the assessment order for that year. Hence, in both the years, we find that the disallowance made by the Assessing Officer of 30% of expenses under the head freight and cartage outward is reasonable and justified - Decided against assessee. Disallowance of vehicle running & maintenance - Held that:- We find force in the submissions of Learned A.R. of the assessee because as per this judgment of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. (supra), even if there is personal use of vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Therefore, by respectfully following this judgment of Hon'ble Gujarat High Court, both these grounds of the assessee are allowed - Decided in favour of assessee. Disallowance of consumable stores - Held that:- When we compare the turnover of assessment year 2000-01 to assessment year 2001-02, we find that the increase in turnover is around 50% but when we compare the increase in expenses under the head consumption of consumable stores, the increase is around 127%, which is quite abnormal and the same could not be explained by the assessee and this is also worth noting that the expenses under this head were incurred in cash as noted by the Assessing Officer. When we compare the turnover of assessment year 2003-04 with that of assessment year 2001-02, we find that the increase in turnover is about 200% and the increase in consumption of consumables stock in assessment year 2003-04 as compared to assessment year 2001-02 is about 75%. Hence, it is seen that the increase in expenses in the assessment year 2003-04 is not abnormal even if the same is compared with the expenses for assessment year 2001-02 after considering 30% disallowance in that year. Thus the disallowance in assessment year 2001-02 made by the Assessing Officer and confirmed by learned CIT(A) to the extent of 30% in that year is proper and reasonable but no disallowance in assessment year 2003-04 is called for in the facts of the present case in view of the fact that the increase in expenses under this head in assessment year 2003-04 as compared to the reduced expenses of assessment year 2001-02 is about 150% when the turnover increase in assessment year 2003-04 as compared to assessment year 20001-02 is about 200%. - Decided partly in favour of assessee. Disallowance of unabsorbed depreciation - Held that:- When we go through the order of learned CIT(A) for assessment year 2001-02, we find that the issue regarding unabsorbed depreciation is not arising out of order of CIT(A) in that year because the ground raised by the assessee before CIT(A) was regarding disallowance out of commission, out of telephone expenses, out of freight cartage outward, out of vehicle running expenses, out of consumable stores and out of previous years expenses and this issue has been raised by the assessee before us by way of normal grounds and not by way of additional ground and therefore, this ground of the assessee does not call for any adjudication because this issue is not arising out of the order of learned CIT(A). - Decided against assessee. Disallowance of depreciation on machinery - Held that:- It is noted by learned CIT(A) for assessment year 2003-04 that the Assessing Officer has disallowed the claim of depreciation on the basis that the assessee could not produce the bill being the cost of new addition to plant & machinery. The said bill was not produced before learned CIT(A) also and the same is also not produced before us and therefore, we do not find any reason to interfere in the order of learned CIT(A) on this issue. - Decided against assessee.
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