2011 (10) TMI 725 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of brokerage/commission expenses.
3. Disallowance of motor car expenses and depreciation.
4. Disallowance of telephone expenses.
5. Disallowance of proportionate expenses u/s 14A.
6. Disallowance of foreign traveling expenses.
7. Charging of interest u/s 234B.

Summary:

Condonation of Delay:
The assessee filed an appeal with a delay of 463 days for AY 2005-06. The delay was attributed to the illness of Mrs. Harsha Parmar, CA, who was handling the case. The Tribunal, considering the affidavits and medical certificates, found the delay to be neither willful nor deliberate. It was held that "a mistake on the part of the counsel may in certain circumstances be taken into account in condoning delay." The Tribunal condoned the delay and admitted the appeal for hearing on merits.

Disallowance of Brokerage/Commission Expenses:
The assessee claimed brokerage expenses for arranging third-party exports and sale of DEPB licenses. The Assessing Officer disallowed these expenses based on the denial of brokerage involvement by the other parties. The Tribunal noted that the payment of brokerage was not disputed by the recipients and was made after TDS deduction. It was held that "the payment of brokerage by the assessee is an independent transaction between the assessee and the broker." The Tribunal allowed the claim of the assessee, setting aside the order of the CIT(A).

Disallowance of Motor Car Expenses and Depreciation:
The AO disallowed 10% of motor car expenses and depreciation on the ground of personal use. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance, stating that "since the assessee is an individual and nothing has been brought on record that the assessee is using a separate car for its personal use, the personal use of the vehicle cannot be ruled out."

Disallowance of Telephone Expenses:
The AO disallowed 5% of telephone expenses for personal use, which was confirmed by the CIT(A). The Tribunal upheld the disallowance, noting that "since the assessee is an individual the personal use of telephone cannot be ruled out."

Disallowance of Proportionate Expenses u/s 14A:
The AO disallowed proportionate expenses related to exempt income. The CIT(A) concurred with this view. The Tribunal restored the issue to the AO for fresh adjudication in light of the decision in "Godrej & Boyce Mfg P Ltd vs DCIT," emphasizing that "the provisions of section 14A are not applicable as no expenditure directly or indirectly has been incurred in relation to the exempt income."

Disallowance of Foreign Traveling Expenses:
The AO disallowed 10% of foreign traveling expenses, suspecting personal use. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance, stating that "since the assessee is an individual and nothing has been brought on record to show that the entire expenditure has been incurred for the purpose of business of the assessee; therefore, element of personal expenditure cannot be ruled out."

Charging of Interest u/s 234B:
The issue of charging interest u/s 234B was deemed mandatory and consequential, requiring no specific adjudication.

Conclusion:
The appeals filed by the assessee were partly allowed for statistical purposes, with specific directions for fresh adjudication on certain issues. The order was pronounced on the 14th day of October 2011.