2017 (10) TMI 1622 - AT - Income Tax

Addition on account of interest attributable to advance made to Sh. Arun Kumar - Action of the AO in disallowing interest as interest attributable at 12% on the ground that this sum has been advanced interest free to Sh. Arun Kapoor S/o Sh. BD Kapoor son of Sh. Janki Dass Kapoor founder of the company - HELD THAT - We note that this issue is already covered and been adjudicated in favour of the assessee for the AY 2003-04 to 2011-12 holding that the said amounts have been embezzled by Sh. Arun Kapoor and therefore the question of charging interest or foregoing interest does not arise. On the same analogy the disallowance made by the AO in the year was rightly deleted by the Ld. CIT(A) which does not need any interference on our part therefore we affirm the impugned order on the issue in dispute involved in ground no. 1 and accordingly reject the same. Addition under the sub-head marriage gift - HELD THAT - We note that the expenditure incurred by the assessee is only towards meeting the social obligation towards the dealer and employees which is an important tool of business promotion and staff welfare. Moreover the same is also covered matter the disallowance made by the AO was rightly deleted by the Ld. CIT(A) which does not need any interference hence we uphold the same. Addition under the sub-head subscription expenses - We find that since the AO could not bring anything on record that the payments are not genuine/ not expended wholly and exclusively for the business purpose and further the issue being a covered matter the adhoc disallowance made by the AO was rightly deleted by the Ld. CIT(A) which does not need any interference on our part hence we uphold the action of the Ld. CIT(A) on the issues in dispute and accordingly reject the ground no. 2 raised by the Revenue. Addition under the consultancy expenses - HELD THAT - It was noted that it was the contention of the A.R. that the advertisement was to pay tribute / homage to the founder of the company by the management staff and workers of all the units which was allowed in the appeal by the ITAT and the Ld. CIT(A) hence the Ld. CIT(A) has rightly deleted the addition by following the precedence which does not need any interference on our part therefore we affirm the impugned order on the issues in dispute involved in ground no. 3 and accordingly reject the same. Addition under the sub head glow shine board expenses - HELD THAT - We are of the considered opinion that this expenditure has been considered to be Revenue in nature hence Ld. CIT(A) has rightly deleted the addition in dispute being a covered matter which does not need any interference on our part therefore we affirm the impugned order on the issue in dispute involved in ground no. 4 and accordingly reject the same. Addition of foreign travel expenses - HELD THAT - We find that AO had disallowed adhoc amount of Rs. 4 lacs without resorting to actual disallowance on being satisfied that particular tours have not been undertaken for business purposes. CIT(A) considering the facts of the case and the decision of the ITAT has rightly deleted the adhoc disallowance made by the AO of Rs. 4 lacs which does not need any interference on our part therefore we affirm the impugned order on the issue in dispute involved in ground no. 5 and accordingly reject the same. Addition under the head sales promotion being unvouched - HELD THAT - We find that before the Ld. CIT(A) the assessee has submitted all the voucher-wise details of expenses and stated that all the expenses were incurred for business purpose only hence after considering the same the Ld. CIT(A) has rightly deleted the addition in dispute which does not need any interference on our part therefore we affirm the impugned order on the issue in dispute involved in ground no. 6 and accordingly reject the same.

Summary

Issues:
1. Disallowance of interest attributable to advance made to an individual.
2. Deletion of expenses categorized as personal in nature.
3. Disallowance of consultancy and advertisement expenses.
4. Disallowance of expenses related to glow shine board and worker welfare.
5. Disallowance of foreign travel expenses and certain entertainment expenses.
6. Disallowance of sales promotion expenses for lack of vouchers.

Analysis:

Issue 1:
The Revenue appealed against the deletion of an addition related to interest on an advance made to an individual. The Tribunal noted that similar issues had been adjudicated in favor of the assessee in previous years. It was established that the advance had been embezzled, making the question of charging interest irrelevant. The Tribunal affirmed the deletion of the addition, rejecting the Revenue's appeal.

Issue 2:
The Tribunal addressed the deletion of expenses categorized as personal, such as marriage gifts and subscription expenses. It was found that these expenses were essential for business promotion and staff welfare. As the AO failed to prove that the payments were not genuine or not for business purposes, the Tribunal upheld the deletion of these expenses, rejecting the Revenue's appeal.

Issue 3:
Regarding consultancy and advertisement expenses, the Tribunal found that the AO could not establish that these expenses were not genuine or not for business purposes. The Tribunal upheld the deletion of these expenses by the Ld. CIT(A), following precedence from previous decisions, and rejected the Revenue's appeal.

Issue 4:
The Tribunal considered the disallowance of expenses related to glow shine board and worker welfare. It was determined that these expenses were revenue in nature, and the Tribunal upheld the deletion of these additions, rejecting the Revenue's appeal.

Issue 5:
The Tribunal reviewed the disallowance of foreign travel expenses and certain entertainment expenses. It was found that the AO had made an ad hoc disallowance without proper justification. The Tribunal upheld the deletion of these expenses, rejecting the Revenue's appeal.

Issue 6:
Regarding the disallowance of sales promotion expenses for lack of vouchers, the Tribunal noted that the assessee had submitted detailed voucher-wise expenses for business purposes. The Tribunal upheld the deletion of this addition, rejecting the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decisions of the Ld. CIT(A) on various grounds, as the issues had been adequately addressed and supported by previous decisions and evidence presented during the proceedings.