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2020 (10) TMI 401 - AT - Income TaxDisallowance of expenditure u/s. 37 - supply of Alcohol to Ireland Embassy where the Director of the company was Honorary Member and payment made to Taj Bengal, both dedicated under the head 'Sales Promotion Expenses' - appellant's alleged failure to establish the nexus with the business need - HELD THAT:- As rightly pointed out by the DR the bills for the expenditure in question claimed to be incurred by the assessee on supply of alcohol issued by the Embassy of Ireland and for other expenses issued by Hotel Taj Bengal, Kolkata were raised in the personal name of Shri M.K. Jalan as Honorary Counsel of Ireland with the Care of Address of Keventer Agro Limited - no evidence to establish the involvement of the assessee-company in the said expenditure - we are unable to accept the claim of the assessee that the expenditure in question incurred on organizing an event to celebrate the Ireland National Day in India by its Managing D rector, Shri M.K. Jalan in his individual capacity was wholly and exclusively incurred for the purpose of business of the assessee-company and he same, in our view, was rightly disallowed by the authorities below. - Decided against assessee. Disallowance of 20% of sales promotion expenses - assessee contended by relying on the provision of sub section (2) of section 142 that the Assessing Officer was required to carry out the necessary enquiry to establish that part of the expenses claimed by the assessee on sales promotion were not for the purpose of its business - HELD THAT:- Assessee-company failed to discharge the said onus successfully and satisfactorily inasmuh as the details and supporting bills and vouchers verified by the AO revealed that unverifiable and personal element was involved in the said expenditure. As rightly contended by the Id. DR, such personal and unverifiable event involved in the said expenses warranted a disallowance out of such expenses to some extent and since the disallowance so made by the AO and confirmed by the Id. CIT (A) at 20% of the sales promotion expenses is air and reasonable, we do not find any justifiable reason to interfere with the same. - There is merit in the alternative contention of assessee that the expenses incurred on organizing an event to celebrate Ireland National Day in India which was included in sales promotion having been entirely disallowed by the authorities below and the said disallowance having been confirmed by us, the disallowance of 20% should be restricted out of the balance amount of sales promotion expenses - Decided partly in favour of assessee. Disallowance of miscellaneous expenses - CIT (Appeals) confirmed the said disallowanae made by the AO keeping in view the unverifiable element involved in the expenses claimed by the assessee as specifically pointed out by the AO - HELD THAT:- We agree with the view taken by the authorities below that the expenses claimed by the assessee under the head "general expenses and office expenses" were not fully verifiable and the same being not fully established as wholly and exclusively incurred for the purpose of the assessee's business some disallowance out of the same was called for. Since the disallowance so made at 20% by the Assessing Officer and confirmed by the Id. CIT (A) in the facts and circumstances of the case is fair and reasonable, we do not find any justifiable reason to interfere with the same - Decided against assessee. Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance by assessee - assessee earned dividend income which was claimed exempt from tax under section 10(34) - HELD THAT:- We hold that the disallowance of ₹ 1,62,02,191/- made by the Assessing Officer and confirmed by the Id. CIT (A) u/ s 14A r.w. Rule 8D is liable to be restricted to ₹ 8,88,566/- being the exempt income actually earned by the assessee during the year under consideration. - Decided in favour of assessee partly.
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