2022 (11) TMI 821 - AT - Income Tax
Disallowance of Commission Expenses - prior period expenditure - due to poor sales performance, security was forfeited and adjusted - on request the same restored and commission paid in subsequent year after deduction of TDS - HELD THAT:- Nature of payment referred is u/s 194H which certainly is provision requiring deduction of tax on any income by way of commission or brokerage. Pertinent to mention is that the ld AO had referred in the assessment order about four amount claimed as commission expenses and these form No. 16A cover up all the four expenses under the head 194H of the Act.
The bench is of firm view that the ld CIT(A) has fallen an error in not giving due consideration to the letter dated 24.01.2014 of M/s. Hitkari Potteries Pvt. Ltd which specifically mentioned that the amount lying as security is being forfeited has compensation for loss of commission or short sales. The TDS deduction against the same stands paid by the appellant in present FY. Thus, the findings of the ld CIT(A) holding that payment was on account of royalty and a prior period expense cannot be sustained. The ground no 1 is allowed in favour of the assessee.
Addition of business promotion expense - Appellant had voluntarily disallowed towards personal expenses of Managing Director/ Directors - AR submitted that the Tax Authorities below have fallen in error in not appreciating that the personal expenditure of the directors were suo motto deducted while claiming the expenditure - HELD THAT:- The bench is of considered opinion that to substantiate the validity of the expenditure of the nature refered above it is necessary to establish that the same can be laid out wholly and exclusively for the purpose of business, however, the assessee failed to establish the same by filing any vouchers or other evidences which would have shown that these expenses were for the procurement of business or for business negotiations or specific business promotion activity. In case of business promotion expenses, the assessee is expected to show that the expenses intended to achieve any specific or general business target or how it could have helped the promotion of business or business interest of the assessee. Specially, when the expenses incurred are not supported by any vouchers and are on heads that same are generally of personal nature like bills of restaurant, hotels, clothing, fashion accessories, duty free shops, cosmetics, spa, gift shops, it becomes all the more necessary that the expenses are explained with some probability of being spent for business promotion and not just personal or for superfluous social networking. Thus AO was not justified to restrict the disallowance to ad hoc 20% and Ld. CIT(A), following due process of law has rightly enhanced the same. The same requires no interference and ground no 2 is decided against the assessee.