1990 (9) TMI 136 - AT - Income Tax

Summary

Issues Involved:

1. Disallowance of commission expenses.
2. Disallowance of miscellaneous expenses.
3. Disallowance of telephone expenses.
4. Disallowance of car expenses, driver's salary, and depreciation on car.
5. Disallowance of business promotion expenses.
6. Disallowance of interest expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Commission Expenses:

Assessment Year 1980-81:
The assessee challenged the disallowance of Rs. 7,865 out of the commission account. The CIT(A) had restricted the disallowance to Rs. 7,864. The Tribunal found that the commission of Rs. 4,910 paid to M/s Prince Advertisers was justified as the confirmation letter was filed and the payment was made by cheque. However, the payment of Rs. 2,954 to M/s Kanwar Printers was disallowed due to the lack of a confirmation letter and evidence of business procurement.

Assessment Year 1981-82:
The assessee disputed the disallowance of Rs. 72,349 out of the commission account. The CIT(A) had sustained the disallowance based on the ITO's findings that the business was directly placed with the assessee without intermediaries. The Tribunal allowed the commission paid to M/s Mehra Enterprises (Rs. 20,180.45) due to sufficient details provided but upheld the disallowance for other parties due to lack of evidence or confirmation.

Assessment Year 1982-83:
The assessee contested the disallowance of Rs. 6,466 out of the commission account. The Tribunal upheld the disallowance as the assessee failed to file confirmation letters from the concerned parties, M/s Vandana Associates and Shri Lal Singh.

2. Disallowance of Miscellaneous Expenses:

Assessment Year 1980-81:
The assessee challenged the disallowance of Rs. 500 out of miscellaneous expenses. The Tribunal found no justification for this petty disallowance and deleted it.

Assessment Year 1981-82:
The Tribunal deleted the disallowance of Rs. 3,000 out of miscellaneous expenses, noting that the CIT(A) had found the expenses to be largely allowable.

Assessment Year 1982-83:
The Tribunal deleted the disallowance of Rs. 500 out of miscellaneous expenses, finding no justification for retaining the petty disallowance.

3. Disallowance of Telephone Expenses:

Assessment Year 1980-81:
The Tribunal upheld the disallowance of Rs. 1,000 on account of personal calls, noting that the assessee could not prove that the entire telephone expenses were for business purposes.

4. Disallowance of Car Expenses, Driver's Salary, and Depreciation on Car:

Assessment Year 1980-81:
The Tribunal found that the disallowance of 1/4th of car expenses was on the higher side and restricted it to 1/5th of the claim due to the lack of a log book.

Assessment Year 1981-82:
The Tribunal similarly restricted the disallowance to 1/5th of the claim.

Assessment Year 1982-83:
The Tribunal again restricted the disallowance to 1/5th of the claim.

5. Disallowance of Business Promotion Expenses:

Assessment Year 1980-81:
The Tribunal upheld the disallowance of Rs. 3,860 out of business promotion expenses, agreeing with the CIT(A) that the expenses were in the nature of entertainment.

Assessment Year 1981-82:
The Tribunal upheld the disallowance of Rs. 2,868 out of business promotion expenses, noting that the expenses were found to be in the nature of entertainment.

Assessment Year 1982-83:
The Tribunal upheld the disallowance of Rs. 9,503 out of business promotion expenses, as the assessee failed to provide details showing that the expenses were not entertainment.

6. Disallowance of Interest Expenses:

Assessment Year 1981-82:
The Tribunal deleted the disallowance of Rs. 3,452 out of interest expenses, finding no evidence that the interest-free loan to Smt. Rajinder Kaur was made out of borrowed funds.

Conclusion:
The appeals were partly allowed to the extent indicated above, with specific disallowances being upheld or deleted based on the evidence and justifications provided by the assessee and the findings of the Tribunal.