2012 (2) TMI 667 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of various additions made by the Assessing Officer.
2. Addition on account of belated payment of PF and ESIC.

Summary:

1. Deletion of Various Additions:
The Revenue challenged the deletion of several additions made by the Assessing Officer, including club fee (Rs. 3,900), vehicle expenses (Rs. 5,20,000), travelling expenses (Rs. 3,20,000), telephone expenses (Rs. 2,70,000), miscellaneous expenses (Rs. 2,40,000), ad hoc addition (Rs. 40,000), advertisement and presentation expenses (Rs. 75,000), and staff welfare expenses (Rs. 64,000). The Tribunal noted that the assessee's accounts were duly audited under both the Companies Act and the Income Tax Act, and the Assessing Officer did not pinpoint any specific disallowable item or defect in the books of account. The Tribunal agreed with the Commissioner of Income Tax (Appeals) that no ad hoc disallowance is permissible without specific defects. The Tribunal referenced several judicial pronouncements supporting this view, including Core Health Limited (70 TTJ 490) and Monarch Foods Private Limited (54 TTJ 405).

2. Addition on Account of Belated Payment of PF and ESIC:
The Tribunal addressed the addition of Rs. 13,05,652/- for belated payment of PF and ESIC and the allowance of Rs. 4,75,473/- u/s 43B of the Act. The Tribunal noted that the amounts were deposited within the grace period allowable under the respective assessment years. The Tribunal referenced decisions from the Hon'ble Gauhati High Court in CIT v. George Williamson (Assam) Limited (284 ITR 619) and the Hon'ble Delhi High Court in CIT v. AMIL Limited (321 ITR 508), which supported the assessee's position. Consequently, the disallowance of Rs. 4,75,473/- was deleted.

Conclusion:
The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to delete the ad hoc disallowances and the addition related to the belated payment of PF and ESIC. The appeal of the Revenue was dismissed. The judgment emphasized that for an expenditure to be allowable u/s 37(1) of the Act, it must be wholly and exclusively for business purposes and not of a capital or personal nature. The Tribunal affirmed that commercial expediency and direct benefit to the trade are crucial factors in determining the allowability of expenses.