Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (7) TMI 434 - AT - Income TaxPersonal expenditure - Expenditure accounted under the head subscription and membership fees - assessee is engaged in the business of assembling, trading and marketing of diesel generator sets of Kirloskar - HELD THAT:- Due to the inherent nature of the business of the assessee, each contract for supply and erection of the diesel generator is obtained after considerable amount of negotiations and discussions with clients which includes builders, hotels, hospitals, business complexes, individuals etc., across the State of Kerala. Since the value of the product range is comparatively high, to convince the customers, a series of presentations, negotiations and discussions at various levels of the client would occur before the finalization of a particular order. Most of such presentations, meetings and discussions are held at various hotels, clubs. Such expenses incurred at hotels, clubs, for meeting, discussions, travelling etc. are accounted under the said head of subscriptions and membership fees, and also, travelling and other expenditures incurred for attending conferences / meetings with the dealer – Kirloskar is also accounted under the said head of expenses. The expenditure incurred is fully supported and are incurred through by banking channels. It is to be further noted that there are no qualifications, observations made by the Auditors in their report regarding these expenses are not incurred. AO has made an arbitrary adhoc disallowance of 30% without giving any reasons for the findings. A.O. has also not found out any defect / deficiency. Disallowance made is on the higher side taking into the given facts and circumstances of the case. As personal element in such expenses cannot be totally ruled out, and to meet the ends of justice 10% of the disallowance of the said expenditure would be sufficient on facts and circumstances of the case Adhoc disallowance under various expenses debited to the profit and loss account - HELD THAT:- The expenditures are very much in the nature of unavoidable expenditure in a small scale manufacturing unit. The quantum of such expenditure is also very small when compared to the volume of operations of the assessee. The assessee is running a small scale manufacturing unit and this expenditure incurred are in the ordinary course of business and are mostly paid to unorganized sectors and hence in most of the cases only self made vouchers are available for incurring such expenses. None of these expenditures are of personal nature. AO has not brought on record any material to show that these impugned expenses are not incurred by the assessee and are not an allowable deduction. It is now well settled law that no adhoc disallowance could be made unless the A.O. brings any specific detail on record which may call for any disallowance. Thus hold that the disallowance of 10% in the facts and circumstances of the case is uncalled for and delete the same.
|