TMI Blog1996 (5) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of conference expenses. Later on, it was stated that these represent air ticket expenses of Shri B.R. Thukral, partner, and had been wrongly debited to conference expenses instead of conveyance expenses. According to the assessee, the expenses were on account of foreign travel toU.K.,Holland,Switzerland, etc., by Shri B.R. Thukral, one of the partners. The assessee is not engaged in production of hi-tech goods. It also does not have any import or export dealings. Thus, the expenses of Rs. 19,679 debited under the head conference expenses/conveyance expenses incurred by Shri B.R. Thukral, partner, are, therefore, for purposes other than business purpose of the firm. The assessee-firm has not been able to justify these expenses and has not produced any evidence to show that the trip to the foreign countries was in any way related to the firm's business. The amount of Rs. 19,679 claimed as conveyance expenses is, therefore, disallowed being expenses of the partner not related to business. Rs. 19,670." Aggrieved by the same, the assessee preferred appeal before the CIT(A). 4. Before the CIT(A), the assessee's counsel filed written submissions dt.16th July, 1990, submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our. Accordingly, the disallowance of Rs. 19,679 on account of foreign tour expenses is upheld." Aggrieved by the same, the assessee preferred appeal before the Tribunal. 5. The assessee's counsel filed a paper book of 21 pages and urged to the following effect: As already brought to the notice of the CIT(A) in the written submissions, the assessee manufactures pneumatic time delay relays which is a highly technical item and that the assessee-firm was only a small-scale industry inIndia. It was urged that Rs. 19,679 was towards air tickets and that the AO has allowed Rs. 6,838 spent towards other expenses on foreign travel. The CIT(A) in his appellate order stated that Mr. Thukral "had no original plans for visitingSwitzerlandand it was only to visit the plant of Dr. Islikr Magnete as he developed interest in this unit atHanover. This submission of Shri Thukral is not correct because it was noted from his passport that he had got the visa forSwitzerlandissued on18th April, 1985inIndiaitself". It is not known where from the CIT(A) inferred like this. Copy of the order-sheet entry in the file of the CIT(A) for the asst. yr. 1986-87 is given at page 3 of the paper book. There it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a business tour. But, at the same time, he admitted that Mr. Thukral visitedHanover. Here it should be seen that Rs. 19,679 is for air tickets only and not for any other expenditure during the period when he visited other places likeBrussels,Paris,LondonandZurich. AtStuttgarthe visited the plants of Balluff (GMBH) and atZurichhe visited the plants of Dr. Ustkar as seen from itineries filed before us as well as CIT(A). In these circumstances, we hold that the lower authorities are not at all justified in disallowing the entire amount of Rs. 19,679. Accordingly, we delete the same. 8. Ground No. 2 in the appeals for the asst. yrs. 1986-87 and 1987-88 and Ground No. 1 in the appeal for the asst. yr. 1988-89 relate to the disallowance of Rs. 7,200 each in the asst. yrs. 1986-87 and 1987-88 and Rs. 23,200 in the asst. yr. 1988-89 incurred for professional and consultancy services disallowed by the AO and confirmed by the CIT(A). 9. In the assessment order for the asst. yr. 1986-87, the AO disallowed Rs. 7,200 by observing as under: "Legal and professional charges have been claimed at Rs. 13,041. These include a sum of Rs. 7,200 being the amount paid to Shri T.K. Thukral f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he account of the above party nor it has been able to show the mode of payment. It has also failed to adduce any evidence/confirmation regarding the receipt of the above consultancy charges. It is also seen that no new machinery has been acquired which require any specialised technical know-how. The assessee had already employed sufficient number of persons as would be apparent from the figure of wages paid and in the absence of production of any new component, there was hardly any justification for payment of the above technical consultancy. In the nature of business carried on by the assessee which is the same as was being done in the past, there was hardly any involvement of new production techniques so as to warrant the engaging of a technical consultant. As the payment is neither proved nor prompted by legitimate business needs, the sum of Rs. 16,000 is not allowed. Accordingly, the same is added. Rs. 16,000." 12. In the appeals, the CIT(A) confirmed the disallowance of Rs. 7,200 each in these assessment years by observing that he did not possess any special qualification which would make him a consultant in accounts and taxation. 13. In the appeals before us, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of Rs. 16,000 paid to M/s S.S. Engineers, the assessee's counsel submitted before the CIT(A) that the AO disallowed the payment stating that the copy of the account and the mode of payment had not been furnished before him. In fact, they were not demanded by the AO from the assessee. The AO also observed that no new machinery had been acquired which required technical know-how and that the assessee had already employed sufficient number of persons and that in the absence of production of any new component, there was hardly any justification for payment of the technical consultancy fee. During the year 1985-86, the assessee had several complaints on the performance of time delay relays. The business was likely to suffer. Hence, a qualified and competent professional had to be put on the job to analyse the reasons for the shortcomings in the products. Hence, M/s S.S. Engineers, Prop. S.K. Sikri, having experience of over 25 years was engaged. In the opinion of the assessee, Mr. S.K. Sikri was competent to give technical input for the performance of the product in terms of the material selection and dimensional control, quality control testing and training shop floor people ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egitimate business needs." 17. At the time of hearing of the appeal before us, the assessee's counsel reiterated the submissions made before the CIT(A) and referred to the written submissions filed before the CIT(A) and letter dt.28th Dec., 1986, filed before the CIT(A) and copy of the account of M/s S.S. Enggs. in the books of the assessee for the calendar year ending on31st Dec., 1987. The assessee's counsel further urged that because of the engagement of M/s S.S. Enggs. and the consequent improvement in the quality of the products, the sales shot up from Rs. 36.50 lakhs to Rs. 47.84 lakhs in the asst. yrs. 1988-89 to 1989-90. 18. The Departmental Representative contended that the question was, whether the payment was for the services rendered. The services were rendered only for 6 months as is evident from page 17 of the paper book. There is no evidence to show that the services of Mr. S.K. Sikri led to substantive changes in the goods of the assessee. 19. We have considered the rival submissions and perused the papers filed before us. The CIT(A) asked the assessee to furnish copy of any other correspondence or report or drawing or any chart, provided by M/s S.S. Enggs. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired than this. In these circumstances, we hold that the AO was not at all justified in disallowing the impugned amount of Rs. 16,000 to the S.S. Enggs. 20. In the asst. yr. 1986-87, the AO has disallowed Rs. 4,520 by observing as under: "Payment of commission to M/s Nema Marketing Pvt. Ltd. The assessee has claimed a sum of Rs. 61,540 on account of commission paid to M/s Nema Marketing (P) Ltd. The commission has been paid @ 3% on total sales of Rs. 20,51,353. The assessee was called upon to justify the payment of commission to the above noted party. It was explained by the assessee in its written explanation dt.13th Oct., 1987, that the commission was paid to the above party. Under a written agreement executed on14th Dec., 1984. The assessee has also filed a copy of the agreement and also copies of certain correspondence between M/s. Nema Marketing (P) Ltd. and various distributors/dealers and vice versa in support of submission that the sales of assessee-firm were arranged by the above company. According to cl. 5 of the agreement referred to by the assessee, it has been agreed that commission will be paid @3% on the total net sales. The sale has, however, been specified to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,40,533 "was realised in the next year". The date of realisation and the relevant assessment year has not been mentioned by the assessee's counsel before the CIT(A). Since the appeals for the latter assessment years, namely, 1987-88 and 1988-89 are before us, we direct the AO to ascertain the date of realisation of the said amount of Rs. 1,50,533 and allow the same in the relevant assessment year if the date of realisation falls in the accounting years ending of 31st Dec., 1986, or 31st Dec., 1987, if not already allowed by the AO at the time of making the assessments for these assessment years. 24. In the appeal for the asst. yr. 1987-88, Ground No. 1 relating to the additions of Rs. 24,000 being cash credits in the names of Smt. Sheela Devi and Pramod Garg and interest of Rs. 1,106 thereon was not pressed at the time of hearing. To this effect, the assessee's counsel has signed in the ground of appeal. Accordingly, the said ground is dismissed. 25. Ground No. 2 in the asst. yr. 1988-89 is to the effect that the CIT(A) was not justified in confirming the disallowance of Rs. 4,291 out of the repairs and maintenance being the amount spent on purchase of wood for repair of fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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