TMI Blog2012 (10) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... t market and accordingly should be allowed as business expenditure - in favour of assessee. Entertainment Expenses - Allowed to the extent used in relation to entertainment of company’s clients or customers - Partly allowed in favour of assessee Gift Presentation Articles - Gifts of expensive items such as Television, gold jewellery and silver articles of Personal nature not a business exp. - Disallowed - against the assessee. General Repair Expenses - As Expenses belong to annual maintenance Contract and are common in nature and hence rightly claimed as revenue expenditure – in favour of assessee. Inflate Job-work Expenses - necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee. This ground is allowed for statistical purpose. - ITA No.3893/AHD/07 - - - Dated:- 18-5-2012 - D K Tyagi, A K Garodia, JJ. For Appellant: Shri M K Patel For Respondent: Shri B L Yadav ORDER Per: A K Garodia: This is an assessee s appeal directed against the order of ld. C.I.T. (Appeals)-IV, Baroda, dated 31.07.2007 for assessment year 2002-03. 2. Ground no.1 is as under: R.T.O. Tax Expenses Rs. 3845 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed if the same is not paid within the relevant year. Therefore, the reliance of the assessee on this Section is not relevant because in the present case, the disallowance was made on this basis that expenditure is capital expenditure. Regarding the first contention that cars can be used before paying the R.T.O. Tax and regarding reliance placed by the assessee on the judgment of Hon ble Allahabad High Court rendered in the case of Janardan Prasad Ashok Prasad vs CIT (Supra), we find that this disallowance is not justified because payment of road tax does not result into the creation of any capital asset. Capital asset i.e. car is already in existence and the road tax is required to be paid for running the car. 8. In our considered opinion, it is a revenue expenditure and not a capital expenditure. Fuel is also required to run a car and without fuel, no car can be run but still it cannot be said that expenditure incurred on fuel for running a car is capital expenditure. Similarly expenditure incurred on road tax to enable the assessee to run a car on road cannot be considered a capital expenditure. We, therefore, decide this issue in favour of the assessee. 9. Ground no.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, it was the only contention raised by ld. A.R. of the assessee that disallowance confirmed by ld. CIT (A) is excessive. 17. Considering the facts of present case, we hold that if the disallowance is restricted to the extent of 10% of total such expenses, it will meet the ends of justice. We order accordingly and confirm the disallowance to the extent of Rs. 55,159/- being 10% of total expenses. 18. Thus, ground no.2 is partly allowed. 19. Ground no.3 is as under: Commission by way of Gift Cheque claim paid to Mr. Vivek B. Ajri: (Refer Para 9, Page 7 of CIT(A)-IV order) The learned Commissioner of Income Tax (Appeal)-IV erred in confirming the disallowance of Rs. 55700/-. The Appellant respectfully submits that gift given by the company is a legitimate genuine expenditure for promotion of business. 20. Brief facts are that it is noted by ld. A.O. on page no.5 of the assessement order that a gift cheque of Rs. 55,700/- was paid by the assessee to Mr. Vivek B. Ajri. When the A.O. of the assessee asked for the purpose of payment, the assessee explained that this is for additional discount at the rate of 5% on a sum worked out at Rs. 11,13,995/-. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque to one Mr. Vivek B. Ajri. It is also submitted that Mr. Vivek B. Ajri is of that Company M/s Ajri Engineering Private Limited but what is his position in that company, is not explained and why this payment was made to him and that too by way of gift cheque instead of a normal cheque. 27. Hence, we find that the business purpose of this payment could not be properly explained and therefore, disallowance made by the authorities below is justified. Ground no.3 is rejected. 28. Ground no. 4 is as under: Professionla service charges paid to Mr. Firoz Alam: (Refer Para 10, Page 8 of CIT (A)-IV order The learned Commissioner of Income Tax (Appeal)-IV erred in confirming disallowance of Rs. 1,25,000/- paid towards professional charges. The Appellant respectfully submit that, the payment to the aforesaid party was made towards repairing charges for servicing of gearboxes located in sugar plant of North Bihar. And it is rightly claimed as business expenditure. 29. Brief facts are that it is noted by the ld. A.O. in the assessment order that an amount of Rs. 1.25 lacs was paid to Mr. FiroZ Alam of Narkatiagunj, Bihar. When the ld. A.R. of the assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue supported the order of authorities below. 38. We have considered the rival submissions and perused the materials on record and gone through the order of the authorities below and the judgment cited by ld. A.R. of the assessee. We find that in the case of CIT vs. Indian Visit.Com Private Limited (supra), the facts were that the assessee was engaged in the travel business and used to make all kinds of arrangements for its clients such as booking of hotel rooms, providing taxi services, booking of air tickets and railway tickets etc. In that case, the assessee incurred the expenditure on development of its website which was disallowed by the ld. A.O. by holding that it is capital in nature. Under these facts, it was held by Hon ble Delhi High Court that merely because a particular expenditure has provided some enduring benefit, it would not make such expenditure of capital nature because what is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. It was also held that the expenditure of website does not result into any creation to fixed capital of the assessee although, it may provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the orders of authorities below. 44. We have considered the rival submissions, perused the materials on record and gone through the orders of authorities below and judgments cited by ld. A.R. of the assessee. 45. When we go through the appointment letter which is available on page nos. 107 and 108 of the paper book, we find that it is stated in this appointment letter that the assessee company wants to set up a subsidiary company in Australia and for this purpose, they want to carry out a survey and for this purpose, the appointment of Mr. Terry Hall is made as Consultant. As per this appointment letter, Mr. Terry Hall was required to submit a report based on study. It is admitted position of fact that ultimately a subsidiary company was set up by the assessee company although two years later. There is no such material made available before us that on the basis of survey carried out by Mr. Terry Hall, the assessee company has got any benefit in the form of any export to Asutralia. Now, in the light of these facts, we examine the applicability of two judgments cited by learned A.R. of the assessee. First, we examine the applicability of the judgment of Hon ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record and gone through the orders of authorities below. We find that it is noted by ld. CIT (A) on page no. 14 of his order that assessee has incurred the expenditure of Rs. 4,52,233/- on account of entertainment of company s clients or customers but no documentary evidence was submitted before the ld. A.O. for verification. He further noted that the element of personal expenditure cannot be ruled out and since the ld. A.O. has disallowed only 1/3rd of the expenditure claimed, the same was confirmed. 51. We are of the considered opinion that the disallowance of 1/3rd is excessive and therefore, we confirm the disallowance of the 1/5th of total expenditure i.e. Rs. 90,000/-. The assessee gets a relief of Rs. 60,000/-. Thus, this ground is partly allowed. 52. Ground No.8 is as under: Gift presentation articles: (Refer Para 15, Page 15 of CIT (A)-IV order) The learned Commissioner of Income Tax (A) erred in confirming disallowance of Rs. 92904/- incurred towards gifts presentation expenses. The Appellant respectfully submits that, the learned Commissioner of Income Tax (a) has arbitrarily disallowed a sum of Rs. 92904 which were incurred for business promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions and perused the materials on record and gone through the orders of authorities below. We find that it is noted by ld. CIT (A) in his order that the assessee company has paid Rs. 57,646/- to M/s EIMCO ELECON in respect of annual maintenance contract charges of A/C Plant and since the same was pertaining to earlier years, the ld. A.O. disallowed the same. Ld. A.R. of the assessee submitted before the ld. CIT (A) that the debit notes for sharing of charges for annual maintenance contract of A.C. was under dispute and therefore, these expenses could not be booked in the respective year and after settlement of dispute, the same bills have been accounted for in this year as expenses. From the copy of these two debit notes available on 158 and 159 of paper book, we find that the same was for the period from April 2000 to September 2000 and from October 2000 to March 2001. 56. The contention of the assessee is this that there was dispute and for this reason, the same could not be accounted for in relevant year. The dispute was settled in the present year and therefore, the same is claimed in the present year. This is not a case of the revenue and these are not revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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