TMI Blog2015 (5) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... n any profit or loss over a period of time, thus this amount is allowable. Similar is the case of Insurance claim. Commission payment payment may get settled in the next year whereby on the date of payment there might be a change in the foreign currency rates. It was explained by the appellant that it was a regular system of accounting followed by him and did not in any profit or loss over a period of time. Expenses allowable u/s 43B are only allowed on payment basis. Even if the liability would have been made in the earlier years the same would have been disallowed. Thus payment of bonus, customs and tax are covered within the provisions of section 43B, accordingly the addition is deleted. - Decided against revenue. Disallowance of travelling expenses - CIT(A) has restricted the disallowance - Held that:- Since the disallowance was made on ad hoc basis without pointing out any defect either in the books of account or in the vouchers maintained by the assessee, no disallowance on ad hoc basis is permissible under the law. We, therefore, delete the addition even sustained by the ld. CIT(A). - Decided in favour of assessee. Disallowance of postage, telegram and telephone expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be disallowed. - Decided against revenue. Deduction under section 80HHC - Held that:- CIT(A) has directed the Assessing Officer to re-compute the deduction under section 80HHC in the light of the judgment of the Hon'ble Apex Court in the case of CIT vs. Ravindra Nath Nair, [2007 (11) TMI 10 - Supreme Court of India] Disallowance of bad debts - Held that:- CIT(A) correctly reexamined the claim of the assessee and finding force in the contentions of the assessee that the claim of bad debts of ₹ 1,37,525/- has only been disallowed because of the fact that RBI has not approved this much amount in the settlement of the claims sent to them & it may not be out of context to mention that the bad debts are governed by section 36(1)(vii) of the Act which clearly stipulates that if the income has already been offered as income, then in that case the amounts can be written off as bad debts deleted the addition. - Decided against revenue. - ITA No.468 & 469/LKW/2013, ITA No.532 & 533/LKW/2013 - - - Dated:- 16-4-2015 - Shri Sunil Kumar Yadav And Shri. A. K. Garodia JJ. For the Appellant : Shri. P. K. Kapoor, C.A. For the Respondent : Shri. O. N. Pathak, D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred an appeal before the ld. CIT(A) and furnished explanations item-wise with the submission that these expenses are crystallized in the impugned assessment year and the assessee has been following similar system of accounting for the last so many years. With regard to the expenditure, it was contended that the assessee has received bills during the impugned assessment year, therefore, it was debited to the profit and loss account in the impugned assessment year. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:- I have considered the facts and circumstances of the case, the reasoning of the Assessing Officer and the submissions of the appellant through ld. A.R. relevant part of which has been produced above. My point wise view is given as under:- 1. Material Bills of previous year received and accounted for during the current year amounting to ₹ 50,353: The details of the amounts were examined and it was noted that these expenses relate to purchase of material etc. As these expenses should have been accounted for on a mercantile basis in year in which these were incurred, the same cannot be allowed as a deduction in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 1,41 ,143 is deleted. Expenses allowable u/s 43B: Expenses allowable u/s 43B are only allowed on payment basis. Even if the liability would have been made in the earlier years the same would have been disallowed. Thus payment of bonus, customs and tax are covered within the provisions of section 43B of the Income Tax Act, 1961 .Accordingly the addition of ₹ 73,316 is deleted. Overall the AO is to allow the amounts [15,693+10,642+ 1,41,143+ 73,316]= ₹ 2,40,794. The addition of ₹ 50,353 is confirmed. Thus this ground no 11 is partly allowed. 6. During the course of hearing, no infirmity has been pointed out by the ld. D.R. in the order of the ld. CIT(A). We, however, have carefully examined the order of the ld. CIT(A) in the light of the arguments raised by the parties and since we do not find any infirmity in the order of the ld. CIT(A) on this issue, we confirm the same. 7. Apropos ground No.2, it is noticed that the Assessing Officer has made disallowance of travelling expenses amounting to ₹ 2,74,802/-, against which an appeal was filed before the ld. CIT(A) with the submission that the Assessing Officer has made ad hoc dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for non-business purposes. We are, therefore, of the view that no disallowance is sustainable in the eyes of law. Accordingly, the addition sustained by the ld. CIT(A) at ₹ 24,000/- is also hereby deleted. Accordingly ground No.7(a) of the assessee s appeal in I.T.A. No.468/LKW/2013 is also disposed of along with this ground. 14. Apropos ground No.4, it is noticed that the Assessing Officer has made disallowance of motor car expenses amounting to ₹ 49,910/- and disallowance of depreciation amounting to ₹ 56,914/- on account of personal use without bringing anything on record. When the matter travelled to the ld. CIT(A), the ld. CIT(A) has restricted the disallowances to ₹ 60,000/-, against which assessee as well as the Revenue are in appeal before the Tribunal. 15. During the course of hearing, the ld. D.R. could not establish that the motor car was utilized for the purpose other than business of the assesseecompany. Therefore, no disallowance on ad hoc basis is sustainable in the eyes of law. Accordingly, we delete the addition of ₹ 60,000/- sustained by the ld. CIT(A) and dispose of ground No.7(b) of the assessee s appeal in I.T.A. No.468/L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the genuineness of the claim. The ld. CIT(A) re-examined the claim of the assessee and being convinced with it, he restricted the disallowance to ₹ 29,418/-. The relevant portion of the order of the ld. CIT(A) is extracted hereunder for the sake of reference:- I have considered the facts and circumstances of the case and the submissions of the appellant. It is seen that in the books, net loss from agriculture operations has been shown at ₹ 5,56,622, which wrongly included a sum of ₹ 4,21,344/- on account of tease rentals written off, which was not at all related to agricultural activities. If one excludes this amount, the total disallowance on account of agriculture expenses would have been ₹ 1.35,278/-. Out of this amount, the appellant has already added back an amount of ₹ 1,05,860/- in the computation of income filed for that year, Thus the balance amount of ₹ 29,418 only needs to be disallowed. The A.O. would do so. 19. Aggrieved, the Revenue has filed an appeal before the Tribunal, but could not point out any defect in the order of the ld. CIT(A). Having noticed that the ld. CIT(A) has adjudicated the issue in a proper manner, we sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Revenue s appeal in I.T.A. No.532/LKW/2013 along with grounds No.2, 3 and 4. 22. Apropos grounds No.1 2, it is noticed that the Assessing Officer has made disallowance of ₹ 50,353/- of the material bills of the previous year received and accounted for during the current year. 23. The assessee preferred an appeal before the ld. CIT(A), but could not furnish the relevant evidence to justify that the liabilities are crystallized during the impugned assessment year. The ld. CIT(A) accordingly confirmed the disallowance having observed that the expenses relate to the purchase of materials, etc. should have been accounted for on mercantile basis in the year in which these were incurred and the same cannot be allowed as deduction in the current year. Even before us, nothing has been placed to justify that the bills for the materials purchased in previous year is to be allowed as deduction in the impugned assessment year. Accordingly we find no force in the claim of the assessee and we confirm the order of the ld. CIT(A). 24. Grounds No.3 4 relate to the claim of deduction under section 80HHC of the Act. In this regard, we find that the ld. CIT(A) has directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO be restored. 27. The grounds raised by the assessee in I.T.A. No. 469/LKW/2013 are as under:- 1. The CIT(Appeals) has erred in law and on facts in upholding disallowance of ₹ 2,79,096/-, out of travelling expenses incurred by the directors of the appellant company on foreign travel holding it to be of personal nature. 2. BECAUSE the entire travelling expenses claimed by the appellant had been incurred wholly and exclusively for the purposes of the business of the appellant and no disallowance out of this expenditure should have been upheld by the CIT(Appeals). 3. BECAUSE the CIT(Appeals) has erred in law and on facts in upholding the disallowances of a) ₹ 50,000 : Out of telephone and telex expense; and b) ₹ 1,00,000 : Out of motor car expenses and depreciation on vehicles on the ground of personal user. 4. Because the CIT(Appeals) has erred in law and on facts I upholding disallowance of ₹ 24,000/- as had been made in the assessment out of expenditure, by invoking the provisions of section 14A of the Act. 5. BECAUSE looking to the nature of investment and the income yielded there from (with reference to which the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue has filed an appeal before the Tribunal, but during the course of hearing, no defect was pointed out in the order of the ld. CIT(A). Accordingly, we confirm the same. 30. Apropos ground No.2 in I.T.A. No. 533/LKW/2013 and grounds No.1 2 in I.T.A. No. 469/LKW/2013, it is noticed that the Assessing Officer has made disallowance of ₹ 9,54,155/- on account of travelling expenses. 31. The assessee preferred an appeal before the ld. CIT(A) with the submission that the Assessing Officer has made disallowance on ad hoc basis without pointing out any defect therein. The ld. CIT(A) re-examined the claim of the assessee and he restricted the disallowance to 10% of the expenditure claimed on foreign travelling. 32. Aggrieved, the assessee as well as the Revenue are in appeal before the Tribunal, but the assessee could not file the relevant evidence on record to establish that the foreign travel was undertaken by the assessee for business purposes. We have carefully examined the orders of the lower authorities and we find that under the given facts and circumstances of the case, the ld. CIT(A) has properly adjudicated the issue and we find no infirmity therein and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the settlement of the claims sent to them. It was further contended before the ld. CIT(A) that it may not be out of context to mention that the bad debts are governed by section 36(1)(vii) of the Act which clearly stipulates that if the income has already been offered as income, then in that case the amounts can be written off as bad debts. The ld. CIT(A) reexamined the claim of the assessee and finding force in the contentions of the assessee, he deleted the addition. 39. Now the Revenue is in appeal before the Tribunal and during the course of hearing, he could not point out any defect in the order of the ld. CIT(A). We, however, have carefully examined the order of the ld. CIT(A) and we find no infirmity therein. Accordingly, we confirm the order of the ld. CIT(A) on this issue. 40. Apropos ground No.6 in I.T.A. No. 533/LKW/201 and grounds No.4 5 in I.T.A. No. 469/LKW/2013, we find that the Assessing Officer has made disallowance under section 14A of the Act at ₹ 2,01,570/-, against which an appeal was filed before the ld. CIT(A) with the submission that during assessment year 2005-06 provisions of section 14A of the Act and rule 8D of the rules cannot be invo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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