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TMI Blog2015 (8) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,950.15 made on account of telephone expenses." Ground No. 2 of the Revenues appeal: "The Ld. CIT(A) has erred in law and on facts in restricting the disallowance made by the AO of Rs. 1,65,220/- out of telephone expenses to 7.5% of the total expenses without giving any reasons for restricting the disallowances and not appreciating the facts brought on record by the A.O. during the course of assessment proceedings." 5. Learned D.R. of the Revenue supported the assessment order whereas it was submitted by Learned A.R. of the assessee that this issue is covered in favour of the assessee by the judgment of Hon'ble Gujarat High Court rendered in the case of Sayaji Iron and Engg. Co. vs. CIT [2002] 253 ITR 749 (Guj). 6. We have considered the rival submissions. We find force in the submissions of Learned A.R. of the assessee that no disallowance is called for in the case of the assessee out of telephone expenses on the basis that it was partly used for personal purposes by the Directors/ employees of the assessee company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were incurred in cash. The main basis is that the expenses are abnormally high. When such abnormal increase in the expenses is considered in the light of the facts that majority portion of increase in expenditure is incurred in cash, the disallowance of 30% is not excessive and unreasonable. We, therefore, reverse the order of CIT(A) and restore that of the Assessing Officer. Accordingly, ground No. 3 of the assessee is rejected and ground No. 3 of the Revenue is allowed. 10. Ground No. 4 of the assessee's appeal is as under: "That learned CIT(A) has erred in confirming the disallowance to the extent of Rs. 1,93,633.60 made on account of vehicle running & maintenance." 11. Ground No. 4 of the Revenue's appeal is as under: "The Ld. CIT(AJ has erred in law and on facts in restricting the disallowance made by the AO of Rs. 4,89,084/- out of vehicle running, maintenance and depreciation expenses to 10% of the total expenses without giving any reasons for restricting the disallowances and not appreciating the facts that no log book was maintained by the assessee company." 12. Learned D.R. of the Revenue supported the assessment order whereas it was submitted by Learned A.R. of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2003-04, we have held that no disallowance is justified because increase in turnover in assessment year 2003-04 as compared to assessment year 2001-02 was more than increase in claim of expenses under this head in assessment year 2003-04 as compared to assessment year 2001-02 and therefore, it was held that no disallowance is justified. In the present year we have seen that although there is increase in turnover of 5%, the expenses under this head have gone down to Rs. 2206.85 lac as compared to Rs. 2286 lac in assessment year 2001-02. Under these facts, in our considered opinion, no disallowance is justified. We hold accordingly. Ground No. 5 of the assessee is allowed and ground No. 6 of the Revenue is rejected. 17. Ground No. 6 of the assessee's appeal is as under: "That learned CIT(A) has erred in confirming the disallowance of Rs. 65,651/- made on account of travelling & conveyance (Director)." 18. Learned A.R. of the assessee reiterated the same contentions which were raised before CIT(A). Learned D. R. of the Revenue supported the orders of the authorities below. 19. We have considered the rival submissions. We find that it is noted by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) in no disallowance is called for under the head 'general expenses'. Moreover, we feel that the expenses debuted under the head 'general expenses' are small day to day expenses incurred for newspaper, journals, magazines, refreshment for customers, typewriter repairing expenses as noted by the Assessing Officer in para 8 of the assessment order and incurring of such expenses in cash is quite normal and therefore, merely for this reason that the expenses are incurred in cash, no disallowance is justified. Accordingly, ground No. 7 of the assessee is allowed and ground No. 7 of the Revenue is rejected. 23. Ground No. 8 of the assessee and connected ground No. 1 of the Revenue are as under: Ground No. 8 of the assessee: "That learned CIT(A) has erred in confirming the disallowance to the extent of Rs. 85,166.50/- made on account of repairs & maintenance (building)." Ground No. 1 of Revenue: "The Ld. CIT(A) has erred in law and on facts in restricting the disallowance made by the AO of Rs. 1,70,333/- out of repair and maintenance expenses to 5% of the total expenses without appreciating the facts that most of the disallowances were made on account of cash payment for which no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply must be provided to the residence of directors and staff quarters. Therefore, he held that 10% disallowance is called for. The CIT(A) has held that since there is no abnormal increase in the expenses, no disallowance is justified under this head. Considering the facts of the present case that there is no abnormal increase in the expenses in the present year and considering the ratio laid down by Hon'ble Gujarat High Court in the case of Sayaji Iron (supra), that for personal use of the assets/facilities of the assessee company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Therefore, we decline to interfere in the order of CIT(A) on this issue. Accordingly, ground No. 5 of the Revenue is rejected. 29. In the result, the appeal of the assessee as well as appeal of the Revenue are partly allowed. 30. Regarding the Cross Objection filed by the assessee, Learned A.R. of the assessee submitted that the Cross Objection is not pressed and accordingly, the same is dismissed as not pressed. 31. In the combined result, the appeal of the assessee and the Revenue are pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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