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TMI Blog2016 (3) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... curred jointly on the employees and outsiders by treating the same as entertainment expenditure which is against the established principles of law that in those cases where there are mixed expenditure on account of exempted expenditure and other no proportionate disallowance is tenable? iii) Whether the order of the Tribunal is perverse and against the provisions of law?" 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee filed its return for the assessment year 1995-96 declaring nil Income on 30.11.1995. Prima facie adjustment/disallowance under section 143(1)(a) of the Act was made by the Assessing Officer in the intimation issued under section 143(1) (a) of the Act on account of interest payable to IFCI amounting to Rs. 22,04,344/- and sales tax of Rs. 13,88,743/- against which the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 17.9.1997, the CIT(A) dismissed the appeal. The assessee filed appeal before the Tribunal which was allowed vide order dated 22.5.1998 and prima facie adjustments were deleted on the ground that the issue being debatable could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and loss account but was transferred to interest recoverable account. The aggregate of such amounts was charged to profit and loss account in this year as the amount was written off in the interest recoverable account. In the light of these facts, it is clear that the initial submission taken before the learned CIT (A) that nothing was claimed in this year was not correct (reference page 63 of the paper book - being submissions before the learned CIT(A)). The changed stand now is that the liability got crystalized in this year and therefore, it was deductible in computing the income of this year as the amount was written off to the profit and loss account. It appears that the assessee was entitled to the rebate of 20% on interest subject to fulfilment of certain conditions regarding export of goods. The assessee did not fulfil the conditions of the agreement in this regard, as clear from the letter of IFCI. Although the interest pertained to financial years 1989-90, 1990-91 and 1991-92, the first letter was written for refund of the amount to the IFCI on 22.9.1992 i.e. after close of financial year 1991-92. Thus, till the close of this financial year, the assessee had no reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to justify how the amounts claimed were transferred to the recoverable account when these were not the liability of the assessment year in question and they were not paid or were payable in this year. The following relevant observations were recorded:- "3.1 Coming to the issue of sales tax, no evidence has been brought in record, as in the case of interest, to show that the assessee was entitled to any rebate, consequent to which payment of sales tax in those years was partly transferred to sales tax recoverable account. The assessee has filed a copy of this account on page 89 of the paper book which shows that various amounts were carried over to this account between 31.3.1991 to 31.3.1992. The narration is either the amount paid or the amount deposited. No order or letter has been filed from the sales tax authorities that any demand was raised by them in this year or that any claim of refund in respect of earlier payments was denied in this year. There is only the Board resolution to the effect that a sum of Rs. 13,88,741/- paid in financial year 1991-92 towards sales tax demand is charged as expenditure to profit and loss account of this year since it has been decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and therefore, the Assessing Officer was right in treating 25% of the expenditure as entertainment expenditure, leading to disallowance of Rs. 52,257/-. 5.1 Before us, learned counsel for the assessee pointed out that the details of the expenditure were filed before the learned CIT(A) which have been placed in the paper book on pages 25 to 29. The expenditure was in the nature of business expenditure and therefore, the same should have been allowed in full. In reply, learned DR relied on the order of learned CIT(A). 5.2 We have considered the facts of the case and rival submissions. We find that the expenditure was incurred on staff members for providing tea etc. Further expenditure was also incurred on lunch and dinner for staff as well as for others. The assessee has not culled out the expenditure incurred on outsiders which will be in the nature of entertainment expenditure while the expenditure on the staff members during office hours or for late sitting in the office will not be in the nature of entertainment expenditure. However, in the absence of proper working furnished by the assessee, the estimate of entertainment expenditure at 25% of the total expenditure is reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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