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2016 (4) TMI 203 - ITAT KOLKATA

2016 (4) TMI 203 - ITAT KOLKATA - TMI - Disallowance of Book Distribution expenses - Held that:- AO disallowed the expense in relation to sample books distribution on the basis of non-availability of supporting documents at the time of assessment proceedings. The assessee was able to produce only the receiving registers duly signed by the recipients to whom the specimen copies were given. In the absence of documentary evidence the AO disallowed such expense on the basis of reasonable estimate. W .....

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penses vouchers have not been produced, so the disallowance was made on estimated basis. No comparison of such expenses claimed by the assessee in the preceding years or subsequent years relevant to the year under consideration has been furnished. Considering the fact regarding the importance of distribution of sample books and totality of the claim of assessee we further restrict the distribution of such expenses to the extent of 5%. Accordingly, we direct the AO to re-compute the disallowance .....

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s of debit vouchers relating to 'carriage inward' and 'carriage outward' enclosed at page No. 46 to 89 of the paper book is enclosed. As find from the chart given by Ld. AR in relation to above stated expenses that assessee has been incurring such expenses for the above stated activities and no disallowance has been made in the past. Besides, this, we find the amount incurred by assessee is meager. Considering the submission of Ld. AR and totality of the facts, we reverse the orders of authoriti .....

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maintain the consistency of such expenses we deem it fit to reverse the orders of authorities below and delete the same.- Decided in favour of assessee

Disallowance of sales promotion expenses - Held that:- Assessee has been claiming these expenses in the earlier years and subsequent year to the relevant year. But no disallowance has been made in respect of the above expenses in earlier years and subsequent years to the relevant assessment year.We find that the AO has disallowed the .....

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s below and delete the addition. - Decided in favour of assessee

Disallowance of canvassing charges - Held that:- The assessee has been incurring such expenses for canvassing charges for which no disallowance has been made by Revenue either in earlier year or subsequent year. Therefore to keep the consistency incurring by assessee for such expenses and considering the facts of the case, we delete the additions made by AO and confirmed by Ld. CIT(A) and AO is directed accordingly.- Dec .....

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ereinafter referred to as 'the Act') vide his order dated 28.12.2011 for assessment year 2009-10. 2. The assessee has raised the following grounds of appeal:- "1. The orders passed by the lower authorities are arbitrary, erroneous, without proper reasoning, invalid and bad in law, to the extent to which they are prejudicial to the inte5est of the appellant. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the disallowance out of 'Book .....

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ase, the learned CIT(A) erred in sustaining the disallowance of ₹ 1,303/- and ₹ 7,750/- out of "Ganesh Puja" expenses and "Bengali New Year Celebration" expenses respectively. 5. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the disallowance out of 'Sales Promotion' expenses at ₹ 70,904/-, being 10% of the total claim of ₹ 7,09,039/- in this regard. 6. On the facts and in the circumstances of the case .....

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ion business which involves both publishing and selling books. During the year assessee has claimed expense for an amount of ₹ 64,60,413/- on account of books distribution. The assessee submitted that distribution of sample or specimen books to educational institutions, teachers and academicians is essential for the purpose of making the books popular. Once the books become popular among the users of the books then it is easy to introduce the books in schools & colleges for the corresp .....

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cademicians to whom specimen copies of books were given. It was observed by AO from receiving registers that stamps of various reputed colleges were also mentioned. Besides, some individual names of recipients of sample books also were recorded along with phone numbers. The AO randomly rang up to some of phone numbers for the purpose of verification but most of the numbers were found out of services, while other persons refused to acknowledgeof having received any sample book. The assessee furth .....

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eal before Ld. CIT(A) who upheld the action of AO after giving partly relief by observing in para-3.3 of his order, which reproduced below:- "3.3 I have carefully considered the observation of the Assessing Officer in the assessment order and also the submissions of the Ld. A/R. During the year, the appellant has incurred an expenditure of ₹ 64,60,413/- on account of "book distribution". The appellant could not produce the supporting bills and vouchers before the A.O at the .....

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book distribution expenses is restricted to ₹ 9,69,062/- being 15% of book distribution expenses. Accordingly the AO is directed to restrict the disallowance on account of book distribution expenses to ₹ 9,69,062/- instead of ₹ 22,61,145/-. This ground of appeal is partly allowed." 6. Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 7. Shri Ravi Tulsiyan, Ld. Authorized Representative appearing on behalf of assessee and Shri Rajat Kr .....

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ncrease sale of such books. As per the prevailing practice in publication business, the promotion of book selling is done by distributing specimen copies of the books to various educational institutions like schools, colleges and teachers/principles of such educational institutions. The Ld. AR further submitted that assessee distributed sample books free of cost to the abovementioned parties after taking acknowledgement from those concerned parties and in this regard our attention was drawn at p .....

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er hand, Ld.DR vehemently relied on the order of authorities below. 9. From the aforesaid discussion, we find that AO disallowed the expense in relation to sample books distribution on the basis of non-availability of supporting documents at the time of assessment proceedings. The assessee was able to produce only the receiving registers duly signed by the recipients to whom the specimen copies were given. In the absence of documentary evidence the AO disallowed such expense on the basis of reas .....

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but the supporting expenses vouchers have not been produced, so the disallowance was made on estimated basis. No comparison of such expenses claimed by the assessee in the preceding years or subsequent years relevant to the year under consideration has been furnished. Considering the fact regarding the importance of distribution of sample books and totality of the claim of assessee we further restrict the distribution of such expenses to the extent of 5%. Accordingly, we direct the AO to re-com .....

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ebit vouchers. Therefore, AO has disallowed 25% of carriage inward expenses and added to the income of assessee. 12. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has reduced the disallowance to the extent of 10% of carriage inward expenses by observing as under:- "4.3 I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of the Ld. A/R. Considering the volume of the business, the AO is directed to restrict (i) the .....

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d then again carry them out to the distributors for delivery. Such expenses are petty in nature but numerous in number, the transporters to whom payments are made are usually minivan drivers or rickshaw pullers. Therefore, payments to such collies/transporters are only made in cash. Moreover, payments made to coolies/transporters in this regard consist of various amounts ranging from ₹ 10 to ₹ 2,875/-. It is only possible to make such payments in cash and not through any banking chan .....

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s below. 15. At the time of hearing, we find from the chart given by Ld. AR in relation to above stated expenses that assessee has been incurring such expenses for the above stated activities and no disallowance has been made in the past. Besides, this, we find the amount incurred by assessee is meager. Considering the submission of Ld. AR and totality of the facts, we reverse the orders of authorities below and delete the additions made by AO. This ground No. 3 of assessee's appeal is allow .....

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d supported with debit vouchers only. Therefore, AO has disallowed 25% of such expenses and added total income of assessee. 18. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has upheld the action of AO by observing as under:- "I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of the Ld. A/R. Considering the nature of the business, the disallowances of ₹ 1,303/- and ₹ 7,750- out of Ganesh Puja and Ben .....

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e of flowers and sweets which were distributed amongst the workers and business associates. The necessary detail of such expense is enclosed at pages 91 to 93 of the paper book. It was also submitted by Ld. AR that such expenses have been incurred by assessee in the earlier assessment year and no disallowance was made. Finally, assessee prayed for relief of such expenses. On the other hand Ld. DR simply relied on the orders of authorities below. 21. From the aforesaid discussion, we find that AO .....

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o. 4 raised by the assessee in this appeal is that Ld. CIT(A) erred in sustaining the disallowance of sales promotion at ₹ 70,904/- being 10% of ₹ 7,09,039/- 23. During the year assessee has claimed sales promotion expense for an amount of ₹ 7,09,039/- which is comprising the following:- a. Expenses reimbursed for sales campaign locally - ₹ 58,406/- b. Expenses reimbursed for sales campaign in the district - ₹ 3,24,467/- c. Car hired expenses for the above - ₹ .....

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erefore, 20% of such expenses are disallowed and added to the total income of assessee. 24. Aggrieve, assessee preferred appeal before Ld. CIT(A) who has reduced such expense to the extent of 10% by observing as under:- "6.3 I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of the Ld. A/R. During the year, the appellant has incurred an expenditure of ₹ 7,09,039/- on account of Sales Promotion Expenses. During the cours .....

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ing 10% of Sales Promotion Expenses instead of ₹ 1,41,808/-. This ground of appeal is partly allowed." 25. Before us Ld. AR of assessee submitted that the assessee in order to popularize its business in all avenues of education conducts promotional campaigns through its sales executive to increase sales all over of this State. For this purpose sales executives travel in and outside Kolkata to distribute books in different areas as a part of this campaign. For thesame, the employees of .....

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able. The executives are required to eat at small vendors and are not permitted to eat at restaurants,therefore proper bills are not issued for the food expense. Further, sometimes car is hired for travelling in and around Kolkata and the payments for the same are made sometime through cheque and sometime in cash. Evidencing these expenses sample copies of bills relating to car hiring expenses are enclosed at page No. 113 to 142 of the paper book. On the other hand Ld. DR simply relied on the or .....

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he comparison between the turnover and such expenses for the earlier years and subsequent year. The purpose of this comparison of expenses of various years isto justify that the assessee has been incurring such expenses consistently and no issue for the disallowance arose.In view of above and in the interest of justice we reverse the orders of authorities below and delete the addition. This ground of assessee's appeal is allowed. 27. Ground No. 5raised by the assessee in this appeal is that .....

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uring assessment proceedings the AO found that the payments have been incurred partially in cash and partially in cheque. The assessee did not produce all the vouchers in support of its claim. Therefore, 25% of such expenses was disallowed and added to the total income of assessee. 29. Aggrieved, assessee preferred appeal before Ld. CIT(A) who reduced the disallowance to the extent of 10% of such expenses by observing as under:- "7.3 I have carefully considered the observation of the Assess .....

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